Can you swap finance from one car to another?
Have you changed your mind on your car? Want a newer model than your car currently quicker than your finance agreement allows? Well, can you swap finance from one car to another?
Well, the short answer is, not usually.
However, while you can’t directly swap a finance agreement from one car to another, there may still be the option to change your car if you have any outstanding finance. To do this, you could pay off your outstanding balance, then sell your car either to a dealership or second hand and the buy a new one, either through part exchange, brand new or second hand.
Why can’t you swap car finance to another car?
So, now we’ve established the ways in which you can aim to get a new car when you’re under a finance agreement, it’s important to understand why you can’t just transfer your agreement over.
In short, you can’t swap car finance from one car to another because the finance deal you agreed is specific to your credit status and rating at the time of the current agreement commencing. Situations may have changed, positively or negatively since then, meaning changing your finance may be risky for the lender.
The original car finance offer provided at the start of your agreement takes several factors into consideration when assessing your initial application and these factors help the finance company make a decision whether you are eligible or not, and if you are, what the terms of your agreement are.
As a result, you can’t swap your already agreed finance to another car, as the information that decided that agreement in the first place may now no longer be up to date.
The factors that decide include:
- your financial records and circumstances at the time such as your income, your employment status (temporary or permanent) and your outgoings.
- the value of the car you wish to finance. Car value almost always constantly depreciate over time, so the finance agreement offered is based on the value of the car when you accept the agreement, not the car value currently or when bought brand new.
Many people also ask, can I get car finance with bad credit? The answer to that is yes you could! Especially here at Car Finance Genie. We are specialists in bad credit car finance. To change your car midway through your contract could increase the risk for the lender or the cost to lender to sell the same car again due to the decrease in value, so this isn’t common practice. However, if you are desperate to upgrade your car before your repayment period comes to a close, there are ways to still do this.
How to still change a car when on finance agreement
Most finance agreements are taken out over the course of several years. You may think at the very start of the agreement that you can happily use the same car for several years and that your decision is justified, but you never know how your circumstances may change. Maybe you bought a small car with a quick acceleration time, and now you have a child on the way, you want something more spacious and family friendly.
If for whatever circumstance change, you need to change or upgrade your car while you still have an outstanding finance agreement, there are options you can look into.
Ask your provider for a settlement figure
If you’re looking to change your financed car, the first step is to get in touch with your finance provider and request a settlement figure. This figure represents the outstanding balance of your agreement, including interest, on your car finance contract. Before you can change cars, you will need to pay this balance off in full and become the legal owner of the vehicle you originally financed. This figure will only be valid for a certain amount of time, decided by your provider, as situations, car value and financial circumstances constantly change.
It’s important to bear in mind that in some circumstances, depending on your lender and agreement, you may be charged early repayment charges and/or charges additional damage such as excessive wear and tear. So, be sure to carefully unpick the details of your agreement before deciding to pay off your settlement figure and own the car outright.
Another option is to go it alone: settle your outstanding balance and sell your current car privately. This can either be done online through car buying sites or privately to friends, family or by word of mouth.
Remember, though, if you have an HP agreement, you do not own the car until you’ve settled any outstanding balance or all the payments have been paid. Once it has been paid in full, ownership will transfer to you from your car finance provider, and then you’ll be able to sell it privately.
If you have a PCP agreement, you only take full ownership of the car when you make the lump sum ‘balloon payment’ at the end – on top of your monthly repayments. So, this will need to be included in your settlement figure. Once you are the legal owner, then you will be able to sell the car.
If you would like to talk to an expert in regards to your existing car finance deal or if you want to learn more about taking out a new agreement, get in touch today!
On the occasion that you have a vehicle with a market value higher than your outstanding balance (positive equity) then you could put the difference towards the deposit on your new or upgraded car.
To do this, you need to contact your lender and ask if your agreement is eligible for any part-exchange (or trade in) agreement on your car. It’s important to understand this new vehicle doesn’t have to be the same dealership you got your current car from, so don’t worry if they have the vehicle you specifically want in stock. They’ll often do a lot of the hard work for you, including getting you an early settlement figure so you can pay off your existing finance.
If you have negative equity though, meaning you owe more than your car is currently worth (more common than not) you’ll need to pay the difference on your current car on top of finding the deposit for your new model.
It’s also important to check all of the terms of your agreement, as if you are leasing your car, there won’t be an option part exchange it as there is no capacity to actually own the vehicle. As you might expect, you can only part-exchange a car that you own. With a personal contract purchase (PCH) you essentially rent the vehicle for the length of your agreement, never actually owning it.