Taking your financed car abroad can be difficult. Not only is it logistically complicated, but the paperwork involved can also be a minefield. When you’ve bought a car outright and have full ownership, taking it abroad involves a lot of paperwork but is often fairly straightforward. However, when you’ve bought your car on finance and haven’t yet paid it off, even more red tape is involved. The short answer to whether you can take your financed car abroad is: it depends. Read on for our guide to moving abroad with a financed car.
To begin with, it depends on how long you’re planning to be overseas. If you’re just taking a holiday, then it’s far easier and you’re far more likely to obtain permission from your finance provider. If, however, you are moving abroad permanently (or at least long-term), there’s a good chance that you’ll need to settle or terminate your finance agreement early i.e. before you leave the country. The reason you need permission from your finance provider is that they are the legal owner of the vehicle, at least until you’ve fully paid off your debt. Failure to obtain permission could result in the car being impounded by authorities.
In the event of a holiday, simply contact your finance provider to obtain permission and have them send you the necessary paperwork. This paperwork will often come in the form of a Vehicle on Hire Certificate (VE103B). This certificate is a form of written permission that certifies that your finance provider allows you to take the car abroad. It also contains information about you, the vehicle, and the length of your finance agreement.
If you’re moving abroad and your finance agreement doesn’t allow you to take your car with you, you’ll need to settle the agreement earlier than planned. In doing so, you’ll no longer be contractually restricted and you’ll be free to transport your car overseas as its sole owner. There are a couple of ways to go about this.
One way is to settle the agreement early. This is generally ill-advised because you’ll likely end up owing thousands of pounds all at once. Allow us to explain. They say that cars start to depreciate the moment you drive them away from the dealership. This because the price you’ve paid includes additional costs, such as dealer fees, VAT (if it’s a new car), and so on, as well as the actual value of the car. Therefore, once you start driving it, all you’re left with is the actual value of the car, minus all the other fees. As a result, you begin your car ownership in negative equity (since your asset (the car) works out to be less valuable than the amount you’ve just paid for it). Then, over time, the car will naturally lose its value as it becomes older and accumulates more miles.
A Personal Contract Purchase (PCP) loan works in such a way that the lender will accurately estimate how much the car will be worth at the end of the finance term and use that to calculate your monthly payments. At the end of your finance term, you have the option to pay off the remaining value of the car in a lump sum, or simply return the vehicle (either way, the lender receives the same amount of money). The value of the car should equal the settlement cost you’ll have to pay (if the estimate was made correctly, which it virtually always is). As a result, this negative equity isn’t a problem so long as you see out the full length of your finance agreement.
Settling early, however, means that you’ll be ending the agreement while you’re in negative equity. In other words, you’ll have to pay the finance company more than your car is currently worth. This can often equate to thousands of pounds. If you’re in a position where you can afford to pay this lump sum, then early settlement may be an option for you. However, it’s a very unappealing situation to be in.
Depending on your particular circumstances, you may opt for voluntary termination. In order to be eligible for voluntary termination, so long as it complies with the terms of your agreement, you must have paid 50% of the total amount payable and there must be no damage to the car. However, you’ll likely have to stay in your current finance plan for several years in order to reach the 50% mark.
It’s important to note that neither early settlement nor voluntary termination will affect your credit score.
If you’re given the all-clear, either on a temporary basis or a long-term basis, there are certain things you must consider. Firstly, you’ll need a copy of lien. A lien is the right to keep possession of someone else’s property until a debt is repaid and/or discharged. If you’re up to date with payments and on good terms with your finance provider, then arranging this should be fairly straightforward.
Secondly, you’ll also need to make sure your car has the right insurance. Despite not being the full legal owner yet, as the legal contract holder, you are responsible for the car’s insurance. You may need to acquire a Green Card, which is proof of insurance and can help in the event of you needing to make a claim abroad.
Thirdly, and this is a general point about driving overseas, get familiar with the local driving laws and customs. It may seem obvious, but it’s important to study the speed limits, road signs and the like before you arrive in a new country. Some countries require that you carry additional equipment in the car, such as a first aid kit, fire extinguisher, and a high-visibility jacket. Doing this research thoroughly will make your (and your fellow road users’) driving experience far better (and safer).
At Carfinanceplus.com, we specialise in making cars more affordable for people in difficult financial situations. We understand that circumstances change, and the terms you agreed to at the start of your finance deal may not be suitable years later. To find out more about taking financed cars abroad or making any changes to a finance agreement, get in touch with us today.View more from The Car Finance Hub