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 current financed car.

In many cases, you can use the equity (the value of your car, minus any finance you owe) of your current car towards your next one, even if it's still on finance.

Before you start shopping, it can be helpful to get an instant part-exchange valuation and check your finance eligibility to get a clearer picture of your budget.

How do I part exchange a car on finance?

Part-exchanging a car on finance is very straightforward – here’s what you need to do:

1. Let your car finance lender know you plan to part-exchange the car - if you bought your car from cinch, our lenders will be happy to explain your options.

2. Ask your lender for a settlement figure - this will show you everything you need to pay to close your finance agreement, including the remaining payments, interest and any admin fees.

   You shouldn’t be charged any early repayment fees, but you may need to pay an extra 30 days’ interest to cover costs. You could also be owed an interest rebate as you’re paying to end the agreement early.

   If you used HP to finance your car, you can hand it back once you’ve paid 50% of the total amount you owe. Depending on your circumstances, the value of your car and how much you’ve paid, this might be better for you than part-exchanging.

3. Get a part-exchange valuation - you can now get a quote to see if you’d be able to part-exchange your financed car for more than your settlement figure.

   When you part-exchange your financed car with cinch, we’ll settle your outstanding finance for you. The money from your old car will automatically be used as a deposit for your next one. If you’re in negative equity, we’ll ask you to pay the difference.

   Remember to include your V5C (log book), any spare keys and any paperwork (owner’s manual, service history, etc.) when part-exchanging your car. A spare set of keys and full service history will help you get the highest valuation for your car.

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What if I am in positive equity?

Being in ‘positive equity’ means your car is worth more than the amount you have left to pay in your current finance agreement.

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

Paying more upfront can give you more cars to choose from or reduce your monthly payments, so being in positive equity is always handy.

What if I am in negative equity?

When you’re in ‘negative equity’, your car’s worth less than your outstanding finance amount.

For example, if you bought your car for £10,000, it’s currently valued at £5,000 and you have £6,000 left on your finance agreement, your negative equity is £1,000.

You can still part-exchange your car if you’re in negative equity though.

When you part-exchange in negative equity with cinch, we’ll ask you to pay the difference and will still settle your finance for you.

You may be also able to add the negative equity to your new finance agreement.

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Things to consider when part exchanging a car on finance

Whether you’ve part-exchanged a car on finance before or not, you need to decide whether it’s the right decision for you.

Once you’ve got a settlement figure, know what your car’s worth and see what finance options are available and affordable, it should make your decision a bit clearer.

Then it just comes down to how much you need or want a new car. Maybe you need something bigger, maybe you’d like something cheaper – or maybe you just fancy something new.

Part-exchanging a car on finance is fairly common, so the process should be easy to follow with lots of help available if you need it. However, if you wait until your finance agreement ends and you own the car outright, you may be able to get a better offer. It’s worth thinking about.

Can I sell a financed car without part exchanging?

Absolutely, and it starts off in a similar way to part-exchanging a car on finance. Here’s what you need to do:

1. Speak to your lender to make sure they agree to you selling the car

2. Get your settlement figure

3. Sell the car in whichever way suits you best

4. Pay your lender the balance of your finance agreement (if you’re in negative equity, you might need to pay the difference or include it in your next agreement)

5. And once again, the fun bit – look for your next car

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 £20,000 HP or PCP agreement (including interest, admin fees, and the PCP balloon payment), you can voluntarily terminate the contract. Do that, and you can hand the car back. Keep in mind, there may be additional charges for excess mileage or damage.

You won’t get any money back, but you’ll be free to find your next car without having to worry about part-exchanging or selling your old one. Be careful to make sure this is the right option and makes financial sense for you – if you’re not sure, find advice from a trusted source, such as this guide from Money Helper.

Ready to change your car?

If you want to part-exchange a car on finance, here’s how cinch can help:

• Get an instant online part-exchange valuation

• Check your finance eligibility (without affecting your credit score)

• Then browse 1,000s of quality used cars, available on flexible HP and PCP deals

Learn more about car finance:

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