I have outstanding finance on my car, can I get a new one?
Got outstanding finance on your current car but want to get a new one? There are several options available to you if you want to swap car finance but it’s important to understand your current finance agreement and the potential costs. Let’s look into them in detail and answer any questions you have.
Can I get a new car if I still have finance?
Yes, even if you have outstanding finance on your car, in some cases you may be able to get a new one before your agreement ends.
It all depends on your situation and your car finance agreement. But, there are three main options to consider:
Voluntary termination: If you have paid half the total amount payable, then you have the right to voluntarily terminate your PCP or HP loan and hand the car back. This includes fees, interest, and, the balloon payment in a PCP deal. If you’ve not already paid 50%, you can also choose to make a one-off payment to make up the difference.
Request a settlement figure: You could also pay off your loan early to own your car. You could then sell it. To do this, you need to request a settlement figure from your lender, which is the amount it will cost to pay off your loan in full (and any interest). But be aware that you might have to pay early settlement fees, so check your agreement carefully.
Refinance a car: If you want to keep your car but pay less each month, you may be able to refinance. This is when you get a new deal to pay off your current loan. You can switch to a loan where you pay less every month and have more time to pay it all back, but extending your term or reducing your payments could increase the total amount payable over time..
Can I swap my financed car for a cheaper one?
Every car finance agreement is tailored to one borrower and vehicle. So, you can't just swap to a cheaper car during your loan. But that doesn’t mean you’re stuck with a car you no longer want or can’t afford. You do have options, even if you haven’t yet reached the end of your agreement.
One option is ending your existing agreement by paying the settlement figure. Typically, the further you are into your agreement, the lower your settlement figure will be.
Or, if you can’t afford your current repayments, refinancing may be an option, but you should consider whether extending the loan term or changing your finance deal is the right choice for your financial situation. Always check the total cost of borrowing before refinancing.
Alternatively, you can ask for voluntary termination and hand the car back, as long as you’ve paid 50% of the total amount payable. Just bear in mind this also includes any fees, interest, and the balloon payment if you’re in a PCP agreement.
Can I downgrade my car on finance?
If you want to downgrade your car, the same three options apply. You could refinance your car, pay off the settlement figure or choose voluntary termination if you’ve off 50% of the total amount owed.
If you're aiming to cut down on your monthly expenses, a refinance deal might be a good idea. Refinancing involves finding a new loan agreement to pay off your current loan. This new loan might offer a better interest rate or lower monthly payments. You'll settle your current loan with a single payment, either covered by the new lender or added to your new loan.
Just make sure to check the total amount you'll pay back on the new loan. Sometimes, having lower monthly payments over a longer period could mean you end up paying more overall.
Can you swap finance from one car to another?
No, you can’t swap finance from one car to another. You’ll first have to settle your loan and take out a new one.
If you’ve paid off 50% of your total amount owed, you could opt for voluntary termination. Or, you could pay off the loan early by asking for your settlement figure. This figure includes interest and potential early termination fees.
If you can’t pay this in full, a refinance agreement could be the best option for you, as this would allow you to pay off your current loan and get a new loan agreement with the car you want.
Can I transfer my car loan to another car?
As every loan is tailored to a specific car, you can’t transfer a loan from one car to another.
You’d have to ask for the early settlement figure from your lender, and pay this off in full, including any fees and interest. Alternatively, you could refinance your car, which is when you get a new deal to pay off your current loan.
If you’ve already paid half of the total amount owed (including interest) you could also be eligible for voluntary termination.
I have recently taken out car finance but need a bigger car. Can I change?
Your options for getting a bigger car depend on the type of loan you have and your loan terms.
First, you’ll need to contact your finance provider and get your settlement figure. If you can't pay it all at once, consider getting a refinance loan. If your car is worth more than the settlement amount, you may be able to use the difference as a deposit for a new car.
However, if your car is worth less than the settlement amount, you'll have negative equity. In this case, if you can't cover the settlement, you may need to cover the shortfall yourself so it's worth exploring other financing options to clear your existing loan.
Alternatively, if you’ve paid more than 50% of the total amount repayable, you may be able to voluntarily terminate your finance agreement. This way, you hand the car back and take out a new loan to get the bigger car you’re after.
If I already have a car on finance, can I get another one?
There’s no set limit on how many car finance agreements you can have, but lenders will assess your affordability and credit history before approving additional finance. The number of finance agreements that you can be approved for depends on your individual circumstances, credit history, and affordability. It isn’t unheard of for people to have two or three car finance agreements in their name.
However, car finance is a commitment, and agreements can last for several years. So it’s important to be aware of the effect they might have on your financial health. You should only consider taking out more than one car loan if you can comfortably afford it.
Think about timing when you apply for a second or third car finance agreement. When you take out a new deal, you might see your credit score decrease slightly as you’re taking on a large new debt. It should recover quickly after you start repaying the loan. But, a lower credit score could make it harder for you to get another agreement right away.
Can I trade in a car that is still on finance?
Yes, you can trade in a car that is still on finance. When you trade in your car, the dealership or buyer will typically assess its value and offer you a trade-in allowance. This allowance can be used to pay off the remaining balance on your finance agreement. If the trade-in allowance is less than the outstanding balance, you'll need to cover the difference.
If your trade-in value is higher than your outstanding finance, you may be able to use the difference as a deposit for a new car. Some dealerships may offer a refund, but this depends on their policies and your finance agreement terms.
Can I swap my car on a Personal Contract Purchase (PCP) agreement?
If you’re in the middle of your loan term and want to swap cars, you have options. You can give your car back to the finance company (known as voluntary termination) as long as you have repaid 50% of the total amount payable. This includes interest and fees, and the balloon payment on your PCP loan.
If you haven't paid 50% of the total amount payable, you can request a settlement figure from your lender. You will need to settle the outstanding finance before selling or trading in the car. Alternatively, you might be able to secure a better deal by refinancing. When you refinance, you take out a new agreement to pay the balance on your existing loan.
Can I part exchange a car that is still on finance?
Yes, you can part exchange a car that is still on finance. Part-exchanging involves trading in your current car to offset the cost of a new vehicle.
The dealership or buyer will typically assess the value of your car and offer you a part-exchange allowance. This allowance can be used to pay off the remaining balance on your finance agreement.
If the part-exchange allowance is less than the outstanding balance, you'll need to cover the difference. Alternatively, if the part-exchange allowance is more than the outstanding balance, you may get a credit for your new car or a cash refund. This depends on the terms of the part-exchange agreement.