Why finance owed is your problem
If a car has finance owing, the finance company owns it until it's paid off. With hire purchase (HP) and PCP, the seller may hold the keys and logbook, but the lender still owns the car. On PCP, that stays true until the final "balloon" payment is made to keep it. Until then, the lender has the right to the car, not you.
The Hire Purchase Act 1964 can protect a private buyer who buys in good faith on HP or conditional sale, and that buyer usually gets good title. It doesn't cover dealers or logbook loans (bills of sale). So don't assume the law will sort it out for you. Check first.
Settle the finance before you pay. Get the seller to clear it, or pay the lender directly, and get proof before you hand over any money. A Finance & Stolen Check costs £4.99 and shows whether finance is recorded against the car.
How to buy it safely
Don't hand over money until the finance is cleared. Ask the seller for the lender's name, then ask the lender for a settlement figure in writing. That's the amount needed to clear the agreement on the day. Don't rely on the seller's word for it.
Pay the lender directly. Pay the settlement figure to the lender, not the seller, and keep proof of payment. Only pay the rest of the price to the seller once the lender has confirmed in writing that the agreement is settled. On hire purchase, a private buyer who buys in good faith usually gets good title, but that's not a reason to skip these steps. Dealers and logbook loans aren't covered.
Re-check the record before you drive away. Run a Full Check (£9.99) after the lender confirms, and make sure finance shows as cleared. Then look at the V5C. The name and address should match the seller's ID, and the VIN should match the car. If anything doesn't add up, Citizens Advice can help you decide what to do next.
If you've already bought one
Contact the lender straight away. Call the finance company and tell them you've bought the car. Ask for the amount still owing and how it can be paid off. If you're not sure whether finance is owing, check the registration with our car finance check.
You may still be protected. Under the Hire Purchase Act 1964, a private buyer who buys a car on hire purchase or conditional sale in good faith usually gets good title, even if finance was owing. This doesn't cover dealers or logbook loans (bills of sale), so check how the car was sold.
Keep your receipts, messages and the V5C, as you'll need them. Ask the seller to settle the finance or refund you. If they won't, or you're unsure where you stand, speak to Citizens Advice for advice on your options.