Can You Scrap a Car on Finance?

If your car is on hire purchase or PCP, it is probably not yet yours to scrap. This guide explains who owns a financed car, the two lawful routes out (settling the finance or handing it back), how voluntary termination and the 50% rule work, and how to check whether finance is recorded against a car.

Facts checked against GOV.UK and the law on 28 October 2026.

The short answer

You can only scrap a car you own. If it is on hire purchase (HP), or a PCP deal structured the same way, the finance company owns it until the agreement is completed. Scrapping or selling it before then means disposing of someone else's property.

Scrapping the car also does not end the agreement. As our process page puts it, the finance agreement stays with you and you remain liable for it. Speak to your lender before arranging collection, and tell the collection company about any finance when you enquire.

Why it matters on collection day

On collection day you sign a written contract with the collection company, and ownership passes to it when you sign. You can only pass on ownership you actually have. If the car still belongs to a lender, you are not in a position to sign that contract, and the agreement, with everything you owe under it, stays in place.

Who owns a car on finance?

The Consumer Credit Act 1974 defines a hire-purchase agreement as one where the goods are hired to you in return for regular payments, and ownership only passes to you once the terms are met and, typically, an option to purchase is exercised (section 189).

Type of finance	Who owns the car during the agreement
Hire purchase (HP)	The finance company, until the final payment and any option-to-purchase fee
PCP	Usually the finance company, until any optional final payment is made; your agreement says which
Lease or contract hire	The leasing company, throughout; the car is never yours
Unsecured personal loan	You; the debt is not tied to the car

Being the registered keeper on the V5C does not change this. The log book records who keeps the car, not who owns it.

Option 1: settle the finance

If you pay off what is owed, ownership passes to you and you can scrap the car like any other. For a regulated agreement, the lender must give you a settlement statement when you ask, showing how much is needed to clear it and how that figure is worked out (Consumer Credit Act 1974, section 97). The request does not have to be in writing.

Get written confirmation that the agreement is settled before you book collection, so you can show the car is now yours.

Option 2: voluntary termination and the 50% rule

With a regulated hire-purchase or conditional sale agreement, you have a legal right to end it at any time before the final payment falls due, by giving notice to the lender (section 99). This is usually called voluntary termination. The car goes back to the lender; you do not scrap it yourself.

What it costs

Under section 100, unless your agreement asks for less, you can be required to pay the amount by which half of the total price is more than what you have paid and what is already due. Payments you have missed before ending it still count against you.

Example: the total price under the agreement is £8,000. Half is £4,000. If you have paid £3,100 and nothing else is due, the most you can be asked for under this rule is £900. If you have already paid £4,000 or more, nothing extra is due under it.

The condition of the car

If you have not taken reasonable care of the car, the amount can be increased to cover that. This matters for a car that has reached the scrap stage, for example after accident damage or neglect. Raise it with the lender before you hand it back.

How to end an agreement under section 99

Check the agreement says it is a regulated hire-purchase or conditional sale agreement.
Find out what you have paid so far and what the total price is, from your statements or the lender.
Give notice to the lender, in writing so you have a record, saying you are ending the agreement under section 99.
Agree with the lender how and when the car is returned. It goes back to them, not for scrap.
Keep up any payments that fall due before the agreement ends.

Option 3: talk to the lender

If neither route fits, for example the car is a non-runner worth far less than the balance, contact the lender and explain. Ask what they need from you, whether they will let it be sold for scrap and how any money from the sale will be applied to the balance. Get their answer in writing.

If the car is off the road because of an MOT failure or a mechanical fault, our pages on MOT failure cars and mechanical failure cars explain how such cars are usually valued.

How to check for outstanding finance

If you have the agreement, it names the lender and the type of finance. If you bought the car second-hand, or are dealing with a relative's car, you may not know. A vehicle finance check from Vehicle Data Information, our sister site, shows whether a finance agreement is recorded against a registration.

If a check shows finance you were not aware of, stop and contact the lender named before doing anything with the car. For a car that belonged to someone who has died, see scrapping a deceased relative's car.

Before you enquire

Find out what type of finance the car is on and who the lender is.
Get a settlement figure, or ask about voluntary termination.
Get the lender's position in writing.
Tell the collection company about the finance when you enquire.
Once the car is yours, follow the usual steps, including telling DVLA.

Questions people ask

Can I scrap my car if I still owe money on it?

It depends on the type of finance. With hire purchase, and PCP set up the same way, the lender owns the car until the agreement is completed, so you cannot sell or scrap it without settling or the lender agreeing. A car bought with an unsecured personal loan is already yours.

Does scrapping the car end the finance agreement?

No. Handing the car to someone else does not cancel the agreement. You stay liable for it until it is settled or ended with the lender.

What is the 50% rule?

Under section 100 of the Consumer Credit Act 1974, if you end a regulated hire-purchase or conditional sale agreement early, you can be asked to pay enough to bring what you have paid up to half the total price, unless the agreement asks for less. Extra can be charged if the car has not been looked after.

How do I get a settlement figure?

Ask your lender. For a regulated agreement, section 97 of the Consumer Credit Act 1974 requires the lender to give you a settlement statement on request, and the request does not have to be in writing.

What if I am not sure whether my car has finance on it?

Your agreement and lender statements are the first place to look. A vehicle finance check on the registration will also show whether a finance agreement is recorded against it.

Sources

Who does what

Scrap A Car For Cash (operated by Lead Stack Ltd, company number 15877625) takes your enquiry and passes it to an affiliated vehicle collection company that covers your area.
The collection company values the vehicle, collects it free of charge and pays you on collection, in line with the terms you agree with them.
If the vehicle is completely scrapped, that happens at an authorised treatment facility (ATF), which gives you a Certificate of Destruction. A vehicle that is repaired and resold instead does not get one.

More detail: how it works and our terms and conditions.

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