Selling a vehicle subject to a finance agreement – where does the buyer stand?

As is so often the case 'it all depends'. 

In the era of the 'never-never' (or Hire Purchase as we now know it) the Government were concerned how easy it was for a HP Customer to sell on their motor vehicles to an unsuspecting buyer but leaving the HP company able to repossess it since they held the legal title to it.  This led to the Hire Purchase Act 1964 (HP Act) which has safeguards for ‘private and innocent’ buyers. 

The HP Act allows good title to pass if a person is both a private buyer innocent of the fact that the car is the subject of a HP or Conditional Sale agreement.  What is of further interest is that the purchaser can be considered ‘private’ if they are not wholly or partly in the business of purchasing and selling vehicles or a finance company.  So, a vehicle repairerer could be considered a ‘private’ buyer.

The subject of special rules here only apply when the vehicle is the subject of a HP or Conditional Sale agreement. Some finance packages eg Personal Contract Purchase (PCP) and Lease Purchase are also classed as Hire Purchase.  The safeguards would not apply in the case of a simple fixed sum loan (secured or unsecured) or in the case of a lease/hire agreement.

In a nutshell, if the vehicle is the subject of a HP or Conditional Sale agreement then when it falls into the hands of a private and innocent buyer (not a car dealer) then that person will obtain good title.


Authors: Dennis Chapman

Published: 13 Oct 2014


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(cAse SeNSItivE!)

Dennis Chapman (22/10/2014)
Thankyou both. Antony-ignorance, unfortunately is no defence , but once a 'private and innocent buyer' has gained good title then any buyer will be able to take good title. Mike-an Experian or HPi check is a wise precaution,although the registers are only as accurate and up to date as the providers of the information to them.Its wise to check and double check both the car and the identity of the person selling it.
Mike (20/10/2014)
I have been in the motor trade for over 20 years and any motortrader who chooses to take ANY part exchange from anyone private or trade and fails to hpi is negligent and foolish.If they suffer loss from this its because of their own stupidity.
Antony (17/10/2014)
So, if a private buyer buys a car subject to an HP agreement and can prove he is private, he gets good title, then he sells the car to a motor dealer/trader does that dealer have good title then? The other thing that strikes me is what do the HP Company do about the loss? Presume they have to sue the vendor who sold it knowingly.. There is no Law currently, that I know, that the Motor Trade HAS to do an HPi check, so would ignorance be any defence in the above case?

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