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Car finance ›
Can you swap finance from one car to another?
Updated: Wednesday, 12 July 2023
If you’re in a car finance agreement but want to swap or purchase a new car, you might be wondering if it’s possible to switch car finance from one vehicle to another.
In this article, we’ll explain why it isn’t possible to transfer finance from one vehicle to another and what other options there might be if you want to swap your current car for a new one.
Can you transfer finance from one car to another?
It is not possible to transfer finance from one car to another. This is because each financial agreement is tailored to a particular car, your financial situation at the time of signing the agreement, and the repayment terms agreed with your lender.
Whilst you can’t make a simple switch between vehicles using the same finance agreement, there are still ways in which you can get a new car before the repayment period has elapsed in full. To do this, you would need to settle your existing finance agreement first before you can take out an agreement for your new car.
Why can’t you transfer car finance to another car?
You can’t transfer car finance to another car because your finance agreement is linked to that specific car. Your lender would’ve tailored your deal to you and your chosen vehicle, as well as your financial circumstances and affordability.
The lender then considers all these pieces of information to assess whether they will offer you a car finance agreement or not. If you were to change your vehicle, this information would now be invalid, and the lender would have to repeat the process with the new information.
If you currently have a car on finance and want to swap it for a different car, you might be wondering what your options are.
What you can do if you’d like to swap a financed vehicle
If you’re looking to change your car with outstanding finance, it’s best to contact your lender and they can explain each of your options and what the costs may be.
They may offer you options including:
Early settlement
One option is to settle your car finance agreement early. Instead of continuing to pay off your remaining balance every month, you can pay off everything you owe to your lender through one final payment; this is known as an early settlement.
By paying off the remaining balance, you will become the legal owner of the vehicle and gain the freedom to sell your car and purchase another one, either outright or on finance, should you wish.
You’ll need to contact your lender to find out your early settlement figure, this is the remaining balance you owe on the vehicle.
Remember that different finance types do have different terms:
- Conditional Sale: You will only legally own your vehicle once you’ve made your final payment or made an early settlement. At this point, you are free to sell the car if you wish
- PCP finance: You must settle your outstanding finance and pay the balloon payment to own the car
- HP finance: You must either settle the outstanding finance or pay the ‘option to purchase fee’ before you legally own the car
- PCH finance: You cannot sell a car on PCH finance as it is a long-term rental agreement. You will never legally own a car that is leased
- Personal loan: You can sell a car if you used a personal loan to purchase the vehicle. However, you will still have to repay the loan even if you no longer have the vehicle.
You will also need to know the current market value of the vehicle in question to work out whether there is negative equity. If this is the case, you will need to contribute the difference between the early settlement figure and the vehicle’s actual value.
Negative equity can arise due to factors such as market depreciation or general wear and tear beyond what is reasonably expected.
Return your car
Another option for changing to a different vehicle when you have outstanding finance is to voluntarily terminate your agreement, and take out a new car finance agreement for the car you wish to own next.
This process is known as Voluntary Termination (VT). If you wish to give your car back to the finance company, read through your agreement documents carefully to check what is required. If you’re not sure, contact your lender and they will be able to discuss this option with you.
For the most popular types of car finance (PCP, HP, and CS), the borrower will be required to pay 50% of the total amount payable, plus any arrears or charges if applicable.
When returning the vehicle, if it has damage or wear and tear outside of the BVRLA’s Fair Wear and Tear guidelines, you may be required to pay for the repairs. Most lenders including Moneybarn use the BVRLA guidelines. If you aren’t sure, contact your lender and they can explain their policy for wear and tear.
Upon requesting the voluntary termination of a finance agreement with Moneybarn, customers will receive a ‘pre-final billing letter’ detailing the potential value of their vehicle at auction followed by a ‘final billing letter’ confirming what the balance payable is. Once this has been settled, they will be able to take out a new car finance agreement, should they wish.
Can you sell a car with outstanding finance?
You cannot sell a car if it has outstanding finance. When your car is still under a finance agreement, the lender legally owns it, and you have no right to sell the car.
Depending on the type of car finance you have, you may become the legal owner of the car once you make your final repayment or when you pay the appropriate fee.
Can I part exchange a car with outstanding finance?
