42% of used car buyers do not know who hold legal title on a car that has finance owing on it, according to a recent survey by HPI.

The latest survey from the automotive technology solutions provider went on to reveal that 23% of those surveyed assumed the car belongs to the person named on the log book, highlighting the extent of misconception amongst consumers.

If a consumer buys a car from a dealer that later turns out to have outstanding finance against, they will be protected by Innocent Purchase Protection. However, if a dealer buys a car from a consumer who has innocently sold it on with finance still owing - believing they are the legal owner - the dealer will be liable if that consumer doesn’t keep up the finance payments. Although dealers buy in good faith, just as the general public do, they are not protected by Innocent Purchase Protection and need to gain ‘clear title’.

Dealers, just as private buyers, stand to lose the car and the money they paid for it if it later turns out to have finance against it. The only safeguard dealers have against putting their reputation and their business at risk, is to conduct a vehicle provenance check. Most provenance checks are backed by a guarantee and the provider will negotiate with the finance house on behalf of the dealer.

Managing director Neil Hodson is calling upon the industry to work closer together to raise greater awareness of the very real risk to trade and private buyers and sellers alike; 1 in 4 cars checked by HPI are subject to outstanding finance.

He said: “Unfortunately, the findings of our survey are bad news for dealers, as they demonstrate we have a long way to go in educating consumers, which in turn exposes dealers to continued risk.

“We always advise dealers to protect themselves by only ever buying from the registered keeper and urge them to ask the customer for photo ID. Payment for the car must be made into a bank account in the registered keeper’s name. If the car has just changed hands then it’s even more important to verify who is selling it and that their ID checks out. Following these guidelines will minimise the risk of buying a car with bad provenance.”

69% of respondents knew who owned a vehicle still on outstanding finance when given the answer as part of a multiple choice question. 12% believed the car belonged to the person on the Log Book, even if they had handed the cash to someone else, whilst 9% believed the opposite. 7% thought the car belonged to the police - believing it was unlawful to sell a car on that had finance on it - and 3% expected it to belong to them.