Selling Cars that are unknowingly still on Finance

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You do a HPI check which comes back as clear of finance.

Author: Jason Williams
Published:
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This article is 4 years old.

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So, this is a scenario that has happened to several Lawgistics members recently.

You are a car dealer.  Someone comes in with a car they want to give in part exchange.  You do a HPI check which comes back as clear of finance.  You buy the car, advertise it and sell it to Joe Bloggs several months later.  At the point of re-sale, you again do a HPI check and again it comes back as clear.

Then, some-time later and out of the blue, you get a demand from the solicitors of a finance company saying that there is outstanding finance from 3 years previously and they want you to pay off that finance at, say, £20,000.  Investigations reveal that the finance company forgot to register the car with HPI as being on finance.  Where do you stand?

Surprisingly, you may not be on as secure grounding as you may assume. This is because of a – wait for it – 1975 House of Lords decision (Moorgate Mercantile Company Ltd v Twitchings) that held that the car dealer was still liable as there was no legal obligation on the finance company to register their interest with HPI.  This can leave a dealer highly exposed because as Joe Bloggs is an innocent first consumer purchaser of the car he DOES get good title (ownership) to it and of course you will never get a response from the seller who may have said it was free of finance.  Even if you did, the seller will simply remind you that you did a check and had satisfied yourself that it was not still on hire-purchase.

The additional obstacle is that this ruling was made by the House of Lords so it remains legally binding until legislation changes it, or another court of at least equal rank (The UK Supreme Court as it is known now) overturns it.  It is unfortunate how something that was perhaps in its comparative infancy over 40 years ago – but much more commonplace now – still protects the negligent finance company who fails to protect their own interests by what is now, a most universally accepted manner.

Jason Williams

Legal Advisor

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