How to swap your car if it's on a finance agreement
Settling car finance early might seem like a daunting task, but you’ve actually got three options and it’s not as tough as you might think. You'll need to do a little bit of quick maths and collect some paperwork but, fear not, we’ll help you every step of the way.
The three options available to you are:
- Settle your finance agreement early by paying the settlement figure
- Sell your car and use the funds to settle your finance agreement
- Part exchange or swap your car for another
For each option in this guide, you’ll need your car’s “settlement figure”, which is essentially the total amount of money you'll need to pay the lender to end your agreement with them, including any fees. Your lender is required by law to supply this to you within 12 days of requesting it, and you should always make sure to get it in writing.
Option 1: Settle your finance agreement early by paying the settlement figure
Early settlement is simple, but potentially quite costly depending on how far through your agreement you are.
Once you have received the settlement figure from your lender, simply pay that amount.
Your lender will advise you on what happens after you pay the settlement figure, though it will usually end up with you becoming the legal owner of the car.
Becoming the legal owner of the car will allow you to do what you like, whether you choose to keep it or sell it; it's entirely up to you.
Option 2: Sell your car and use the funds to settle your finance agreement
Selling a financed car allows you to use the current market value of the car to pay all or part of the settlement figure. Be warned that some lenders won't let you sell your car privately, so check with them first. Most lenders will let you sell your car to a car retailer (like us) though, since we will settle the finance for you.
Simply add the details of your car into our Sell Your Car tool and we'll let you know how much it’s worth.
Next, take your car value and subtract your settlement figure from it. If you end up with a positive figure, that's how much money we'll pay you for your car along with settling your finance. If it's negative, that's the amount you'll need to pay on top of the value of your car, in order for us to settle your finance agreement.
When you bring your car into one of our centres, you'll need to bring along the settlement figure letter that your lender sent to you and we'll take care of everything else.
Option 3: Part exchange or swap your car for another
Whether you’re on a Personal Contract Purchase or Hire Purchase agreement, switching cars is actually quite easy.
You’ll need the following:
- A finance settlement figure from your lender
- The V5C log book in your name
- A valuation for your car
Subtract the settlement figure from your car’s valuation to find out the amount of “equity” available in your car. If you end up with a positive figure, you can use this amount of money as a part exchange for your next car. If it’s negative, you’ll actually need to pay that amount of money on top of your new car’s price.
If you're paying your current car finance by Direct Debit check when your payments come out of your bank account, since your settlement figure will lower each time you make a payment, and you don’t want to end up shorting yourself on the value of your car.
Finance your next used car your way
If you feel confident that you know what you want from a car finance agreement, then you can go right ahead and arrange your finance online with CarStore. It's simple, easy and quick to do.
However, we know that you may want someone to help you understand everything that's involved with finance. Our personal advisors will be happy to listen to your individual requirements and present you with all the information using plain, jargon-free language.
Talk to us online, over the phone or contact a CarStore Centre with any questions you may have.