Under a bill of sale agreement, the finance company holds a legal charge against the item bought under the finance agreement. Where one defaults on the agreement, the finance company has a legal right of possession to the item, and prevents a sale of the item to a third party until the finance is cleared. To either sell the car or part exchange the car, you will need to clear the finance first. You will need to check the terms and conditions of the finance agreement to see whether the return of the car to the finance company will clear the finance owing - by the sound of it, it won't.

Edited by Auristocrat on 22/03/2012 at 01:01

The Bill of Sale is the instrument by which the financing deal is secured against the car. The primary financing arrangement will be, undoubtedly, a loan.

The loan is repayable in full, with additional interest, no matter what. The settlement figure for settling the loan early will have to allow a discount from the total interest charges calculated under the Consumer Credit Act.

You have no rights to voluntarily surrender the car and terminate the agreement and if you allow the lender to take possession of the car, they will sell it at auction and credit the loan account with the proceeds of sale after deduction of their costs and disbursements. You will still be liable for the balance of the account.

Sorry that I cannot suggest an exit for you without digging deeply into your pocket.