If your car is on finance and no longer roadworthy, you might wonder if you can scrap it. The short answer is noโuntil you finish paying off the finance, the car still belongs to the lender. That means you need permission before doing anything with it. However, there are ways to deal with a damaged or unwanted car on finance.
The legal side of things
When you take out a car finance agreement, you donโt own the car until the final payment clears. Scrapping it before then is like getting rid of something that isnโt yours. This can lead to serious consequences, including legal action.
If the car is beyond repair, speak to your finance provider first. They will explain your options, which might include using an insurance payout to settle what you owe.
Selling instead of scrapping
You canโt scrap a financed car, but you might be able to sell it. Some buyers, like dealers, offer to pay off the finance as part of the sale. This works if the car is worth more than the amount still owed.
- Contact your finance provider for a settlement figureโthe total amount needed to pay off the loan.
- Find a buyer willing to pay at least that amount.
- Make sure the payment goes to the lender so they can clear the finance.
Always involve your lender in the process. Selling a car with outstanding finance without their approval could cause legal trouble.
What can you do instead?
If scrapping isnโt an option, there are a few ways to handle a car on finance that is no longer useful.
Pay off the finance
Ask your lender for a settlement figure. If you can pay it off, the car becomes yours, and you can scrap or sell it freely. Some dealers might even offer to buy the car and settle the finance for you.
Voluntary termination
If youโve paid at least 50% of the total finance amount, you might be able to return the car under voluntary termination. This option is available with Hire Purchase (HP) and Personal Contract Purchase (PCP) agreements.
- The car must be in reasonable condition.
- If you havenโt reached 50%, you will need to pay the difference.
- Returning the car ends your finance agreement without extra costs.
Repairing the car
If repairs cost less than settling the finance, fixing the car could be a better option. Some lenders require the car to be in usable condition before allowing voluntary termination or settlements.
Can you ever scrap a car with outstanding finance?
Only if your finance provider allows it. Most wonโt approve scrapping until the finance is fully repaid. If your car is written off in an accident, the insurance payout usually goes directly to the lender first.
If youโre struggling with payments and need finance a car with bad credit score, some lenders offer tailored options to help you manage repayments or refinance your agreement.
What happens if you scrap a financed car without settling the finance?
Scrapping a car with outstanding finance without permission could lead to:
- Legal action from your lender.
- A demand to pay off the remaining balance immediately.
- Damage to your credit rating.
Before making any decisions, check your finance agreement and speak to your lender. If you are struggling with repayments or your car is no longer roadworthy, explore the options that work best for you.
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