financed car

Can you scrap a car that has outstanding finance?

28th Jun, 2023

Car finance is a pretty useful financial tool for lots of people, offering an affordable way to buy cars that might have otherwise not been within reach. However, if you’ve bought your car on finance, it does leave a few grey areas when it comes to situations like scrapping your car. If you find yourself in a situation in which your car is written off but you still have an outstanding finance balance, can you scrap your car?

Essentially: no. Not without permission anyway. Below, we go into exactly why, and what else you need to know about scrapping a car on finance.

What is car finance?

Car finance is an all-encompassing term that refers to a variety of ways to buy a car without paying the full price in one go. Instead the cost is spread out over a period of time and you pay instalments, usually monthly. There’s no denying how useful that is, but it’s important to remember that because you’re effectively taking out a loan, you will most likely end up paying more for the car than if you were to buy it upfront – it’s a swings and roundabouts sort of situation.

There are a range of different finance options out there when it comes to buying a car, all complete with their own nuances. These include:

  • A personal loan from the bank or a building society
  • A Personal Contract Purchase (or PCP) deal
  • A Hire Purchase (or HP) deal

A personal loan will see you owning the car as soon as you buy it outright, and you’ll have the option of many different lenders to choose from. If you opt for a PCP deal, you’ll place down an initial deposit and then make monthly repayments to cover the depreciation, and at the end of the deal you have the option to pay the car off and keep it, or exchange it for another model. A HP deal is similar to a PCP deal, in which you hire the vehicle and pay monthly instalments, but when your last payment clears in a HP deal, the car is yours.

Why can’t you scrap a financed car

So, now we’ve explored the options available, why can’t you scrap a car that has outstanding finance? Well, it’s basically because the car wouldn’t be yours to scrap. Legally speaking, if you’re still repaying the car finance, then by definition you are not the owner of the car. As you can imagine, scrapping a car that’s not yours can get you in all kinds of trouble, so it would be best to hold off on that until you’ve spoken to your provider.

A bank or building society loan is slightly different, because you bought the car outright, but even if you do choose to scrap your car, you’ll still have to repay the loan. If you didn’t take out a bank loan and instead opted for a PCP or HP deal, the first port of call would be to contact your finance provider and let them know, then the DVLA and your insurance provider. From there, you’d be advised on what to do next.

You’d more than likely be presented with the following options:

  • Clear your outstanding balance – You could use the money from your insurance pay out to pay the amount remaining on your finance agreement (if it covered it, that is).
  • Buy back the car and repair it – If the damage is anything less than Category A or Category B, you could look into buying it back, fixing it up and keeping it (so you can use it as you pay off the remaining balance on your loan)
  • Insurance money – You could use your insurance pay out to buy a entirely new car and keep paying the finance on your old car until you’ve paid it off, at which point you can simply forget about it.

And if your circumstances mean that you do ultimately decide to scrap your car, that’s exactly where we can help here at Scrap Car Network.

Our super fast collection service is nice and easy to arrange. All you’d have to do is enter your car reg and postcode into the fields on our site and you’d get your instant quote. Then we’d be in touch to arrange a time and place to take it off your hands. We finalise the payment upon collection, and that’s all there is to it! So then… wondering how much your car could be worth?

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