If you already have an outstanding car loan, but are considering changing your vehicle, you may assume it’s a complicated process. Some people even think it’s not a possibility! But there are various options available to you when it comes to swapping cars, even if your current car still has existing finance.

Can I Change My Car If I Have Existing Finance?

There are a huge number of reasons as to why you might want to change your vehicle part way through your current car finance agreement. Perhaps you need to travel more, and need a more economical vehicle, or maybe your family has grown, and you need extra car space! In a lot of cases, people are simply looking for a change. 

Regardless of the reason for wanting a new vehicle, your existing finance agreement shouldn’t stand in your way. There are three main options available to you - trading in or part exchanging your car, selling your car and using the funds to settle your outstanding loan, and paying the settlement figure. We’ve outlined each of these options in more detail below.

How to Trade in a Car With Outstanding Finance

When it comes to trading in your car, the process is surprisingly easy. It doesn’t matter whether you’re on a hire purchase or personal contract purchase either. First, you need to make sure that the V5 certificate is in your name - it should be, but it’s not a bad idea to check! 

You can then get a settlement figure from your lender (or ask that the dealer does this on your behalf), and a valuation figure from the dealership. The difference between the two will be the amount of equity you have in your vehicle, which can go towards the cost of a new car. If your vehicle is worth more than the outstanding loan, these funds can effectively be used as a deposit for your next car, which should reduce your monthly payments. But if the settlement figure exceeds the value of your vehicle, you may need to make a cash deposit towards the new car.

The only thing to keep in mind with this option is that when working with a dealership, you’ll be limited to the vehicles they have available when choosing a new car. The upside is that they’ll take your current vehicle in part-exchange, so you won’t need to sell this on yourself. The dealership should do most of the work for you when trading in a vehicle.

How to Sell a Car With Outstanding Finance

A lot of people are surprised to learn that you’re able to sell your vehicle even with a car loan outstanding. It does usually mean slightly more work than trading in a car, but you’ll have more options at the end of the process, and you may get a better deal in terms of selling. 

The initial step is to get a settlement figure from your finance provider. They should be able to do this quickly over the phone, but bear in mind that the figure will only be valid for a short amount of time - you may need to request a new figure if this period expires. Once you have the settlement figure, you can start looking at how much your vehicle is worth. It’s a good idea to explore the market, as prices can significantly vary, especially between private buyers and car dealers. Of course if you’re looking to sell your vehicle quickly, traders are the way to go.

Selling privately will mean you’ll need to consult with your finance company, as they’ll need to ensure you follow the correct process. Once all the figures are agreed, you can sell your car - hopefully this will cover the lender’s settlement figure, but you may have to cover the shortfall. If you’re really lucky, you could even be in profit!

Paying the Settlement Figure

While early settlement is perhaps the simplest option, it can work out to be fairly costly, depending on how far you are in your agreement. There may also be an early settlement charge in your contract, so it’s a good idea to check this before going ahead. There may also be other terms and conditions - speak to your lender about your options if you’re unsure.

The other thing to consider is that if you settle the finance agreement, this will almost certainly mean that you own the vehicle. If the aim was to get a new car, this may not be the best outcome! However, sometimes paying the settlement figure so that you own the car outright can mean you’re in a stronger position to sell the vehicle and upgrade to a new one. 

How Do I Apply for New Car Finance?

Once you’ve gone through one of the three options above, you can then look into a new car loan. The way you go about this will depend on whether you’ve sold your last car, or part exchanged it. If you’ve traded in your via a dealership, you’ll essentially have just swapped vehicles, and can simply draw up a new agreement with your finance provider. You may be able to get a cheaper rate elsewhere of course, so it can be sensible to shop around first. The dealership will often do this for you, dealing with finance companies on your behalf.

If you’ve paid the settlement figure in order to sell your car, or sold your vehicle with outstanding finance, your transactions with the lender will be considered settled. You’re therefore free to explore the market, finding a car and finance arrangement that suit your needs.

We can help you find a lender who meets your requirements, and offers a great rate! Once you’ve submitted a few details, we’ll search our network of lenders and put you in touch with a finance provider who can fund your next vehicle! Apply today with no impact on your credit rating!