Buying a Car with Outstanding Finance?

[ianpicknell]

(Sorry for the long post...)

I viewied a car this morning which I'm interested in buying (a 2000 Boxster S). But the car has outstanding finance on it and I'm worried about being stung by the seller. It all looks above board, but you can't be too careful these days.

The car was bought via a three-year Personal Contract Purchase whereby a certain amount is paid for 36 months followed by a final (large) 'option to purchase' payment to keep the car. This has been running for about 33 months so far and the guy wants to sell. (I'm guessing he can't cover the final payment.) He suggested me drawing up two bankers drafts: one made out to the finance company to cover the 'settlement value' of the car (effectively the final 'option to purchase' payment plus three months worth of standard payments), plus another bankers draft made payable to him (to make the two payments equal the asking price for the car).

Now this sounds reasonably safe as he can't do anything with the draft I make payable to the finance company (which accounts for about 90% of the asking price). But I obviously want to make sure that I don't end up buying a car that the finance company technically still owns, and then repossesses from me.

Has anyone been in this position before? Is there anything I should be suspicious of? It is 'normal' to buy a car which is still being paid for?

Cheers,
Ian.

[twit]

In theory I can't see anything wrong with this, except the normal don't buy with existing finance etc etc.

If the car is really worth the cash I would ask for details of the finance house and check myself. Once that is established the two drafts would work but I would go with the guy selling to see that the money has been passed across and then ask the finance house for a full receipt in settlement.

However, in reality I probably would not buy the car, there i salways another one out there without the hassle...

Twit

[bennno]

ask him to get the finance company to fax you a settlement figure. he will need to request it.

then pay via a TT to the finance company or a bankers draft and give him the balance.

this is how it works if even if a dealer buys a car.

the guy has already shown he is honest by telling you about the finance.

to be on safe side get a HPI check done

bennno

[ianpicknell]

I've done the HPI check, which confirms the details of the finance company provided by the seller. I've called them up (Black Horse) and they've confirmed that they technically own the car and that there would be no problem with me paying off the settlement amount directly (doesn't have to come from their customer).

But they also said that until mid-May (when the original three year term is up) the account is still open, and they seller can withdraw the 'overpayment' at any time. Is sounded sort of like those flexible mortgages where you can pay in more than you're supposed to (the seller doesn't need to pay the balance until mid-May) and then draw it back out if you like.

This sounded completely bizzare (and scary) to me. I'd have thought that once the agreement has been settled then it's closed. I have no reason to suspect that the seller would draw the settlement amount back out - but the fact that he can is somewhat worrying.

I'll try contacting them again (on the assumption that I'll get to speak with someone different) and see if there's a way to force the agreement to close once the settlement amount has been paid.

Perhaps I should just walk away - but I want the car!

Ian.

[pies]

Do yourself a big favour and dont contemplate buying a car with outstanding finance.

Take the safer route and look for another car

[rewster]

Ask the seller to get a settlement figure faxed/posted. Get a bankers draft drawn in favour of the finance company, and put this in an envelope together with a letter explaining that the car has been sold, this is the settlement figure required to pass title, and attach a copy of your receipt from the seller. Then both go to the nearest post box and watch him post it.

Wouldn't worry about the "being able to withdraw the overpayment". The numpty from the finance company that you spoke to, is completely wrong. Talk to a supervisor/manager and they should be able to put you right. If this were the case, how many car dealers would catch a cold when settling finance????

As far as buying a car on PCP, I always buy my cars like this (although I can afford to buy them outright). Its like leasing a car, but being able to take any profit available in the car at the end of the agreement. It also means that the cash alternative for not having a company car can be used to buy the car instead of my savings.

It may be that like me, the seller sells the car just before the 3 years is up, and has been offered a pathetic price on a part exchange.

If you want the car, don't let the finance put you off. Just be a little more cautious, but if you follow the instructions above you should be OK.

[bennno]

pies said: Do yourself a big favour and dont contemplate buying a car with outstanding finance.

Take the safer route and look for another car

How stupid, even dealers regualarly finance their own stock.

Surely more than 70% of 25k+ cars have finance on them.

As long as you pay the settlement and close the agreement at the same time you are safe.

Bennno

>> Edited by bennno on Sunday 9th February 15:48

[pies]

whats so stupid in taking a safer route and not bothering buying a car with outstanding finance on. It might be fine for dealers but private individuals it can be risky especially with the sums involved. Its a buyers market and if the deal looks to good to be true it probably is

And where do you get those stats from there bollox ive just visited me landlord,hes having a party lots of pricy cars (23) and none have any outstanding finance on them

[bennno]

if you want a safe route, pay 10-30% extra and buy from a dealer.

you have no legal redress if you buy privately, nor any warranty.

point i was making is that if the guy is upfront about the finance and asks for the money to be paid directly to the finance co then i dont see any risk.

the traders do it all of the time, and again, most new cars over a certain value have some sort of finance or lease agreement secured on them.

