Can I make modifications to a car on finance?

Whether you can modify a car on finance will depend on the terms and conditions of your loan, what the lender classes as a modification, and the type of car finance you’ve chosen.

5 min read
Modified cars

What constitutes a car modification to lenders?

Car modifications come in all shapes and sizes, and each lender will impose their own restrictions based on what they deem to be permanent changes. These could be large modifications like changing the wheels for a set of alloys, adding a new spoiler, or investing in performance upgrades to the engine, exhaust, brakes, gearbox, or suspension. But they could also be smaller alterations, such as adding a tow bar, switching out the stereo, or swapping the standard headlights for LED lamps.

Cosmetic changes can also be considered modifications, so you may want to check your car finance agreement before splashing out on fresh paintwork, a vehicle wrap, or window tints.

Modifying a car on HP

Hire purchase (HP) car finance allows you to spread the cost of a car over fixed monthly repayments for a period of up to five years. Typically, you’ll be asked to put down a deposit and then pay a small ‘Option to Purchase’ admin fee to take ownership of the car at the end of your agreement. HP loans are secured against the vehicle. This means that you won’t be the car’s legal owner during your loan term and the lender will have a vested interest in the car’s condition. If prohibited modifications are made, this could affect the car’s value and cause problems if the lender needed to repossess the car for non-payment and try to sell it on.

Modifying a car on PCP

Personal contract purchase (PCP) car finance is like HP in that it helps you spread the cost of a car over several years, but you don’t necessarily have to take ownership of the car at the end of your agreement. The loan will be secured against the vehicle, and you will be its registered keeper throughout the term. That means you’re responsible for its upkeep, repairs, tax, and MOT, but the lender will remain the legal owner.

Modifications are typically prohibited during a PCP agreement as your loan is closely linked to the car’s future value and you have the option to hand it back when your term ends. If you decide to return the car to the lender, it should be in a condition that’s as close as possible to its original state and ready to resell. Any modifications could make this impossible.

Modifying a car bought with a personal loan

Unlike HP and PCP, personal loans are not secured against the vehicle. As soon as you use the loan to pay the seller, you’ll become the car’s legal owner. This means that you’re free to do whatever you like to the car from the outset, including sell it or make major modifications.

Can I make a modification that adds value?

It’s not easy to predict the effect a modification will have on a car’s future value. You might want to make a change that you believe will add value to the car, but this isn’t guaranteed, and you could end up reducing its value instead. Lenders can’t be sure that a future buyer will want a more powerful version of your vehicle, for example, or how much they might pay for it, which could restrict their chances of achieving a good resale price. They also won’t be able to judge the quality of the work and may have safety concerns.

Can I make minor modifications?

You may be able to make some minor modifications to a car on finance without causing any issues with your lender. A good rule of thumb is to think of your car like a rented flat; you might be able to add your own temporary furnishings, but you could run into problems if you start painting the walls and ripping up the carpet.

Reversible car modifications may be permitted under the terms of your agreement, such as adding a phone holder, seat covers, or sun blinds. You may also be free to replace headlight bulbs and worn tyres, but you might have to agree to use only approved parts. If you choose to remove anything from the vehicle, like branded floor mats or a parcel shelf, you might want to keep them somewhere safe so you can put them back when your loan term comes to an end.

What should I do if I want to modify a car on finance?

If you’re bursting with ideas and can’t wait to start modifying a car on finance, check your agreement. The terms and conditions should detail exactly what is and isn’t permitted during your loan term. It will also usually include a list of penalties if you break the terms of the contract. If you’re still not sure, you can speak with your lender to clarify their position. And if you are yet to sign your car finance agreement, it could be worth asking the lender these questions before doing so.

What happens if you modify a financed car and break the terms of your deal?

So, what consequences could you face if you go ahead and make modifications even though you’re not yet the car’s legal owner? The action taken will depend on the lender’s policy, which should be outlined in your car finance agreement. You might find that the company will withdraw your finance immediately and give you 14 days to pay the remaining balance in full. If you have a PCP deal, this may also include your balloon payment.

If you’ve made modifications and fail to keep up with your car finance repayments, the vehicle might be repossessed. In that case, the car could be sold for less than its true value and you might be asked to pay the difference. To avoid any issues, waiting until you’ve become the legal owner or seeking permission from your lender before making any changes could be your best option.

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*Representative example: Borrowing £6,500 over 5 years with a representative APR of 19.9%, an annual interest rate of 19.9% (Fixed) and a deposit of £0.00, the amount payable would be £166.07 per month, with a total cost of credit of £3,464.37 and a total amount payable of £9,964.37. Rates may differ as they are dependent on individual circumstances. Subject to status. We're a credit broker, not a lender.

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