Can you swap car finance from one car to another?

Can you swap a car on finance?

You can't swap the finance itself, but you can swap the car. You just need to end or change your current deal first.

The finance can't simply move to a different car, for three reasons:

• The lender owns the car: With hire purchase (HP) and personal contract purchase (PCP), the car belongs to the lender until you make your last payment (the balloon payment on PCP).
• Your deal is built around that car: Your lender set your payments using that car’s price. On a PCP deal, they would have also used its expected mileage and how fast it loses value.
• A different car has a different price and value: Every car has its own price and value, so each one needs a separate agreement.

Because the lender owns the car, you also can't sell it privately until the finance is paid off.

Option 1: Part-exchange your car

Part-exchange is often the simplest way to change your car. You trade in your current car at a dealer and put its value towards your next one.

Here's how it works:

1. The dealer values your car.
2. They ask your lender how much you still owe. This is called the settlement figure.
3. The dealer pays off your old finance.
4. Any money left over goes towards your next car.

What if you owe more than the car is worth?

This is called negative equity. You'd need to pay the difference yourself, or some dealers may add it to your new finance. Adding it means you borrow more, so your new payments could be higher. Check the full cost before you agree.

Option 2: Settle your finance early

You have the right to pay off your car finance early. Once you've paid it off, the car is yours. You can then sell it, keep it or trade it in for a different car.

To settle your finance:

• Ask your lender for a settlement figure. They must give you one in writing within 12 working days.
• Pay the amount before the date shown on the figure.
• Get confirmation that your agreement is closed.

Your settlement figure is usually less than the total of your remaining payments, because you save on some interest. Your lender may add a small fee for paying early, but the law limits how much they can charge.

If you can't pay it all at once, you could pay off part of the finance early instead. This lowers what you owe.

Option 3: Voluntary termination

Voluntary termination lets you hand your car back to the lender and end your deal. It's a legal right under the Consumer Credit Act 1974, and it works for both HP and PCP agreements.

To use it, you need to have paid at least half of the total amount payable. This includes interest, any fees, your deposit, and on PCP, the final balloon payment.

• If you've paid half or more, you can usually hand the car back with no more monthly payments.
• If you've paid less than half, you'll need to pay the difference to reach half first.
• If you've missed any payments, you'll need to pay these too.

You may still need to pay for damage beyond normal wear and tear. If your deal has a mileage limit and you've gone over it, you may be charged for that too.

Once your deal ends, you're free to choose your next car. If you're taking out finance again, the new lender may see the ended agreement on your credit report.

Which option suits you best?

The right choice depends on your money, your car and how far into your deal you are.

Option	Best if you…	Things to think about
Part-exchange	Want to change your car quickly, with the dealer handling the paperwork	Negative equity could make your next deal cost more
Settle early	Have savings and want to own your car outright	You'll need to pay the settlement figure in one go
Voluntary termination	Have paid, or can top up to, half the total amount and want to end your deal	Charges for damage or extra miles may still apply

 

Tips before you change your car on finance

A few quick checks now could save you money later. Before you decide:

• Ask your lender for your settlement figure, so you know exactly what you owe today.
• Use a free online valuation tool to see what your car is worth, then compare it with what you owe.
• Read your agreement for mileage limits, fees and the total amount payable.
• Talk to your lender. They can explain your options and answer your questions.
• If you're taking out finance again, compare the total cost of each deal, not just the monthly payment.

If you're finding payments hard, free help is available from Citizens Advice, National Debtline and StepChange.