The question has been raised recently as to whether or not you are able to trade in a car that you are currently entered into a finance plan for, meaning that the agreement has yet to expire. This has led to confusion as to what the rights of the drivers are. The simple answer is that it will depend on the finance plan that you have signed up for when it comes to having the option to trade in a financed vehicle, and we will now delve into this in further detail.
Let’s use the example of a Hire Purchase (HP) agreement. If your car has been financed through a HP plan, then you will not be able to trade it in. The reason for this is that, under the terms of the agreement, the lender is the legal owner and thus the person or company who has the right to trade it in, meaning that you will not. Until the entire payment has been concluded, the car does not belong to you. Your only option would be to force an early end to the HP, and given that such a decision may be for financial reasons, it would bring about little benefit when trading in the car if you’ve had to pay a larger amount just to terminate the HP plan earlier than expected.
Similarly, if you have entered into a Personal Contract Purchase (PCP) plan, and you wish to trade your vehicle in, you will not be able to do so for the same reason: you’re not yet the owner of the car, and won’t be until you have completed the payment process. Voluntary termination is your best bet if you wish to bring about an early end to this plan, but again it will hardly have a positive impact on your plans to then trade the motor in. Bear in mind that once the car is yours, you are free to trade it in straight away if you wish, but until then, this is not an option that you have.
Which brings us to a finance plan where you would be able to trade in a financed car while still entered into an agreement: the Personal Loan (PL). Because you have opted for a loan from your bank or building society, technically you’ve already paid for the vehicle, meaning that while you are still needing to cover monthly payments, officially the car belongs to you, and the basic nature of the plan means that there are no limitations on what you can and can’t do as a driver. You’ll still have to complete the loan payments, so bear that in mind, but if trading in the vehicle is your aim, then having a Personal Loan would allow you to do so.
Of course, the assumption is that you will have come to such a decision after entering an agreement rather than beforehand, and it can be dangerous to choose a finance plan if the sole intention is to trade it in prior to completion. You can find out more about this interesting topic by contacting us.
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