Can I part exchange a car on finance?
Buying a car on finance comes with a lot of perks, but it can make things tricky when it comes to part exchange.
Popular types of car finance like Hire Purchase (HP) and Personal Contract Purchase (PCP) are secured against your wheels meaning you can’t sell or part exchange during your loan repayment period.
Instead, you need to settle the finance and become your car’s legal owner first.
How can you do that? Well, check the T&Cs of your finance agreement for more details but you’ll usually need to start by requesting a settlement figure from your lender.
This is the amount you need to pay to end your loan early and is usually equivalent to your remaining monthly repayments minus any interest you won’t have to pay. An early settlement charge might also apply.
Once you have your settlement figure, you can visit the dealer that stocks your next set of wheels. They’ll value your car and give you an offer for it. If that offer is less than you hoped, you’re under no obligation to accept it.
If your offer is either the same or more than your settlement figure, you can sit back, relax, and let the dealer handle the details. They’ll connect with your lender, pay the settlement figure, and take any remaining money off the price of your new car.
On the other hand, if the offer is lower than the settlement figure, you’ll be in negative equity. That means you’ll need to pay the difference yourself if you want to go ahead with the part exchange.
What documents do I need to part exchange my car?
Let’s talk paperwork.
To help your part exchange go through without a hitch, you can get prepped by sorting the following documents in advance:
- Your car’s logbook (also known as its V5C)
- Its most recent MOT certificate
- Any service history you have
- The car manufacturer’s handbook
It can also make the dealer’s life easier if you track down any spare keys or tyre keys before trading your car in for part exchange.
How can I get the best price for my part exchange?
Money isn’t everything, but when it comes to getting a fair price for your part exchange, there are several factors that can affect that final offer.
It’s not just the make and model, market conditions and trends in the industry can also impact your car’s value.
To give yourself the best chance of getting the best price, try our top tips:
- Have all the documents ready – a car with a complete service history can be worth a lot more than one with a patchier track record.
- Clean inside and out – give the carpet a hoover and try a touch of wax and polish on the paintwork.
- Make small repairs – spending a little cash to fix minor dents and scratches could be more cost-effective in the long-run.
- Get a new MOT – if you have less than three months left on your MOT, getting a new test could make your car more desirable on the used car market.
What alternatives are there to part exchange?
If part exchange isn’t the right choice for you, there are other options out there.
- Sell your car privately – you might be able to get a better price by selling it yourself.
- Hand the car back – if you have a PCP deal, you have the option to hand the car back and walk away.
- Wait until your loan term ends – waiting until your finance comes to a natural end might be a better option especially if you’re in negative equity.