Nowadays, a huge number of plant machines in the UK are bought on finance. If you're looking to sell machinery that still has outstanding finance, don't worry – it's absolutely possible. Here's everything you need to know.
Can I Sell Machinery with Outstanding Finance?
Yes, you can sell machinery that's still on finance, but the finance must be settled as part of the sale. Until the finance is paid off, the finance company legally owns the machinery. Selling without settling the finance first is illegal and could result in the buyer losing the machine.
Types of Finance Agreements
Different finance types affect the sale process:
- Hire Purchase (HP): You own the machinery once all payments are made. Until then, the finance company owns it.
- Finance Lease: The finance company always owns the asset. You may have an option to purchase at the end.
- Operating Lease: You're essentially renting. You'll need to return the machinery or buy it at residual value.
- Asset Finance Loan: You own the machinery from day one, using it as security. Selling requires settling the loan.
Step-by-Step: Selling Financed Machinery
1. Get a Settlement Figure
Contact your finance company and request a settlement figure. This is the amount needed to pay off the agreement in full. Settlement figures are typically valid for a limited period (usually 7-14 days) as interest continues to accrue.
2. Compare Settlement vs Sale Value
Get a valuation for your machinery and compare it to the settlement figure:
- Positive equity: The machinery is worth more than the settlement. You'll receive the difference.
- Negative equity: The settlement exceeds the machinery's value. You'll need to pay the shortfall.
3. Arrange the Sale
When selling to a professional buyer, they often handle the finance settlement directly. The settlement amount is paid to the finance company, and any remaining funds come to you. This makes the process much simpler than a private sale.
What About Early Repayment Charges?
Some finance agreements include early repayment charges. Check your contract or ask your finance provider. Under the Consumer Credit Act, you have the right to settle agreements early and may be entitled to a rebate on future interest charges.