Who is the legal owner of a car on finance?

Roman Danaev

7 July 2021

The time from applying for a loan to obtaining a personal vehicle is only a few days. In addition, the interest rate on auto loans is noticeably lower than on other types of credit. Moreover, borrowed funds can be used to purchase a new car or a used vehicle.

However, before you apply for a financed car, it is worth understanding who the car's legal owner will be. Carplus has prepared a simple and straightforward guide on this topic.

In the UK, when a car is purchased on finance, the legal owner of the vehicle is typically the financing company or lender, not the person making payments on the car loan. In simple terms, when you finance a car, you are borrowing money from a lender to pay for the car and the lender becomes the legal owner of the car until the loan is fully paid off, but you are still responsible for looking after and insuring the car during that time. You have the right to use and drive the car, but you do not own it until the loan is paid in full. Once the loan is fully repaid, the ownership of the car will transfer to the borrower, and they will become the legal owner of the car.

Carplus has prepared a simple and straightforward guide on this topic.

What is the difference between owning a car and being the registered keeper?

When you buy a car in one payment, you immediately become the legal owner. All the legal documentation for the vehicle is transferred to you, and with it, full ownership. With a car taken out on credit, it is a little more complicated.

You get a V5 registration document with a car loan, which confirms that you are the vehicle's registered keeper. But you are not the owner. The finance company is the legal owner of the car until the loan is fully paid off.

If the car is involved in an accident or receives a fine for parking or speeding, the registered keeper (i.e., you) will pay. It is the car's legal owner (i.e., the borrower) who is authorised to resell the vehicle.

Who is the legal owner on a hire purchase (hp)?

You have probably heard of the Hire Purchase (HP) method of buying a car. HP car finance allows you to spread the cost of the vehicle over the entire payment period. That way, you can gradually pay the car's price, and at the end of the contract, become the complete owner.

How does succession of one's own work in this case? The financial provider is the legal owner until the contract is up. Therefore, the legal ownership remains with the borrower until you complete all final payments.

Who is the legal owner on a personal contract purchase (pcp)?

Things are a little more complicated with the Personal Contract Purchase (PCP) program. This is because PCP car finance has several options after the agreement expires.

So, you have three possibilities:

  1. Return the car
  2. Pay a one-time payment to become the owner of the car
  3. Refinance the car with a new loan for a new vehicle

Regardless of which option you choose, legal ownership remains with the auto loan company. That is until you make the final payment - and before that, you are effectively leasing the car.

Who is the legal owner with a personal loan?

In the case of a personal loan, where you use borrowed money to pay for the car directly, everything makes sense. Paying for the vehicle will make you the legal and registered owner. You will receive all the legal documents for the car and become its complete owner from the moment you make the payment.

If I buy a car on finance, can someone else be the registered keeper?

Yes, it is possible for someone else to be the registered keeper of a car that is financed by another person in the UK. For example, if a parent finances a car for their child, the child can be the registered keeper of the car, while the parent is the registered owner (because they are the ones who financed the car).

However, it is important to be upfront with the finance company about who will be the registered keeper, as it can affect the finance application. It is important to inform the lender before signing the contract.

Failing to inform the lender that someone else will be the registered keeper might compromise the financial agreement, and it could also lead to the lender refusing to offer you the finance.

Also, if you struggle to find a lender willing to finance a car for you without you being the registered keeper, you can always apply for a joint application, both your names will be on the agreement, and either can be the registered keeper.

Can you change the name on a car finance agreement?

No, you cannot do that. The car belongs to the financing company until you make all the payments, so you cannot change the name on the contract until then. And even if you find it hard to make payments and want to sell your car, it is impossible to do so.

But it's not all so grim! You can give the car on finance back to the finance company but without a refund. So, if you paid less than half the amount specified in the contract, you will owe the lending company the difference of up to half the total amount.

However, it is better not to let it come to this. If you find it challenging to pay back your car loan, contact the lender's management right away and see if they can help you.

Can you insure a car if you aren't the legal owner?

You will need to insure your car anyway, even if you are not the legal owner. Unfortunately, the finance company providing the loan will not do it, which means you will have to take care of it.

Otherwise, you are facing a considerable risk. For example, if you get into an accident without auto insurance, you will have to pay for all of the credit car repairs out of your pocket - and that is not very pleasant, don't you agree?

Because of the increased popularity of car finance, auto insurance companies have become more likely to accept applications from people who are not legal owners. So you shouldn't have any problems at all. You may have to deal with the only thing proving that you are the car's registered owner.