Many people decide to purchase a van on finance. This provides plenty of flexibility and doesn’t put a significant strain on your resources. If you want to scrap your van on finance, your options are quite limited, especially if you have a lot of outstanding debt.
This article will explain what finance means and whether you could scrap a van on finance. Moreover, we’ll provide insight into the most advantageous options.
What Is a Vehicle on Finance?
When you want to finance a vehicle, you borrow money from a financial institution and pay it back over a specific period. Of course, this comes at a price. You’ll need to pay the lender fees and interest rates.
Besides banks, credit unions, finance companies, online lenders, and even some car dealerships offer numerous finance options. Typically, setting up financing through a car dealership is more expensive because they charge for arranging the process. The amount you pay each month depends on your loan, interest rate, and loan term.
As mentioned, there are various financing options available. Regardless of the one you choose, it’s essential to remember that although the vehicle is in your possession, it doesn’t belong to you until the finance is completely paid off.
For this reason, many don’t consider financing a good idea. If you purchase your vehicle with cash, you instantly become the owner, plus you avoid paying interest and fees. If buying a vehicle would completely drain your savings, financing may be your only option. Before purchasing on finance, it’s essential to consider whether you can commit to making regular payments for an extended period. If you miss a payment, you’ll end up paying high interest rates.
Can I Scrap a Van on Finance?
You can’t scrap a van on finance until you’ve completely paid off the outstanding debt. As mentioned, you don’t become an owner until you’re free of debt, which is why you can’t scrap it, regardless of the vehicle’s condition.
Any loan directly related to purchasing a vehicle restricts you from scraping it until the debt is settled. However, if you have a bank loan that isn’t tied to the vehicle purchase, you are the owner on paper, and you can sell or scrap it. But the debt will remain, and you’ll need to pay it back.
Likewise, if you used an overdraft to purchase a vehicle, you are its owner, which gives you the right to sell or scrap it at any time. But doing so doesn’t erase the debt.
Every legitimate scrap yard will check ownership before accepting a vehicle. These firms will establish the vehicle is on finance in a matter of minutes and will refuse to take it.
Although you can’t legally scrap a van on finance, you can always request a quote. Once you get a quote, you can weigh your options and determine what would be the most cost-effective solution. If you manage to find a scrap yard that’s willing to accept your van even though it’s on finance, you’ll know this isn’t a good company to work with. No reputable scrap buyer will take a van that comes with debt. Scraping vehicles with outstanding finance is illegal and could result in you being sued by the financial institution you have the contract with. In the end, you may pay much more than the amount from the agreement.
What Are My Options if I Want to Scrap a Van on Finance?
If you own a van with outstanding finance and want to scrap it, here are your options:
Settle the Outstanding Debt
This is the best and most straightforward option. By settling the outstanding debt, you’ll become the vehicle’s legal owner and gain the right to do whatever you want with it.
If you decide to settle the debt early, check with your lender about potential fees. Most institutions will charge extra for paying off the debt earlier than stated in the contract. In some cases, you may even find that the total costs are more than the vehicle’s actual value.
Keep Paying Monthly Amounts
If you can’t afford to settle your debt early, one of the options is to continue paying monthly amounts until you settle the debt and become the vehicle’s legal owner. Unfortunately, it could take years before you are debt-free, but this may be your only choice in some cases.
Repair the Vehicle
This option is all about weighing the costs. If you don’t have enough money to settle the debt early, you may consider repairing the vehicle and using it. This isn’t an ideal solution as you’ll need to cover the repair costs and continue making monthly payments to the bank. Still, in some cases, it may be the best course of action.
Of course, the scope of the vehicle’s damage plays a crucial role here. If the vehicle is damaged beyond repair or the costs are too high, this option may not be practical.
Find a Buyer
Another option is to find someone who will settle the outstanding finance for you and buy the vehicle. While this is unlikely if you’re considering scrapping your van, it’s worth mentioning. Some buyers offer the option of settling your debt to get you signed up for a new plan. This is only viable if your van is in working condition.
What if My Vehicle on Finance Is Written Off?
If your vehicle on finance has been so badly damaged that it’s written off, repairing or finding a buyer isn’t possible. In this case, your options depend on the vehicle’s value, the financing type, how much you have left to pay off, etc. Unfortunately, if you have outstanding debt, you’ll need to pay off the instalments, regardless of the damage. This is where your insurance company can be of great help. Depending on your policy and the circumstances, the company may cover the outstanding debt.
Don’t Scrap if the Van Is on Finance
If you have a vehicle on finance, you’re technically not the owner, which prevents you from scraping it legally. You only become the owner once you’ve settled the outstanding finance, and that’s when you can sell or scrap the vehicle. Remember that it’s perfectly legal to get a quote from a scrap service, which could help you decide on the best option.