Understanding Car Finance

This article is purely for reference purposes only and does not attempt to provide legal advice.

Car ownership with outstanding finance is similar to home ownership with a mortgage, the “owner” does not legally hold the title of the car/house until the finance/mortgage is fully paid off. Until then, the relevant lender is the legal owner of the car/house and they can repossess the asset if the amount outstanding is not paid.

While the process of buying and selling a house follows a strict process involving solicitors etc. there is no such process in place for selling and buying cars. Therefore it is important to know your rights and do your research before deciding to buy a car.

How Car Finance works

A finance agreement is where the financial institution purchases the car you want and hires the car to you over an agreed period of time. When the final payment is paid, the ownership of the car transfers to you. Until the final payment is made the car is owned by the financial institution but you will have full use of the car for the term of the finance agreement.

Before you can sell on the vehicle you must repay the full amount of finance outstanding.

How does MyWheels.ie check for outstanding finance on a car?

MyWheels.ie provides a verified finance check on the vehicle registration provided. This is a two step process which involves (a)  verifying the finance status of the vehicle with HPI (Ireland) and (b) subsequently contacting the relevant financial institution to confirm that the reported details are correct, and ensuring that any financing obligations have been discharged.

We can only confirm if finance is outstanding on the car. Due to Data Protection policies we are unable to provide any additional information such as;

  • The amount of finance outstanding or the number of repayments outstanding
  • Personal details on who took out the finance on the car
  • The name of the financial institution that is owed the finance

Discovering outstanding finance on a car you want to buy

It is the responsibility of the owner to ensure there is no outstanding finance on a vehicle. In the event that you purchase a vehicle with outstanding finance, it will be your responsibility to settle the outstanding finance, or the vehicle could be repossessed by the financial institution.

You can easily find out if there is finance outstanding on a vehicle on MyWheels.ie. If you discover outstanding finance on the vehicle then contact the seller about it. They are responsible for clearing the finance before selling the car.

Some people may try to sell the car in order to pay the outstanding finance but it is important to highlight that ownership of the car does not transfer in this situation as it is still owned by the financial institution. Unless you know and trust the seller it is a highly risky process to agree to buy the car in this case as you are relying on the seller to follow through and clear the finance.

Discovering outstanding finance on a car you own

It is the responsibility of the owner to ensure there is no outstanding finance on a vehicle. In the event that you own a vehicle with outstanding finance, it will be your responsibility to settle the outstanding finance, or the vehicle could be repossessed by the financial institution.

If the finance was taken out by you then you can arrange to pay the balance with the relevant financial institution.

If the finance was arranged by a previous owner then it may prove difficult to find out how much is owed and who took out the finance (especially in the case of multiple previous owners). The financial institution will only communicate with the person who took out the finance so you will not be able to contact them to resolve the issue.

Who you bought the car from will determine what you rights are in relation to this matter. If you bought the car from a Commercial Dealer then you are covered by the Consumer Protection Act 2007. Please contact the National Consumer Agency for advice on what you can do.

Private sales (Consumer-to-Consumer transactions) are not covered by the Sale of Goods Act or the Consumer Protection Act 2007. In a consumer-to-consumer there is no implied term applicable as to merchantable quality. In this case we can only suggest that you seek independent legal advice on the matter.

 

For more information please check the following Car Finance articles:

The Citizen Information Board

National Consumer Agency