Can you swap a car on finance?

Got outstanding finance on your current car but want to get a new one? You may be able to part exchange a car on finance, opt for voluntary termination, pay off your loan in full early or refinance your car. There are several options available to you if you want to swap car finance, but it’s important to understand your current finance agreement and the potential costs. Let’s look into these options in detail and answer any questions you have.

Can I get a new car if I still have finance?

Yes, even if you have outstanding finance on your car, you may be able to get a new one before your agreement ends.

It all depends on your situation and your car finance agreement. But, there are four main options to consider:

• Part exchange finance: Part exchanging a car on finance means trading in your current car and using its value to pay off your remaining finance balance. If the car is worth more than you owe, the difference can go towards your new car. If it’s worth less, you’ll need to cover the shortfall.

• Voluntary termination: If you have paid half the total amount payable, then you have the right to voluntarily terminate your PCP or HP loan and hand the car back. The right applies to HP and PCP only, not personal loans or leasing. The amount payable  includes fees, interest, and the balloon payment in a PCP deal. If you’ve not already paid 50%, you could also choose to make a one-off payment to make up the difference. Be aware that the car must have been reasonably looked after and you may be charged for excess mileage or damage beyond fair wear and tear. 

• Request a settlement figure: You could also pay off your loan early to own your car. You could then sell it. To do this, you need to request a settlement figure from your lender, which is the amount it will cost to pay off your loan in full (including any interest owed to date). But be aware that you might have to pay early settlement fees, so check your agreement carefully.

• Refinance a car: If you want to keep your car but pay less each month, you may be able to refinance. This is when you get a new deal to pay off your current loan. You can switch to a refinance car loan where you could reduce your monthly payments and have more time to pay it all back, but extending your term or reducing your payments could increase the total amount payable over time.

Can I part exchange a car that is still on finance?

Yes, you may be able to part exchange a car that is still on finance. Part-exchanging involves trading in your current car to offset the cost of a new vehicle. You don't necessarily have to wait until your current finance agreement ends to change cars, but your outstanding finance must be settled as part of the process.

How does part exchange work with finance?

To part exchange a car on finance, you first need to request a settlement figure from your lender to know exactly how much is needed to clear the finance. Then, ask a dealership or buyer to assess the value of your car and offer you a part-exchange allowance. This allowance may then be able to be used to pay off the remaining balance on your finance agreement. 

If the part exchange allowance is more than the outstanding balance, you have positive equity, which means you may get money towards your new car or a cash payment. This depends on the terms of the part-exchange agreement. 

However, if the part exchange allowance is less than the outstanding balance, this is known as negative equity and you'll need to cover the difference, or roll it into a new finance deal. If you're considering rolling negative equity into a new finance agreement, bear in mind that this means borrowing more and could increase the total amount you repay.

How does part exchange work if you still owe money on your car?

To part exchange a car with outstanding finance, you’ll need to follow these steps:

1. Get a settlement figure: Contact your lender to find out how much you need to pay to clear your existing finance.

2. Get your car valued: Ask a dealership how much they’re willing to offer for your car as a part exchange.

3. Compare the figures: The dealer compares your car’s value with your settlement figure to work out whether you have positive or negative equity.

4. Settle any difference: If your car is worth more than you owe, the extra money can go towards your next car. If it’s worth less, you’ll need to cover the shortfall yourself or, subject to approval, add it to your new finance agreement.

5. Complete the part exchange: If you agree to the deal, the dealer pays off your existing finance. Any remaining value can then go towards your next car, potentially helping to reduce your deposit or monthly payments.

Here’s an example of how part exchanging a car on finance can go:

If a car with a £10,000 settlement figure is valued at £12,000 for part exchange, you’d be left with £2,000 of positive equity to put toward the next car. However, if the car had a £10,000 settlement figure but an £8,000 valuation, it would leave you with £2,000 of negative equity. You’d need to cover this shortfall yourself, or roll it into the new finance agreement, subject to approval.

"Rolling negative equity into a new agreement means adding the shortfall to what you borrow for your next car, so your total amount repayable will be higher. It’s also subject to approval, so it isn’t always possible. If you can, it may be worth covering some of the shortfall first." - Ross Wild, Head of Lenders at Car Finance 247

When can you part exchange a car on finance?

There's no fixed minimum point in your finance agreement when you can part exchange a car on finance. But, timing can affect whether you have positive or negative equity. The earlier into an agreement you are, the larger the settlement figure tends to be, compared with your car's current value. This can therefore make negative equity more likely.

Before deciding to part exchange, request an up-to-date settlement figure from your lender and compare it with your car's current value. This will help you understand whether you may need to cover the shortfall and if it’s the right move financially.

"The dealer will usually ask for an up-to-date settlement figure from your lender, your V5C logbook and any service history. They’ll normally pay the settlement directly to your lender as part of the deal. Settlement figures are only valid until a set date, so request one when you’re ready to move forward." - Ross Wild, Head of Lenders at Car Finance 247

Work out what your car could be worth

Want to know what your current car could be worth as a part exchange? Before visiting a dealership, use our free car valuation tool to get an estimate.

You can also use our car finance calculator to get a good idea of what your repayments look like for your next car finance deal. 

Comparing both can help you get a feel for both sides of the equation and have figures in mind before visiting a dealer.

Can I swap my financed car for a cheaper one?

Every car finance agreement is tailored to one borrower and vehicle. So, you can't just swap to a cheaper car during your loan on the same contract. But that doesn’t mean you’re stuck with a car you no longer want or can’t afford. You may have options, even if you haven’t yet reached the end of your agreement. 

One option could be ending your existing agreement by paying the settlement figure. Typically, the further you are into your agreement, the lower your settlement figure will be. 