Yes, it is possible to part exchange a car on finance, even when there is still an outstanding balance to be paid. There are two ways in which you may be able to do this:
1. Settling the finance agreement early by paying off the remaining balance, thereby becoming the legal owner of the vehicle, and using the car’s current market value to go towards the purchase of a new car or finance agreement.
2. Using the current market value of the car to pay off any outstanding finance then using any value left over to go towards the cost of a new vehicle or finance agreement. This option is rarely offered to customers in negative equity.
The value of your vehicle (and, subsequently, the amount you will have available to go towards your part exchange) will be affected by its level of wear and tear. The BVRLA’s guidelines on Fair Wear and Tear can help inform customers about what might lower the market value of their vehicle.
We’ve written a page with more information if you want to learn more about whether you can part exchange your car on finance.
Negative equity example
If the early settlement figure for a car is £10,000 but the current retail value of the vehicle is £8,000, there is £2,000 of negative equity. You would need to contribute £2,000 to make up the difference.
This is a suitable option if you have spare funds available to cover the outstanding balance owed to your lender, but this might not be the case for everyone. For example, if you are only halfway through a finance agreement with a lender, the amount you will have left to pay will likely be considerably greater than if you were near the end of your repayment period.
Lenders usually can’t advise on the current retail value of your vehicle. You could speak to dealerships and use online car valuation services to understand the possible part-exchange or sale value of your car.
FAQs about getting a new car on finance
Can I swap my financed car for a cheaper one?
You will have to settle your outstanding finance agreement before you can swap or sell the current financed car you have.
How do I end my car finance agreement?
Your options for ending your agreement vary depending on the type of finance you have and how far along in the agreement term you are. The most common methods of ending a car finance agreement are by early settlement or voluntary termination.
Can you transfer car finance to another person?
Transferring car finance to another person is not possible as your car finance agreement will be tailored to you. If you can no longer afford to make your repayments, contact your car finance lender to discuss your options.
If you’re a Moneybarn customer and are struggling to make your repayments, or are considering settling your agreement, and we will be happy to discuss your options. Alternatively if you are in financial difficulties, there are not-for-profit debt organisations such as StepChange and Money Helper who can help.
If you’re in a car finance agreement but want to swap or purchase a new car, you might be wondering if it’s possible to switch car finance from one vehicle to another.
In this article, we’ll explain why it isn’t possible to transfer finance from one vehicle to another and what other options there might be if you want to swap your current car for a new one.
Can you transfer finance from one car to another?
It is not possible to transfer finance from one car to another. This is because each financial agreement is tailored to a particular car, your financial situation at the time of signing the agreement, and the repayment terms agreed with your lender.
Whilst you can’t make a simple switch between vehicles using the same finance agreement, there are still ways in which you can get a new car before the repayment period has elapsed in full. To do this, you would need to settle your existing finance agreement first before you can take out an agreement for your new car.
Why can’t you transfer car finance to another car?
You can’t transfer car finance to another car because your finance agreement is linked to that specific car. Your lender would’ve tailored your deal to you and your chosen vehicle, as well as your financial circumstances and affordability.
The lender then considers all these pieces of information to assess whether they will offer you a car finance agreement or not. If you were to change your vehicle, this information would now be invalid, and the lender would have to repeat the process with the new information.
If you currently have a car on finance and want to swap it for a different car, you might be wondering what your options are.
What you can do if you’d like to swap a financed vehicle
If you’re looking to change your car with outstanding finance, it’s best to contact your lender and they can explain each of your options and what the costs may be.
They may offer you options including:
Early settlement
One option is to settle your car finance agreement early. Instead of continuing to pay off your remaining balance every month, you can pay off everything you owe to your lender through one final payment; this is known as an early settlement.
By paying off the remaining balance, you will become the legal owner of the vehicle and gain the freedom to sell your car and purchase another one, either outright or on finance, should you wish.
You’ll need to contact your lender to find out your early settlement figure, this is the remaining balance you owe on the vehicle.
