Short answer: if you bought a car privately, honestly and without knowing it was still on hire purchase or conditional sale, the law usually lets you keep it. Section 27 of the Hire Purchase Act 1964 gives a private buyer in that position “good title”, meaning ownership. The finance company then has to pursue the person who took out the agreement, not you. The protection has limits, though. It can depend on how you bought the car and on what you knew at the time.
Last reviewed: 22 October 2026. General information about the law in England, Wales and Scotland, not legal advice. Northern Ireland has its own rules. If a finance company is chasing you or has taken the car, get free advice from Citizens Advice before you sign or pay anything.
Why a car can still be “on finance” after you buy it
Under hire purchase (HP) and conditional sale, the car belongs to the finance company until the borrower makes the last payment. The Act’s definitions are clear on this: the goods are hired, or sold on condition, and ownership passes only when the agreement’s terms are met. Until then the borrower has no right to sell the car. If they sell it anyway, the finance agreement doesn’t disappear, and the car can still be recorded against it.
Many PCP (personal contract purchase) deals are a type of hire purchase, so the same rules often apply. The legal form of the agreement is what counts, not the name of the product. If you aren’t sure what kind of agreement was involved, ask the finance company to tell you in writing.
When the law protects you
Citizens Advice sums up section 27 like this. You have the right to own the car if all of these apply:
- You didn’t know the car was under a hire purchase or conditional sale agreement. The Act means “actual notice”: what you actually knew at the time, not what you could have found out.
- You bought it in good faith. You bought honestly and had no reason to think anything was wrong.
- You’re a private buyer. Section 29 defines this as someone who isn’t in the business of buying cars to sell, or of financing them. A motor trader or finance house buying the car doesn’t get this protection.
- You’re the first private buyer after the person with the finance agreement sold it. If the car went through a dealer first, section 27(3) protects the first private buyer after that trade sale.
If you’re not the first private buyer, you may still have good title, because you can inherit it from an earlier owner who had it. Citizens Advice recommends getting advice in that situation, because it depends on the car’s history.
When the protection may not apply
- You knew about the finance. If the seller told you the car was “still on finance but I’ll clear it”, you had notice. Section 27 is unlikely to help, and you’re relying on the seller’s promise.
- You bought it as a trader. Dealers and finance companies are trade or finance purchasers under section 29, so the protection doesn’t cover them.
- It wasn’t HP or conditional sale. Section 27 covers those two agreement types. Leases and contract hire (where the driver never owns the car) and loans secured on a car, such as logbook loans, work differently. Get advice if the car was financed in one of these ways.
- The car was stolen. Section 27 is about a borrower selling a car they hadn’t finished paying for. It doesn’t give you ownership of a stolen car.
If the finance company contacts you
Don’t panic, and don’t agree to pay off someone else’s agreement before you’ve taken advice. Citizens Advice notes that the finance company has to prove you don’t have good title; you don’t have to prove that you do. Section 28 of the Act backs this up with presumptions that favour an honest private buyer unless the finance company proves otherwise.
Reply in writing. Explain that you bought the car in good faith as a private buyer and didn’t know about the agreement. Citizens Advice suggests including:
- the name and address of the person you bought it from
- the date you bought it
- how the car was advertised, with a copy of the advert if you have one
- how much you paid
- a copy of the receipt or other proof of purchase, such as a bank transfer record
Keep copies of everything you send and receive, and note the date and time of any phone calls.
If the car is taken away
What you do next depends on whether you had good title.
If you had good title, complain to the finance company using its complaints procedure. If it doesn’t resolve your complaint, Citizens Advice says you can take it to the Financial Ombudsman Service, which is free for consumers.
If you didn’t have good title, your claim is against the seller, because they didn’t have the right to sell you the car:
- Bought from a private seller: section 12 of the Sale of Goods Act 1979 implies a term that the seller has the right to sell. Citizens Advice suggests telling them you have a right to a refund under that Act.
- Bought from a dealer: section 17 of the Consumer Rights Act 2015 makes the same promise part of every consumer sale. Ask the dealer whether it belongs to a trade association with an alternative dispute resolution (ADR) scheme, and keep a note of when you asked.
If that doesn’t work, the last resort is a court claim. In England and Wales you can make a money claim through GOV.UK. Court action takes time and can cost money, so take advice first.
Private seller or dealer: what changes
| Bought from a private seller | Bought from a dealer | |
|---|---|---|
| Can you keep the car? | Usually yes, if section 27 applies (private buyer, good faith, no knowledge) | Usually yes. You’re the first private buyer after a trade sale, if you didn’t know about the finance |
| Who should have cleared the finance? | The seller, before selling | The dealer, when it bought the car in |
| Your claim if you lose the car | Against the seller, Sale of Goods Act 1979 s.12 | Against the dealer, Consumer Rights Act 2015 s.17, plus any ADR scheme |
Before you buy: avoid the problem in the first place
The law protects honest buyers, but sorting out a dispute is stressful. It’s better to find out before any money changes hands:
- Ask the seller directly whether the car has, or has ever had, finance on it. If it has, insist on written confirmation from the lender that it has been settled before you pay.
- Check the V5C logbook matches the seller and the car. See how to check a V5C is genuine.
- Use GOV.UK’s free checks on the car’s details and MOT history, as set out in checks when buying a used car. Bear in mind they don’t show finance.
- GOV.UK’s free services don’t show finance; agreements are recorded by commercial vehicle history providers. See our car check before you buy guide for the checks worth running.
- Check whether the car is ULEZ compliant before you travel to view it, and whether it is recorded as a write-off. See our ULEZ check guide and Cat S vs Cat N guide.
- Pay traceably (a bank transfer, not cash) and get a dated receipt with the seller’s name and address. It’s your evidence if a problem comes up later.
For the full viewing-day routine, use our car check before you buy guide.
Frequently asked questions
Can the finance company take a car I bought with outstanding finance?
Not usually, if you’re a private buyer who bought in good faith without knowing about the hire purchase or conditional sale agreement. Section 27 of the Hire Purchase Act 1964 treats you as the owner. If a finance company says otherwise, ask it to explain in writing and get advice.
Do I have to pay off the previous owner’s finance?
No. The debt belongs to the person who signed the agreement, and section 27(6) says the protection doesn’t release them from their own liability. Don’t agree to pay it while you’re taking advice.
Does this apply to PCP cars?
Often yes, because many PCP agreements are a form of hire purchase. The legal form of the agreement decides it, so ask the lender what type it was.
What if the seller told me about the finance?
Then you had notice, and section 27 probably won’t protect you. Your position depends on whether the finance was actually settled. Contact the finance company and get advice quickly.
What if the car has been sold several times since?
You may still own it if an earlier private buyer acquired good title and passed it on. This depends on the car’s history, so Citizens Advice suggests getting advice.
Is a bailiff the same as a finance company taking the car?
No. Bailiffs collect debts such as council tax or court judgments. They’re covered in can bailiffs take a car on finance?
Selling a car that’s still on finance? Clear the agreement before you advertise it. See how to sell your car privately.
Sources checked 22 October 2026: legislation.gov.uk, Hire Purchase Act 1964, section 27, section 28 and section 29; Sale of Goods Act 1979, section 12; Consumer Rights Act 2015, section 17; Citizens Advice, If the car you bought is still on hire purchase; GOV.UK, Check a vehicle before you buy it and Make a court claim for money; Financial Ombudsman Service, How to complain.