Can You Part Exchange a Car With Outstanding Finance?
07th Feb 2025
If you’re currently tied up in a finance agreement but need to change your car, there are ways of terminating the contract early, depending on the type of finance agreement you have.
Even though dealing with this matter may add an extra couple of steps to your part-exchange process, it is usually simple and straightforward.
In this guide, we’ll walk you through the steps and the documents you’ll need in order to use your vehicle with outstanding finance as part-exchange to a new car.
Contents
- Can you part exchange a car on finance?
- How to part exchange your financed car
- What if I'm in positive equity?
- What if I'm in negative equity?
- Which documents should I bring when I part-exchange my car on finance?
- Frequently Asked Questions
Can you part exchange a car on finance?
Yes, it’s possible to part exchange a car that still has outstanding finance, however, the process isn’t as straightforward as if you owned the vehicle outright.
The first step is to find out which type of finance you have. The most common finance agreements are Personal Contract Purchase, also known as PCP, and Hire Purchase, which can be referred to as HP. Finding out your car’s finance type will help you make an informed decision, whether you should settle your debt, return the car to the dealership or use it as part exchange.
HP agreements allow you to return your vehicle to the dealership after you’ve paid at least 50 percent of the total amount owed. If your vehicle is in negative equity, it might be a good idea to return it and settle the debt right then, instead of paying it off to use it as part exchange.
How to part exchange your financed car
The process of part exchanging your vehicle is relatively simple, if you follow the steps below:
Request a Settlement Figure
This is the first step to the process. You need to find out how much you still owe before you can make the final payment.
Your lender will provide a document with the outstanding balance if you request a final settlement figure. This figure is the total amount of the finance agreement minus all the instalments that you have paid so far.
Request a valuation from the dealership
Now that you know how much you still owe to your previous lender, it's time to find out how much your car is worth.
You can request that the dealership you're looking to buy your new car from perform a valuation so you know how much they're willing to pay for your current vehicle (or deduct from the new one).
Accept the Offer
If the dealership makes you an offer you're happy with, you can accept it and proceed with the purchase of the new vehicle.
Dealerships are qualified to handle outstanding finance on the vehicles they're accepting as part exchange. If you provide the retailer all the information for your current lender, they should be able to handle the termination of your current finance agreement for you.
What if I am in positive equity?
This would be the ideal situation. After the new dealership provides you with their valuation, you’ll compare the amount they’re willing to pay for your old vehicle with the settlement figure. If you have an offer superior to the outstanding balance on your finance agreement, this means you’re in positive equity.
To exemplify this scenario, we’re going to say that the dealership is offering £5,000 for your car and the settlement figure is £2,000. This means that if you decide to part exchange your car, you’ll be able pay back your current finance agreement and put the remaining £3,000 towards the new car you’re buying.
What if I am in negative equity?
You’ll be in negative equity if the amount offered by the valuation is inferior to the settlement figure. For example, if the dealership says they’re willing to pay £3,000 for your old vehicle, but you still owe the lender £5,000. This means that if you give your old vehicle as part exchange, you won’t have enough money to cover the outstanding agreement.
In this case, it’s worth checking if you can return your current vehicle to the dealership where you purchased, in exchange for the settlement of the debt.
Which documents should I bring when I part exchange my car on finance?
When you part exchange a vehicle, you’ll be basically selling it to the dealership, therefore you need to take all the documents you normally would to any buyer. These documents include:
- V5C Logbook
- MOT Certificate
- Spare set of keys
- Service Records
Can I sell a financed car without part exchanging?
Yes, it's possible to sell your car with outstanding finance, even if it's not to be used as part exchange. The steps to be taken are similar to when you use the vehicle as part exchange. You need to request a settlement figure from your lender first. Then you'll know how much you need to sell your vehicle for in order to pay the debt.
Alternatively, you can sell your vehicle to us at your local Evans Halshaw retailer. We have a team of friendly associates who will be able to assist you within the process and help you terminate the current finance contract, once the sale's gone through.
Frequently Asked Questions
There are many advantages to part exchanging a car. Usually, the process of trading in your vehicle with a dealership is simple, hassle-free, and relatively quick, compared to advertising the car privately, which could take to months and even years before you find someone interested.
If you consider the financial side, part exchange a car with outstanding finance is a good idea if you’re in positive equity. After the dealership provides you with a valuation, you’ll be aware of how much they’re offering, and you’ll be able to make an informed decision when comparing to how much you’ll still have to pay on your finance agreement.
The process of part exchanging a car is similar to a sale. If you keep your car in good condition, you clean it regularly, and avoid stains, it’s more likely that your car will hold its value.
If you don’t keep up with your vehicle’s maintenance schedule, and don’t generally look after it, the buyer, in this case the dealership, can perceive your car as less valuable and make a lower offer.
There are a few items dealerships look into when performing a valuation. Factors such as make, model, age, and mileage are taken into consideration, as well as extra features and the maintenance aspect of it.
Cleaner cars, without stains, with all the basic features working well, such as window openers, infotainment system and air conditioning are known for holding their value better than vehicles with features that aren’t working.
