Whether your current car no longer suits your lifestyle, repair bills are becoming more frequent or you’ve simply found a newer vehicle you’d rather be driving, it’s natural to start thinking about upgrading.
If your current vehicle is on finance, however, you may be wondering whether you can change your car before your agreement ends. Perhaps you’ve heard you can swap your financed car, use it as a deposit or trade in a car with outstanding finance, but you’re unsure how it all works.
The good news is that changing your car on finance is often possible. The key is understanding your current position before you start shopping for your next vehicle.
Before You Start Looking at Cars
One of the easiest mistakes to make is choosing your next car before understanding your current finance agreement.
It’s exciting to browse dealerships or compare vehicles online, but agreeing to a new car before checking what you still owe can lead to disappointment if the numbers don’t work.
Before you begin looking seriously at another vehicle, we’d recommend finding out three things:
- Your current finance settlement figure.
- What your existing car is realistically worth.
- What monthly payment comfortably fits your budget.
Knowing these before you visit a dealership makes it much easier to understand what’s affordable, compare finance options confidently and avoid agreeing to a vehicle that doesn’t suit your circumstances.
Can You Change Your Car Before Your Finance Agreement Ends?
In many cases, yes.
Many drivers believe they have to wait until they’ve made their final payment before changing cars, but that’s not always the case. Depending on your agreement and your individual circumstances, it may be possible to upgrade your financed car before your current agreement comes to an end.
Even if upgrading is possible, you’ll still need to meet the lender’s affordability and eligibility criteria before any new finance agreement can be approved.
The first step is requesting a settlement figure from your finance provider. This tells you exactly how much is required to settle your current agreement.
We’d recommend doing this before visiting a dealership or applying for another finance agreement. Once you know your settlement figure, your next step is comparing it with the value of your current vehicle. Together, these two figures give you a much clearer understanding of what your options are likely to be.
How to Find Out Whether You Have Positive or Negative Equity
Once you know your settlement figure, it’s time to compare it with the value of your car.
If your vehicle is worth more than the amount needed to settle your finance agreement, you have positive equity. This often puts you in a stronger position when changing cars because that difference may contribute towards your next vehicle, reducing the amount you need to finance.
For example, if your settlement figure is £13,000 and your car is worth around £15,000, you may have approximately £2,000 available to put towards your next agreement.
Imagine you’re buying a £20,000 vehicle. That £2,000 of positive equity could potentially be used towards your next finance agreement, meaning you may only need to finance the remaining balance, depending on the agreement you choose and your individual circumstances.
If your vehicle is worth less than your settlement figure, this is known as negative equity.
Negative equity doesn’t automatically mean you can’t upgrade your car on finance, but it does mean you’ll want to understand how the remaining balance could affect your next agreement before making a decision.
One point that’s worth remembering is that vehicle valuations can vary. Online valuation tools are a useful starting point, but dealerships and vehicle buyers may offer different amounts depending on mileage, condition, service history and market demand.
If you’re planning to part exchange your vehicle, obtaining an independent valuation before visiting a dealership can provide a useful benchmark when discussing your car’s value. Comparing a few different valuations will also give you a more realistic understanding of what your vehicle is worth.
If you’ve discovered you have positive equity, your next step should be comparing finance options rather than accepting the first offer available. Positive equity can reduce the amount you need to borrow, but it’s still worth comparing the overall cost of different finance agreements before making your decision.
When comparing finance agreements, don’t focus solely on the monthly payment. It’s also worth looking at the APR, the total amount repayable, the length of the agreement and, if you’re considering a Personal Contract Purchase (PCP) agreement, whether there’s an optional final payment. Looking at the full picture makes it easier to choose the option that offers the best overall value for your circumstances.
Will You Have to Pay to End Your Finance Agreement Early?
Not necessarily.
Your finance provider can provide an up-to-date settlement quotation showing exactly what’s required to settle your agreement. This allows you to understand your position before deciding whether changing cars now makes financial sense.
Rather than worrying about what it might cost, we’d recommend requesting your settlement figure first. Having accurate information allows you to compare your options based on facts rather than assumptions.
