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How to part exchange a car with finance – PCP and HP finance

If you've got your eyes on another car, it may be possible to part exchange your old financed car

Car finance

Can I part exchange a car that’s still on finance?

The short answer is yes, you can part exchange a car on finance. It’s just not quite as straightforward as part exchanging a car that you own outright.

There are systems in place to let you switch to a different car, even if you haven’t reached the end of your Personal Contract Purchase (PCP) or Hire Purchase (HP) agreement.

If you want to part exchange your finance car with cinch, we're usually able to settle your PCP or HP agreement beforehand.

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How do I part exchange a car on finance?

The prospect of part exchanging a financed car might seem intimidating at first because you don’t fully own the vehicle, but it’s actually not that difficult. To kick things off, you should do the following:

  1. Contact your car finance company and let them know of your intentions to part exchange the car. If you purchased your car from cinch on finance, our lenders – Black Horse, Evolution Funding, MotoNovo and Alphera Financial Services – will be happy to help you and give you your options.

  2. Ask them for a settlement figure. The settlement figure is simply the money you must pay to clear off the loan in full, which includes the remaining scheduled payments and the interest, as well as potential administration fees. There shouldn't be any early repayment fees, but there may be up to 30 days interest to cover the costs and you may also be due an interest rebate. If you're on an HP agreement, you can hand the car back and end the agreement once you’ve paid 50% of the total agreement value. This may be better for you, rather than part exchanging.

  3. Once you have received the settlement figure, you should ask the company or dealership you’re attempting to part exchange with to give you their valuation of the car. This will tell you how much money it will offer you for your financed car, as part of the package for the new vehicle you’ve been eyeing.  Don’t jump at the first offer though, as there may be other companies out there offering a better price. One option is to check cinch – we offer a part exchange service for financed cars.

Remember, when part exchanging it’s important to provide your V5C (logbook), the car’s manual and service documents, as well as the set of spare keys.

If the car is more than three years old, make sure you provide any MOT paperwork that you have. Keeping these with the car will ensure the highest valuation.

What if I am in positive equity?

In an ideal world, your current car is worth more than the finance amount you have left to pay in the agreement. This would mean you’re in positive equity, the sum of which can be used towards purchasing your next car.

For example, if your car is valued at £6,000 and you have £1,000 worth of outstanding finance left on it, you will have £5,000 in equity to go towards a new car.

What if I am in negative equity?

There are still ways to sell a financed car if your car is in negative equity. This is when the remaining amount on your finance exceeds the value of the car.

For example, if you owe £5,500 but the value of your car is now worth £5,000, you will have a negative equity of £500.

The company you’re attempting to part exchange your car with may be able to lend you the additional £500 as part of your new finance agreement, meaning you simply add the £500 you owe to the new PCP or HP deal for your next car.

But bear in mind that if you enter into this sort of agreement, you will still be in negative equity and you will owe more than the car is worth.

It can be hard to break this cycle, so you may wish to wait until you are in positive equity, if it’s possible to do so, before changing cars.

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Things to consider when part exchanging a car on finance

Some people have no qualms about part exchanging while their car is on finance (it’s a fairly common thing to do), while it can be an off-putting prospect for others.

Ultimately, it comes down to your current situation and how much you want or need a new car. Sometimes, circumstances change, and you simply cannot wait to make the switch.

Consider this though: holding back on a part exchange until your finance agreement has come to an end can often land you with a better offer for the car you want to sell. If you’re the outright owner after a PCP or HP agreement has concluded, you have more power in the negotiation.

Can I sell a financed car without part exchanging?

Yes, you can, and the initial process is remarkably similar to that of a part exchange request if you’ve not yet paid off 50% of the total agreement value. Here are the first steps:

  1. Contact the company you took PCP or HP finance agreement out with and let it know of your intentions to sell the car.

  2. Request a settlement figure.

  3. Sell the car for the best price you can get.

  4. Pay the PCP/HP provider the money you make from the sale, plus any remaining money you need to make the total value of your agreement. Alternatively, the company that’s supplying your next car may offer to pay off the unpaid finance, leaving you to receive only the equity in your next car.

Car finance

Things are even easier if you’re in an HP or PCP agreement and have already paid off at least 50% of the total value of the contract.

For example, if you’ve paid £10,000 into a PCP agreement valued at £20,000 all in (that includes interest, admin fees and the balloon payment at the end of a PCP deal), you can simply voluntarily terminate the contract. Do that, and you can hand the car back.

You will not receive any money back, but you can end your payments and walk away from the contract. You’re then free to look for your next car, which is the fun bit.

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