Legal ownership

Legal ownership is a term used to accredit the legal rights of an asset, to either a business or an individual. When a car is purchased through a finance agreement, – such as a Hire Purchase or a Lease Purchase agreement, the vehicle legally belongs to the finance company until the agreement has been settled and all outstanding repayments have been made.

The registered keeper of a vehicle should be the most regular driver of the vehicle.  Therefore, when you take out a finance agreement, you may find the V5 document is registered in your name. However, this does not mean that you are the legal owner of the vehicle.

This is also often the case with company cars, when an employee is the registered keeper, but the company have legal ownership of the vehicle.

Can you finance a car and register it in someone else's name?

Taking out a finance agreement on behalf of another individual is referred to as Fronting. Fronting is an illegal practice that lenders will of course not support.

For those who are struggling to get accepted for car finance, there is the option of a Guarantor Loan, whereby someone (a close friend or family member with a strong credit profile) agrees to repay the loan on behalf of the borrower, should they fail to meet the agreed repayment.

Can you insure a car if you are not the legal owner?

Yes - you are still able to take out car insurance, despite not being the legal owner of the vehicle. However, you will normally be required to provide the name (or company name) of owner when you apply.

Who owns the car in a joint car finance agreement?

In joint applications, both parties will be expected to maintain payments on the car. At the end of the agreement, providing all outstanding payments have been made, both parties will then become the legal owner of the vehicle.

If for any reason you are unable to continue with the joint payments i.e. in the case of a divorce – it’s generally advisable to settle the finance early, sell the car and split any equity left on the car.

Who owns the car if the car finance customer passes away?

If an individual were to pass away before the end of their finance agreement their debts would be deducted from their estate. If they do not have enough funds to pay off the debt, their assets may be sold in order to settle the remaining finance left on the agreement.

If the deceased had Payment Protection Insurance (often included in a life insurance policy) you may be able to make a claim to cover the remaining finance left to pay.

If the agreement was taken out as a joint application, responsibility for the payments are automatically transferred to the partner who is still alive.