Bennno


>> Edited by bennno on Sunday 9th February 18:30

[rob.ellis]

bennno said:
As long as you pay the settlement and close the agreement at the same time you are safe.

Actually, no. Even if the outstanding amount has been paid, the 'account' stays open for some time afterwards. This is quite normal. If the finance co owns the car now, then you'd probably not become the owner formally for at least a month after the settlement has been paid.

If you pay off this guy's outstanding finance for him, theres nothing to stop him just disappearing with the car.

Its not like there are only a few boxsters around.. i'd personally not take the risk. Keep looking (sorry).

I just bought a car that did show o/s finance when i first did an hpi check. I agreed to buy the car but waited 'til the owner had cleared the finance before i bought the car. The HPI check gives you the number to ring for the finance co to check that it has been cleared. If the guy hasn't got the money to do this its his problem not yours.

Rob

[bennno]

i probably dont know as i have only bought / sold about 20 cars on finance of some sort or other over the last 3 years.

point is if you ask for the balance to clear the finance, wire the money, ask for a fax to confirm that it has been rec'd and nothing is owing then you are as safe as you can be - when buying privately. If the balance is paid off the finance co have no claim on the car and the V5 should be with the vendor. If you keep evidence of the payment / the settlement letter / a receipt for the car then I cannot see any risk.

Obviously if you wire the money you want to take the car at the same point in time.

Personally if I am buying a car for 15k ish upwards and am told it has no finance then I am suspicious.

its fine to ask the vendor to pay off the balance but this is unusual as they often wont have 20k sat around.

bennno

>> Edited by bennno on Sunday 9th February 18:56

[rewster]

bennno said:
point is if you ask for the balance to clear the finance, wire the money, ask for a fax to confirm that it has been rec'd and nothing is owing then you are as safe as you can be - when buying privately. If the balance is paid off the finance co have no claim on the car and the V5 should be with the vendor. If you keep evidence of the payment / the settlement letter / a receipt for the car then I cannot see any risk.

Obviously if you wire the money you want to take the car at the same point in time.

its fine to ask the vendor to pay off the balance but this is unusual as they often wont have 20k sat around.

Totally agree, as long as you have the car, the V5 and receipt etc, then there should be no problem.

Wiring the settlement is more of a risk, as this can take 24 hours and who's got the car in the meantime?

In order to protect both parties (Seller is also at risk, as until the finance is repaid, they are on the hook for the settlement/ remaining payments). Best route is as I suggested above get all the paperwork upfront, then with both parties present, put the settlement (Bank Draft, as these cannot be cancelled)in the post (to be 100% certain, send it registered post and get proof of posting).

Very little risk for a buyer at all.

[clanger]

Buggar the finance issues don't buy a Boxster S!!

[bennno]

clanger said: Buggar the finance issues don't buy a Boxster S!!

hit the nail on the head there

bennno

[griff2be]

pies said: Do yourself a big favour and dont contemplate buying a car with outstanding finance.

Take the safer route and look for another car

That is not good advice.

I sold my last three cars with finance outstanding on them - the last to a city lawyer and I suspect he knows a thing or two about being cautious in buying a car.

Each time I was up-front about the finance, and each time I got 2 bankers drafts from the buyers - one for the settlement amount in favour of the finance company and the balance to me. The draft made out to the finance company is no use to me, other than to clear a debt that remains in my name regardless of what happens to the car.

The drafts were exchanged for the car and the V5, and I got the draft to the finance company as soon as I could. We investigated wiring the money, but it couldn't be done instantaneously, nor could they take a Switch payment over the phone.

The best advice is check out the story. Do an HPI check. Ask to see the settlement amount confirmation from the finance company. If it all stacks up then go for it.

[Big Chris]

Get it all in writing, if the fianance company accept you paying the final sum make sure you have it written somewhere you own the car. I would get this from the guy your buying the car off as well.

You wont have much of a legal stance without this.

[ianpicknell]

Thanks for all the advice. I've called Black Horse again, and they confirmed that as long at the bankers draft is for the full settlement amount then the account closes that point (or technically once the funds have reached their bank account) and that the seller would have no access to those funds after that point. I also quoted them the settlement amount that the seller had told me verbally and they confirmed that as being correct.

I've therefore decided to proceed - but with caution. The pre-purchase inspection happens this afternoon. Watch this space...

[ianpicknell]

Just thought those of you that offered advice would like to know that I paid for and picked up the car last night.

I'd written up an Agreement with pertenant details (which we both signed), a letter to the Finance Company (from the seller) and two receipts (one for me and one for him). We decided that ownership formally changed when we dropped everying (including the V5) in the post box.

Thanks again for all the help. I'm now the proud owner of a Boxster S.

[griff2be]

Congratulations! There is now't wrong with this approach provided you proceed with caution!