Yes, you can part exchange a car that has outstanding finance. It’s a common practice in the UK car market, and dealers are well-versed in handling these transactions. The process involves the dealer settling your existing finance agreement and arranging the part exchange as part of a single transaction.
Table of Contents
- Can You Part Exchange a Car with Outstanding Finance?
- How Part Exchange Works with Outstanding Finance
- Understanding Settlement Figures and Equity
- The Part Exchange Process with Outstanding Finance
- Important Considerations When Part Exchanging
- Different Finance Types and Part Exchange
- Common Questions About Part Exchange with Finance
- Making Your Decision
- Professional Tips for Success
- Getting Support
Can You Part Exchange a Car with Outstanding Finance?
Once you have the settlement figure, the dealer will assess your car’s value and handle the settlement with your finance company directly. This means you won’t need to manage two separate transactions – the dealer takes care of clearing your existing finance while processing the part exchange.
Understanding Settlement Figures and Equity
Positive Equity Scenario
When your car is worth more than the settlement figure, you’re in positive equity. For example, if your car is valued at £15,000 and your settlement figure is £12,000, you have £3,000 in positive equity that can contribute toward your next vehicle.
Negative Equity Scenario
If your settlement figure exceeds your car’s value, you’re in negative equity. For instance, if you owe £13,000 but your car is worth £11,000, you have £2,000 of negative equity that will need to be addressed as part of the new agreement.
The Part Exchange Process with Outstanding Finance
Initial Steps
The dealer will begin by valuing your current vehicle and checking your settlement figure. They’ll then calculate whether you’re in positive or negative equity, which affects how the transaction proceeds.
Finance Settlement
The dealer handles the settlement directly with your finance company. This is a crucial benefit of part exchanging through a dealer rather than trying to sell privately while under finance.
New Vehicle Arrangement
Once the settlement process is understood, you can proceed with choosing your new vehicle and arranging any new finance if required. The dealer will incorporate your equity position into the new agreement.
Important Considerations When Part Exchanging
Timing Matters
Your settlement figure usually remains valid for a limited time, typically 14 days. It’s important to time your part exchange accordingly to avoid having to request an updated figure.
Documentation Required
- • Current finance agreement details
- • Settlement letter from your finance company
- • Vehicle registration document (V5C)
- • Service history and maintenance records
- • All keys and associated documentation
Market Value Impact
- • Age and mileage
- • Service history
- • Overall condition
- • Current market demands
- • Seasonal variations
Different Finance Types and Part Exchange
Personal Contract Purchase (PCP)
Part exchanging a car on PCP requires special consideration of the balloon payment and any early termination fees. The settlement figure will include the balloon payment, which can significantly affect your equity position.
Hire Purchase (HP)
HP agreements often provide more straightforward part exchange options. The settlement figure represents the remaining payments plus any fees, with no balloon payment to consider.
Common Questions About Part Exchange with Finance
Will I Have to Handle Two Finance Agreements?
No, the dealer manages the settlement of your existing finance as part of the part exchange process. You won’t be responsible for two separate agreements.
Can I Part Exchange if I’m in Negative Equity?
Yes, though you’ll need to account for the negative equity, either by paying it off or incorporating it into your new finance agreement.
Does Part Exchanging Affect My Credit Score?
The settlement of your existing finance agreement shouldn’t negatively impact your credit score, though any application for new finance will involve a credit check.
Making Your Decision
- • Obtain and verify your settlement figure
- • Get multiple valuations for your current vehicle
- • Compare deals from different dealers
- • Understand all terms and conditions
- • Calculate total costs including any new finance
Professional Tips for Success
Research Current Values
Understanding your car’s true market value helps ensure you receive a fair part exchange offer. Use multiple valuation tools and get several dealer quotes.
Understand Your Agreement
Review your current finance agreement carefully, particularly regarding early settlement terms and any associated fees.
Don’t Rush
Take time to understand all aspects of the transaction before proceeding. A reputable dealer will respect your need to make an informed decision.
Getting Support
If you need additional guidance, several resources are available:
- • Money Advice Service for free, impartial financial guidance
- • Your current finance provider for settlement information
- • Financial Conduct Authority for consumer protection information
- • Citizens Advice for general consumer rights advice
Part exchanging a car with outstanding finance is a common transaction in the UK car market. While it may seem complex, dealers handle these situations daily and can guide you through the process. The key is understanding your position and ensuring any new agreement meets your financial circumstances.