Remember that different finance types do have different terms:
- Conditional Sale: You will only legally own your vehicle once you’ve made your final payment or made an early settlement. At this point, you are free to sell the car if you wish
- PCP finance: You must settle your outstanding finance and pay the balloon payment to own the car
- HP finance: You must either settle the outstanding finance or pay the ‘option to purchase fee’ before you legally own the car
- PCH finance: You cannot sell a car on PCH finance as it is a long-term rental agreement. You will never legally own a car that is leased
- Personal loan: You can sell a car if you used a personal loan to purchase the vehicle. However, you will still have to repay the loan even if you no longer have the vehicle.
You will also need to know the current market value of the vehicle in question to work out whether there is negative equity. If this is the case, you will need to contribute the difference between the early settlement figure and the vehicle’s actual value.
Negative equity can arise due to factors such as market depreciation or general wear and tear beyond what is reasonably expected.
Return your car
Another option for changing to a different vehicle when you have outstanding finance is to voluntarily terminate your agreement, and take out a new car finance agreement for the car you wish to own next.
This process is known as Voluntary Termination (VT). If you wish to give your car back to the finance company, read through your agreement documents carefully to check what is required. If you’re not sure, contact your lender and they will be able to discuss this option with you.
For the most popular types of car finance (PCP, HP, and CS), the borrower will be required to pay 50% of the total amount payable, plus any arrears or charges if applicable.
When returning the vehicle, if it has damage or wear and tear outside of the BVRLA’s Fair Wear and Tear guidelines, you may be required to pay for the repairs. Most lenders including Moneybarn use the BVRLA guidelines. If you aren’t sure, contact your lender and they can explain their policy for wear and tear.
Upon requesting the voluntary termination of a finance agreement with Moneybarn, customers will receive a ‘pre-final billing letter’ detailing the potential value of their vehicle at auction followed by a ‘final billing letter’ confirming what the balance payable is. Once this has been settled, they will be able to take out a new car finance agreement, should they wish.
Can you sell a car with outstanding finance?
You cannot sell a car if it has outstanding finance. When your car is still under a finance agreement, the lender legally owns it, and you have no right to sell the car.
Depending on the type of car finance you have, you may become the legal owner of the car once you make your final repayment or when you pay the appropriate fee.
Can I part exchange a car with outstanding finance?
Yes, it is possible to part exchange a car on finance, even when there is still an outstanding balance to be paid. There are two ways in which you may be able to do this:
1. Settling the finance agreement early by paying off the remaining balance, thereby becoming the legal owner of the vehicle, and using the car’s current market value to go towards the purchase of a new car or finance agreement.
2. Using the current market value of the car to pay off any outstanding finance then using any value left over to go towards the cost of a new vehicle or finance agreement. This option is rarely offered to customers in negative equity.
The value of your vehicle (and, subsequently, the amount you will have available to go towards your part exchange) will be affected by its level of wear and tear. The BVRLA’s guidelines on Fair Wear and Tear can help inform customers about what might lower the market value of their vehicle.
We’ve written a page with more information if you want to learn more about whether you can part exchange your car on finance.
Negative equity example
If the early settlement figure for a car is £10,000 but the current retail value of the vehicle is £8,000, there is £2,000 of negative equity. You would need to contribute £2,000 to make up the difference.
This is a suitable option if you have spare funds available to cover the outstanding balance owed to your lender, but this might not be the case for everyone. For example, if you are only halfway through a finance agreement with a lender, the amount you will have left to pay will likely be considerably greater than if you were near the end of your repayment period.
Lenders usually can’t advise on the current retail value of your vehicle. You could speak to dealerships and use online car valuation services to understand the possible part-exchange or sale value of your car.
FAQs about getting a new car on finance
Can I swap my financed car for a cheaper one?
You will have to settle your outstanding finance agreement before you can swap or sell the current financed car you have.
How do I end my car finance agreement?
Your options for ending your agreement vary depending on the type of finance you have and how far along in the agreement term you are. The most common methods of ending a car finance agreement are by early settlement or voluntary termination.
Can you transfer car finance to another person?
Transferring car finance to another person is not possible as your car finance agreement will be tailored to you. If you can no longer afford to make your repayments, contact your car finance lender to discuss your options.
If you’re a Moneybarn customer and are struggling to make your repayments, or are considering settling your agreement, and we will be happy to discuss your options. Alternatively if you are in financial difficulties, there are not-for-profit debt organisations such as StepChange and Money Helper who can help.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