If you’re struggling to keep up with your repayments, speak to your lender first, as they may be able to offer support. You can also get free, impartial guidance from MoneyHelper. Refinancing may be an option for some people, but please bear in mind that spreading your outstanding loan over a longer term can reduce the monthly payment but may increase the total amount of interest payable. 

Alternatively, you could ask for voluntary termination and hand the car back, as long as you’ve paid 50% of the total amount payable. Just bear in mind this also includes any fees, interest, and the balloon payment if you’re in a PCP agreement.

Can I downgrade my car on finance?

If you want to downgrade your car, the same options might apply. You could refinance your car, pay off the settlement figure, choose voluntary termination if you’ve paid off 50% of the total amount owed. You could also part exchange a car on finance.

If you're aiming to cut down on your monthly expenses on your existing car, a refinance deal might be a good idea. 

Refinancing involves finding a new loan agreement to pay off your current loan. The new lender uses the money from your new loan to settle your current finance agreement. This new loan might offer a better interest rate or lower monthly payments.  Just make sure to check the total amount you'll pay back on the new loan. Sometimes, having lower monthly payments over a longer period could mean you end up paying more overall.

Can you swap finance from one car to another?

You can’t transfer your existing car finance agreement to another car. But, you may be able to change cars by settling your current finance and taking out a new agreement. 

If you’ve paid off 50% of your total amount owed, you could opt for voluntary termination. Or, you could pay off the loan early by asking for your settlement figure. This figure includes interest and potential early termination fees. 

If you can’t pay this in full, part exchange could be a better option for you. You may be able to use the value of your current car to settle your existing finance and arrange a new agreement for the car you want. However, if your car is worth less than what you owe on your current finance, you’ll need to cover the shortfall or roll it into your new finance agreement, subject to approval.

Can I transfer my car loan to another car?

As every loan is tailored to a specific car, you can’t transfer a loan from one car to another. 

You’d have to ask for the early settlement figure from your lender, and pay this off in full, including any fees and interest. Alternatively, you could refinance your car, which is when you get a new deal to pay off your current loan.

If you’ve already paid half of the total amount owed (including interest) you could also be eligible for voluntary termination.

I have recently taken out car finance but need a bigger car. Can I change?

Your options for getting a bigger car depend on the type of loan you have and your loan terms. 

First, you’ll need to contact your finance provider and get your settlement figure. If you can't pay it all at once, you could consider part exchange. If your car is worth more than the settlement amount, you may be able to use the difference as a deposit for a new, bigger car.

However, if your car is worth less than the settlement amount, you'll have negative equity. In this case, if you can't cover the settlement, you will need to cover the shortfall yourself so it may be worth exploring other financing options to clear your existing loan.

Alternatively, if you’ve paid more than 50% of the total amount repayable, you may be able to voluntarily terminate your finance agreement. This way, you hand the car back and take out a new loan to get the bigger car you’re after.

If I already have a car on finance, can I get another one?

There’s no set limit on how many car finance agreements you can have, but lenders will assess your affordability and credit history before approving additional finance. The number of finance agreements that you can be approved for depends on your individual circumstances, credit history, and affordability. It isn’t unheard of for people to have two or three car finance agreements in their name.

However, car finance is a commitment, and agreements can last for several years. So it’s

important to be aware of the effect they might have on your financial health. You should only consider taking out more than one car loan if you can comfortably afford it.

Think about timing when you apply for a second or third car finance agreement. When you take out a new deal, you might see your credit score decrease slightly as you’re taking on a large new debt. This may improve over time as you make your repayments on time, but a lower credit score could make it harder for you to get another agreement right away.

Can I trade in a car that is still on finance?

You may be able to trade in a car that is still on finance, but you have to pay off your existing finance first as part of the process. Trading in a car is the same process as part exchanging a car on finance. When you trade in your car, the dealership will typically assess its value and offer you a trade-in allowance. This allowance can be used to pay off the remaining balance on your finance agreement. If the trade-in allowance is less than the outstanding balance, you'll need to cover the difference.

If your trade-in value is higher than your outstanding finance, you may be able to use the difference as a deposit for a new car. Some dealerships may offer a cash payment, but this depends on their policies and your finance agreement terms.

Can I swap my car on a Personal Contract Purchase (PCP) agreement?

If you’re in the middle of your loan term and want to swap cars, you may have options. You could give your car back to the finance company (known as voluntary termination) as long as you have repaid 50% of the total amount payable. This includes interest and fees, and the balloon payment on your PCP loan.

If you haven't paid 50% of the total amount payable, you can request a settlement figure from your lender. You will need to settle the outstanding finance before selling or trading in the car. 

Alternatively, you could part exchange your car. This involves trading in your current vehicle at a dealership and putting its value towards another car. The dealer can use the part exchange value to settle your outstanding finance, with any remaining amount going towards your new car. If your car is worth less than the outstanding finance, you'll need to cover the shortfall.

Another option is to keep the car you have but secure a better deal by refinancing. When you refinance, you take out a new agreement to pay the balance on your existing loan. Just make sure to check the total amount you'll pay back on the new loan. Sometimes, having lower monthly payments over a longer period could mean you end up paying more overall.

How soon can you trade in a financed car?

There’s no fixed minimum period you have to wait before trading in a financed car. You can usually part exchange it at any point during your finance agreement, provided you settle the outstanding finance first as part of the process.

Can I exchange my car if it's on finance?

You may be able to exchange your car for another car while it's still on finance. This is known as a part exchange. However, you'll need to settle your existing finance agreement as part of the process before you can complete the change. You can do this by using the value of your current car to settle the outstanding finance and put the rest towards your new car. If you don’t have enough for both, you’ll have to cover the shortfall.