Can you swap your finance from one car to another?

Roman Danaev

7 July 2021

Many car enthusiasts use a bank to finance the purchase of a personal car, which is very convenient. They do not need to save for years to buy a car. Drivers can take out a loan for the purchase - and their dreams come true. But sometimes, a situation arises whereby the borrower chooses a vehicle in a hurry and later wants to swap car finance to purchase a different brand or model. In this case, they can face difficulties because the bank still controls all actions related to the car finance loan.

Can you swap your car during a finance agreement?

Car finance is a complicated subject, so it's important to know the rules. An auto dealer will not allow you to swap car finance from one car to another because each agreement has certain set criteria. The financing company will consider many different factors when evaluating your application, and these affect whether or not you are eligible.

When you take out a car finance plan, many factors need to be considered. Some of them are:

  1. Your circumstances when taking the loan out on your vehicle.
  2. How much it will be worth at each point during the repayment period.
  3. The special offers or packages offered by the lender.

The underwriting process is a crucial step in getting your loan approved. You will need to provide all the requested information, and it might take some time for the finance company to decide whether or not they can offer you finance at an affordable rate.

This information is vital for underwriting decisions. Changing any information about your vehicle may mean starting a brand new application process. That is, the finance company has to start all over again.

The financial implications of swapping finance from one car to another are huge, so it's something that the bank may not consider doing.

Car upgrades while on finance

You might not think at the start of an agreement that you will want to change cars in the near future, but life is full of surprises. Your two-seater sports may become too small if a baby appears, for example.

Whether you simply want to upgrade your current vehicle or need a larger, more practical one due to circumstances, you can do so.

With a car on Hire Purchase or Personal Contract, you can rest assured that the process is simple. You can always change or upgrade your car while you have outstanding finance! There are a few options available to suit everyone's circumstances.

Payment of the settlement figure

When looking to change a car finance agreement, the first step is to get in touch with lenders and request an estimate of how much money still needs to be paid off. This settlement figure represents what's left on any agreements, including interest rates. So, before you can move on, you have to pay off your debts in full, and then you can become the legal owner of your vehicle.

Financial service providers often have limitations on the time frame in which this settlement figure will be valid.

Be sure to read the details of your agreement before paying a settlement figure. There might be charges for early repayment and/or excessive wear and tear, so do some research first!

Car sale

Another option is to go it alone: settle your outstanding balance and sell the car yourself. However, if you have an HP agreement, do not expect ownership of this vehicle until the final payment has been made.

If there is a PCP contract, the car is yours only after making a one-time balloon payment at the end of your contract. You can sell it then, but no earlier! Do not forget to consider this point when calculating the settlement amount.

Refinancing your car

When you're stuck with an agreement that lasts for several years, it can be hard to stay flexible. But if your finances or lifestyle change in the future and force a review of options, then look into refinancing instead!

Refinancing is the perfect solution for people looking to save money on interest payments. You can secure a better deal by settling your old loans with a one-off payment, which will be covered in full by a new lender or incorporated into your contract!

When you change loans, be sure to take note of the total amount payable and the length of your new term. If shorter than what's currently owed on account or if higher monthly payments are required over an extended period, this might not end up being a cheaper solution.

Part-exchanging on finance

You could use the difference between what you owe on your car and its current value as a deposit for next time.

To get a better deal on your car, you should consider part-exchanging (or trading in) an old one for a newer one. The new lender will do all of that hard work and more, including getting you an early settlement figure, so everything works out nicely for both parties involved!

You may be in a difficult situation if you have negative equity. In this case, it would be necessary to find the deposit for another car out of your pocket and pay off what's owed on top of that!

With a personal contract purchase (PCH), you essentially rent the vehicle and never actually own it. This means that there is no part exchange option for leasing customers.

Can I transfer my current car loan to another bank?

Why not change your finance provider if you're less than happy with what they offer? There are many reasons why people may want this; perhaps they've seen better deals elsewhere or just need more time for payments. The good news is that it's possible!

You can refinance your debt with a new lender to get an even better interest rate. Your old debts will be settled in full at the expense of the money you borrow from the new lender.

When you consider refinancing or consolidating your debts, be sure to weigh up the costs. You may end up paying more overall if it's taken out of a longer-term loan with higher interest.

Call us to get advice on car finance

You might be wondering what to expect when you arrange your finance. We all want to feel confident in our financial decisions, but sometimes we need someone else's expertise.

We want to help you understand your options for financing an auto purchase. Many people have questions about what kind of agreement will be best, and we've got the answers! With a specialist, you can talk through anything, from instalment loans right up to delinquency.

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