Can You Part Exchange a Financed Car?
Yes, in many situations you can.
Many people are surprised to learn they don’t have to own their vehicle outright before they can part exchange it. If you’re buying another car through a dealership, they can often work with your finance provider to settle your existing agreement as part of the transaction.
If your vehicle has positive equity, that value may reduce the amount you need to finance. If there’s negative equity, it’s important to understand how this could affect your next agreement before committing to another vehicle.
Knowing both your settlement figure and your vehicle’s value before visiting a dealership puts you in a much stronger position when discussing a part exchange or deciding whether to swap your financed car.
Should You Upgrade Now or Wait?
This is one of the biggest decisions you’ll make, and the answer depends on your circumstances rather than a specific point in your agreement.
If you’ve only recently started your finance agreement, you may not have built much equity yet. Waiting a little longer could reduce your settlement figure and potentially increase the value available towards your next vehicle.
On the other hand, waiting isn’t always the most sensible option.
If repair bills are becoming more frequent, your family has grown, your daily commute has changed or you’d benefit from a vehicle with lower running costs, upgrading sooner could make better financial sense than continuing to drive a car that no longer meets your needs.
Rather than asking whether you can upgrade, it’s often more helpful to ask whether upgrading now genuinely improves your overall financial position.
Can You Keep Your Monthly Payments Similar?
Many drivers assume that upgrading automatically means paying more each month, but that isn’t always the case.
The monthly payment on your next agreement will depend on several factors, including the price of the vehicle, your deposit, the finance term and the finance product you choose.
Depending on your circumstances, different finance products may be more suitable. For example, Hire Purchase (HP) and Personal Contract Purchase (PCP) work in different ways, so it’s worth understanding which type of agreement best suits your needs before making a decision.
If you’re using positive equity as a deposit or selecting a vehicle with lower running costs, you may find it’s possible to keep your monthly budget at a similar level.
It’s also worth remembering that two finance agreements with similar monthly payments can have very different repayment terms, interest charges and total amounts repayable. We’d always recommend looking beyond the monthly payment and comparing the overall cost of the agreement before deciding which option offers the best value.
Will Your Credit Score Affect Upgrading?
Whenever you apply for a new finance agreement, lenders will assess your application based on your individual circumstances.
Your credit history is one of several factors that may be considered alongside affordability and the information you provide as part of your application.
A stronger credit profile may increase your chances of being accepted for finance or give you access to a wider range of finance products and potentially more competitive rates. However, this will always depend on the lender’s assessment and your individual circumstances.
If your financial circumstances have improved since taking out your current agreement, it’s worth reviewing your options rather than assuming you’ll receive the same finance terms again.
Questions to Ask Before You Agree to Your Next Car
Before signing a new finance agreement, it’s worth taking a final step back and asking yourself a few simple questions.
- Have I checked my settlement figure?
- Do I know what my current car is worth?
- Am I comparing the total amount repayable, not just the monthly payment?
- Will this vehicle still suit my needs in three or four years?
- Have I compared more than one finance option?
If you can answer “yes” to these questions, you’ll be making your decision with a much clearer understanding of both your current position and the long-term cost of upgrading.
Final Thoughts
Changing your car on finance isn’t simply about finding another vehicle—it’s about making sure the decision works for your circumstances and your budget.
Before agreeing to your next car, we’d recommend understanding exactly where you stand today. Knowing your settlement figure, understanding what your current vehicle is worth and comparing finance options carefully will help you make a more informed decision and reduce the likelihood of unexpected surprises.
Whether you’re looking to upgrade your financed car, trade in a car with outstanding finance or simply explore what’s possible, taking the time to understand your options first will put you in the strongest position.
At Low Rate Car Finance, we help customers explore finance options from our panel of UK lenders based on their individual circumstances. By comparing suitable finance options and understanding your current position first, you can move forward with greater confidence and choose an agreement that’s right for you.
Disclaimer: Car finance is subject to status and affordability. Terms and conditions apply. Finance options, interest rates and monthly repayments will vary depending on your individual circumstances and the lender’s assessment. Always ensure any finance agreement is affordable before proceeding.