You can part-exchange a car that still has finance on it. The dealer settles what you owe with your lender and takes the car, and any value left over goes towards your next vehicle. The key is knowing whether you have positive or negative equity before you walk in.
In short
Yes. The dealer values your car, pays your settlement figure to the lender, and uses any positive equity as part of your deposit. If you owe more than the car is worth, you’ll need to pay the difference, or the dealer may offer to add it to your new finance, which increases your total cost.
Can you part-exchange a car on finance?
Yes, and dealers do it all the time. Whether you have HP, PCP or balloon HP, the dealer can settle the finance as part of your new deal. It works the same for vans, pickups and motorbikes.
How part-exchange works with outstanding finance
- The dealer values your car.
- It gets a settlement figure from your lender, with your permission.
- It compares the two. Value minus settlement figure is your equity.
- It pays off your old finance directly.
- Your equity goes towards your next vehicle, usually as part of the deposit.
You’ll sign paperwork for both the part-exchange and the new agreement. Check that the settlement of your old finance is clearly shown.
Positive vs negative equity
Worked example
Positive equity. Your car is valued at £14,000 and your settlement figure is £11,500. You have £2,500 of equity, which can go towards your next deposit.
Negative equity. Your car is valued at £10,000 and your settlement figure is £11,500. You’re £1,500 short, which you’ll need to pay or deal with another way.
How to get the best part-exchange deal
- Know your settlement figure before you visit. See how to get one.
- Get several valuations, including from online buying services, so you know what the car is really worth.
- Negotiate the price of the new vehicle and the part-exchange value separately. A generous part-exchange offer can hide a higher price on the new car.
- Look at the total amount payable on the new agreement, not just the monthly payment.
Risks of rolling negative equity into a new deal
If you have negative equity, a dealer may offer to add it to your new finance. This makes your new loan bigger, so you pay interest on your old debt and start the new agreement owing more than the vehicle is worth.
As a rough guide, rolling £2,000 into a four-year agreement at an illustrative 10.9% APR adds about £51 a month and about £2,450 to the total you repay. See negative equity for more.
Part-exchange FAQs
Do I need to tell the dealer I have finance?
Yes. The dealer will find out from a finance check anyway, and it needs your settlement figure to complete the deal.
What if I owe more than the car is worth?
You’ll need to pay the difference, wait until the gap is smaller, or consider other options such as voluntary termination. Rolling it into new finance is possible but makes your next deal more expensive.
Can I part-exchange a PCP car before the end?
Yes. The dealer pays the full settlement figure, including the final payment. Check your equity first, as it’s more likely to be negative part-way through.
Will I get a better price selling privately?
Often, yes. But you’ll need to settle the finance yourself first. See selling a car on finance.
Does part-exchange affect my credit file?
Settling your old finance shows as a settled account. Your new finance will show as a new agreement, and the application usually involves a hard search.