Buying a Used Car? Watch out for an existing HP Agreement

by Kidd Rapinet on January 13, 2013

Car buyers would be wise to check whether the car they are buying has an existing HP Agreement still current. A recent case has highlighted the risk that the purchaser may not obtain good title to the goods. Jim Lett, a partner in Kidd Rapinet’s Maidenhead office says: “Used car buyers need to beware; the Court decided that each case must be judged on its merits. Any asset sold with an HP Agreement still current could be at risk.”

In the case, a Dr Kulkarni purchased a Mercedes for £39,000; however the seller still had an HP Agreement for the car. This normally means the owner can’t legally sell the car until they pay off the outstanding HP agreement. The hire purchase company, Manor Credit (Davenham) Ltd, seized the car when they discovered it had been sold. Dr Kulkarni sued the HP Company for “conversion”. The court decided that the critical issue was that if the intention to sell to an innocent purchaser arose after the hire purchase agreement was formed then the buyer could obtain good title to the goods, but that if the seller had had that intention before entering into the HP Agreement then the position would be different.

Jim Lett comments: “Although in this case the court decided that the doctor acquired good title, buyers need to be careful. It could all have ended very differently.  The point seems to be: check beforehand, and steer clear if you find there’s an existing HP agreement.” If you feel you may need advice, Kidd Rapinet can advise you on the latest law in this field. Call Jim Lett on 01628 621301for further information.