Can I change my car if I have outstanding finance?

Trading in a car with outstanding finance can be done, but there is a specific process you’ll need to follow.

If you want to change your car but still have outstanding finance payments to settle, you’ll need to end your contract early and take out another one on your new car. But when you can do this and how much it’ll cost you depends on the type of car finance contract you’re looking to settle.

“Can I swap my car on finance?” is a common query, so to help answer your questions, here’s everything you need to know in detail.

Can you swap finance from one car to another?

Car finance has many moving parts, and loans are tailored to your individual circumstances and your financed vehicle. This means swapping finance from one car to another isn’t possible, nor can you take your current car off the finance arrangement and replace it with another.  

Instead, you’ll need to end the contract you have on your current car and take out another finance agreement on the new one.

To find out how much finance is left on your car, you’ll need to contact the lender and ask for a settlement figure. This is the amount the lender is prepared to accept from you to end your current agreement.

Can I change my car on PCP early?

Personal circumstances can change during the length of a PCP contract, and you might want to change your car at some point during your arrangement. If you’re thinking about swapping or upgrading a car while on finance, this is the process you need to follow.

1. Get your settlement figure. This is how much you have left to pay on your current agreement.
2. Get the car valued.
3. Subtract the settlement figure from the car value.

If it’s a positive number, you have what’s known as positive equity. Your car is valued at more than the remaining balance on your contract, and therefore you can settle your finance agreement and even put the rest towards a deposit for a new vehicle.

If it’s a negative number, you have negative equity. Your car is valued at less than what you owe, so you’ll have to pay this number on top of the price of a new car.

When it comes to trading a car with outstanding finance, timing is important. If you are in negative equity (as you are likely to be at the beginning of your contract), you are likely to be better off waiting until you are in positive equity to settle up.

How to end Personal Contract Purchase (PCP) early

There are two options open to you if you want to end a Personal Contract Purchase (PCP) arrangement early.

1. Return the car to the lender - If you’ve paid half the loan off or you’re happy to pay to make up the difference between what you’ve already paid and half of the amount borrowed, you can return the car to the lender. This is known as a voluntary termination.
2. Buy the car outright - Ask your lender for a settlement figure. Once this is paid, the car is legally yours and you’re free to sell it and use the money to put towards your next car.

How to end Hire Purchase (HP) early

When taking out HP finance you can return the car early if you’ve paid half the loan or can make up the difference between what you’ve paid and half of the loan’s value. The credit agreement you signed with the lender should detail the amount you’ll need to pay to return the car early.

What is outstanding finance on a car?

If you’ve bought a car on finance, this usually means that the finance provider buys the car on your behalf and you pay them for it in regular instalments. Outstanding finance is simply the amount of money you owe until the arrangement is paid in full. 

When using HP or PCP finance to buy a car, you don’t actually own the vehicle until the outstanding finance is paid off. In this instance, the finance company is the vehicle's 'owner’, and you’re known as the vehicle’s 'keeper'.

What happens if I sell a car with outstanding finance?

When you buy a car on finance, you’re not the legal owner of that car until you’ve settled the finance agreement.

If you sell a car you still owe money on, the finance company will still expect you to pay the regular payments you agreed to when you took out the agreement. If these payments are missed, the lender will go after you or the new owner to recover the repayments and may even repossess the car. If there is still outstanding finance left once they’ve recovered the car, they can take you to court to get it back.

What happens if I buy a car with outstanding finance?

If you buy a car that you know has outstanding finance on it and those repayments aren’t made, the finance company can repossess the car and may even come after you for the money that’s owed.

If you bought a car without knowing it had outstanding finance, you do have the right to keep it and it’s up to the finance company to prove that you did know there was outstanding finance available. As part of this process, you’ll need to provide evidence of who you bought the car from, when you bought it, and any other information to support your case.

This situation is known as ‘good title’, but it’s not a guarantee that you won’t be chased for payment. It’s never advisable to buy a car with outstanding finance on it.

How do I find out if a car has outstanding finance?

You’ll need to run a finance check on the car you’re looking to buy to find out if it has outstanding finance. Zuto will complete both a vehicle history check and a vehicle valuation check on any car you’re looking at, completely free of charge. 

Find out more at our guide What do the free vehicle checks tell me?

How to work out a car finance settlement figure

The simplest way to work out a car finance settlement figure is to contact your lender. Remember, the finance has been arranged based upon your individual circumstances and the value of the car at various stages of the arrangement. The settlement figure might also include early settlement fees. 

If you’re thinking about changing a car with outstanding finance, the good news is Zuto may be able to help. Simply get in touch with your lender for a settlement figure and we’ll take it from there.

It’s worth noting that if you apply for further finance on a new car while you still have outstanding finance elsewhere, potential new lenders will take the current unpaid finance into consideration when determining your affordability for new finance. This may result in getting higher interest rates on the new borrowing or even a refusal.

If you’re looking to change your current vehicle and need some help and advice on what you need to do, why not talk to one of the Zuto team. Give us a call on 01625 619944.

Ryan has worked at Zuto for a number of years and uses his experience within the industry to help customers understand the ins and outs of car finance.

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It’s worth noting if you apply for further finance on a new car while you still have outstanding finance elsewhere, potential new lenders will take the current unpaid finance into consideration when determining your affordability for new finance.