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Title to Vehicles

“Subject to Finance”?
Avoid an expensive and unnecessary mistake

The Legal Helpline regularly receives calls from dealers who have purchased a vehicle in good faith only discover that it is “subject to finance”.

Firstly, is the vehicle really “subject to finance”?

Traditionally many vehicles have been financed using either a conditional sale or Hire Purchase Agreement, under both of which the title passes from the supplying dealer to the finance company.  As such the finance company own the vehicle until the finance is settled, therefore, they are entitled to claim ownership against any subsequent purchaser.

We have found that some finance companies, offering personal loans, have registered a financial interest in the vehicle.  In such cases, they are not entitled to claim ownership and can usually be persuaded to remove their finance marker once the facts are pointed out.

There are also a number of finance companies that use “bills of sale” that enable vehicle owners to release some equity in their vehicle. If a Bill of Sale has been properly registered with the High Court they may indeed be able claim ownership of the vehicle however it is worth checking properly.

If a vehicle is found to be on finance the next question is whether any protection can be sought under Part III of the Hire Purchase Act 1964.  This provides protection, for innocent consumers, purchasing without notice of any prior finance interest.  It does not directly protect dealers but if the vehicle has passed through them to a private person prior to becoming into a dealers possession, then the dealer may well have obtained title.

It is also worth checking whether the finance agreement should have been settled by another dealer.  If the car in question was taken in part-exchange against another vehicle purchase on finance it is possible that the second finance company is liable to settle the finance as part of a transaction, taking the responsibility away from the dealer.

If it is clear that the dealer has brought a car that is on finance, it is well worth remembering that the dealer is only liable for the true market value of the car, which may often be considerably less than the outstanding finance balance.  He is only liable to either return the vehicle or to pay the market value.

First and Foremost, in dealing with the complexities of title – please ensure that you take immediate advice from the Lawdata Legal Team before assuming that you are liable to settle the finance.

One client was recently extremely disappointed to discover that he had unnecessarily settled the finance agreement before taking advice.
An expensive and unnecessary mistake!

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