What You Can do Once You find out Your Car has Outstanding Finance
You may have not realised it, but the second-hand car you recently purchased could have been sold to you with outstanding finance on it.
What does Outstanding Finance mean?
When we speak of ‘a car with outstanding finance on it’, we mean a car that wasn’t bought with one full outright payment but instead obtained as a hire purchase.
A hire purchase is a car finance plan where the buyer pays a relatively low deposit followed by monthly instalments until the contract concludes. At the end of the contract, the driver would then generally be given the choice to either purchase the car outright or exchange it, effectively starting a new hire purchase.
The key point here is that the driver does not own the car, it is always owned by the finance company until the finance is paid off in full(just like a mortgage company owns the house until the mortgage is paid off).
What is HPI?
The abbreviation HPI stands for Hire Purchase Inspection and is used to describe the checks that can be carried out to verify the ownership of a second-hand vehicle up for sale. If the HPI check comes back positive, the car does have finance outstanding and is therefore owned by the company offering the financing to the person currently driving the car.
HPI checks are strongly recommended to be carried out prior to buying any second hand vehicle as purchasing a vehicle that is not HPI clear could prove very costly for the buyer. If the check comes back to you and states that the car is a hire purchase, you should avoid buying it – regardless of how much you might like it.
Vehicles that fail HPI checks do not belong to the seller, but rather the finance company who issued the hire purchase agreement. This means that you could spend a fortune on a good quality second-hand car from a seemingly reputable dealer, but it wouldn’t legally be yours to keep.
On some sites, you can find the status “HPI clear”, meaning the car has been checked and does not have any outstanding finance on it.
What is an HPI Check?
Checking if a car has finance on it is relatively easy, with many companies offering instant car checks online for a low price, normally between two and ten pounds.
In addition to the standard HPI check these companies usually also offer other information through additional stolen car audits, mileage discrepancy tests and historical research on the amount of previous owners and MOT reviews.
Despite being a serious issue that causes many complications for unsuspecting buyers across the UK, plenty of consumers remain unaware that there are lots of unscrupulous car dealers and private sellers advertising vehicles for sale with outstanding finance.
HPI check provider, HPI.co.uk, has stated that one in four HPI checks come back registering outstanding finance. In addition to this, they found that roughly one in four cars on UK roads were bought on hire purchase terms, suggesting that the threat of being sold such a vehicle is constantly increasing.
I Have Bought a Car with Outstanding Finance Already, What do I do?
If you have recently purchased a car, it won’t take you long to find out if it has outstanding finance on it.
The finance company who leases the car as a hire purchase will remain the owner of that vehicle until the contract has ended and the driver has made the final payment. If the driver sold the car to you before that contract ends, the vehicle does not automatically belong to you – even if you can prove that you have paid for it.
The driver did not have the right to sell the vehicle that they did not own.
The finance company will likely decide to chase you for the outstanding payments, or reclaim the vehicle from you without any kind of refund.
As soon as you find out that you have been put in this situation, and consequently driving a car that is not yours as a result, you will need to take action.
Avoiding the issue, attempting to hide the vehicle or in any other way obstructing the finance company will worsen your situation significantly. For that reason we advise you to always comply with the finance company’s requests whilst you are in the process of obtaining legal advice.
What You Can do Once You find out Your Car has Outstanding Finance
As a victim of a bad sell, you have more rights than you may realise. Even though the finance company is initially still the formal owner of the vehicle, you can use the Hire Purchase Act to claim ownership rights to the vehicle instead of the finance company or compensation for your purchase money.
Issuing proceedings to start a court case claiming your consumer rights is a complex process that can quickly drain your time, energy and finances. However, with the right legal assistance at hand, the process can be managed swiftly and without much cost or hassle.
How much Time will it Take me to Settle This?
The process is relatively straightforward and generally takes only between one to six months, depending on the particulars of your case.
Your solicitor will do most of the work for you and only require for you to physically present on one occasion at the court hearing, if it ever gets that far. This way your solicitor can ensure that the process causes you as little disruption as possible.
If you aim to manage the process yourself without the legal support from experienced solicitors you may find the process taking significantly longer and more of your time will be required.
What if I Paid for the Car in Cash?
This normally won’t be an issue, as long as you can prove that the money has been withdrawn from your account. A bank statement is a perfect example of evidence you could use.
It is preferred that you are also able to provide receipts of the purchase. However, as receipts aren’t always issued during a second-hand trade, these are not a necessity in most cases.
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