If you’re cruising along with a car finance agreement but have your eye on a new set of wheels, you might be wondering if you can switch your existing finance from one car to another. We get it; change is exciting. However, when it comes to car finance, the process is more complex than changing lanes on the motorway. In this article, we’ll break it down for you in simple terms, explaining why transferring car finance to another vehicle isn’t possible and what alternatives you have if you want to make a change.

Understanding the Roadblock: Why You Can’t Transfer Car Finance

Unfortunately, transferring your existing car finance loan isn’t possible. This is because each finance agreement is tailored to the specific car you’ve purchased, your financial situation at the time, and the agreed-upon repayment terms with your lender.

Think of it like a jigsaw; all the pieces must fit together perfectly for the picture to work – it’s the same with a car finance agreement. If you choose to change your vehicle, the jigsaw pieces no longer match, and your lender will need to start from scratch with the new information.

Don’t fret; there are plenty of choices at your disposal.

Your Options for Swapping a Financed Vehicle

Now that we’ve made it clear that a direct transfer isn’t an option let’s look at the alternative routes you can take:

Early Settlement

You have the option to settle your car finance agreement before its scheduled end date. By paying off the remaining balance, you’ll become the vehicle’s legal owner.

When ending a car finance agreement early, it’s essential to understand the nuances between different types of agreements, such as Hire Purchase (HP) and Personal Contract Purchase (PCP). While both options allow you to settle your finance ahead of schedule, the decision to do so may be more advantageous for those with an HP agreement than those with a PCP agreement.

In a Hire Purchase agreement, you gradually repay the cost of the vehicle, including interest, over a fixed term. Ownership of the car transfers to you once you make the final payment or pay the ‘option to purchase fee.’

Early settlement is often more advantageous for those with HP agreements compared to PCP agreements for several reasons, the most common being that with a PCP agreement, you’ll need to pay off a large sum, also known as a balloon payment, when settling your car finance loan.

This newfound ownership allows you to sell your car or finance a new one if you wish. Be sure to contact your lender to determine your early settlement figure, which is the remaining balance on your vehicle.

Request your early settlement quote here.

Voluntary Termination (VT)

Voluntary termination involves returning your financed vehicle to your lender voluntarily. With voluntary termination, you may be required to pay 50% of the total amount payable plus any applicable arrears or charges.

If choosing the VT route, you must be mindful of damage or wear and tear, as it can impact the process and cost you more. After completing VT, you’ll receive a final billing letter detailing the balance payable. This will enable you to take out a new car finance agreement if desired.

Can You Sell a Car with Outstanding Finance?

While the vehicle is under finance, you legally can’t sell it. The lender retains ownership until the final repayment or payment of the appropriate fee. The type of car finance you have determines when ownership transfers.

Part Exchange with Outstanding Finance: Yes, It’s Possible

If you’re looking to part exchange a car with outstanding finance, you have two options:

Settling the Finance: Pay off the remaining balance to become the vehicle’s legal owner. You can then use the car’s current market value as part of a new car purchase or finance agreement.

Using Market Value: Utilise the vehicle’s market value to pay off outstanding finance, with any remaining value going towards a new car or finance agreement. This option is less common for those in negative equity.

Navigating Negative Equity

Negative equity can be a speed bump in your car finance journey. If your vehicle’s market value is less than the outstanding finance, you’re in negative equity.

The most common reason for negative equity in a car finance agreement is depreciation. New cars often lose value quickly, and if you financed a significant portion of the purchase price, chose longer loan terms, or have high mileage, your car’s value may lag behind what you owe on the loan. Wear and tear, accidents, and high interest rates can also contribute to negative equity.

To help bridge the gap, you may need to contribute the difference between the early settlement figure and the vehicle’s actual value. Keep in mind that different lenders might have varying policies on valuation.

Seeking Alternatives: Refinancing Your Car

Refinancing is an option if you’re still attached to your car but need a more manageable finance agreement due to changing circumstances. This process involves securing a new finance agreement, usually with a different lender, to pay off your existing loan with better terms. Be cautious, though, as lower monthly payments over an extended period can result in paying more overall.

If you’d like to submit a refinancing request click here.

Can I Transfer my Car Finance Agreement to Another Lender?

When considering changing elements of your finance plan, including your lender, you might wonder if you can transfer a car loan to another bank or finance provider.

We understand that there are many reasons for considering this option, such as seeking a better interest rate or consolidating existing debt. In many cases, it is possible to move your loan from one provider to another. To explore this option, the first step is to obtain a settlement figure from your current lender. Armed with this information, you can initiate discussions with your preferred loan provider, allowing them to settle the existing finance and set up a new repayment plan with you. Communication with both lenders is key to making this transition smooth and beneficial to your financial situation.

Will Outstanding Finance Affect My Car Finance Eligibility?

Various factors influence car loan eligibility, and it’s not solely determined by your credit score. Different lenders have their own unique eligibility criteria, and one critical aspect they consider is your affordability.

Affordability hinges on the amount of disposable income you have after covering your monthly expenses. If taking on a new car loan would strain your finances and potentially jeopardise your ability to meet your financial obligations, approval might be challenging.

However, if you plan to settle your outstanding finance before applying for a new car loan, it can positively impact your eligibility. Responsible management of your existing loan, with consistent monthly repayments, can demonstrate your financial responsibility and make you a more appealing candidate for a new loan. To explore your eligibility further, click here to see if you’ll be approved without impacting your credit score.

We’re Here to Help!

While transferring car finance from one vehicle to another isn’t feasible, there are plenty of routes you can take if you want to make a change. Early settlement, voluntary termination, and refinancing are all viable options, each with its own considerations.

 If you’re uncertain about your eligibility for a new car loan without impacting your credit score, request a quote by clicking here – you’ll find out if you’re pre-approved without affecting your credit score.

If you’re looking to request a settlement figure, you can do so here. Or, if you’d prefer to explore the possibility of refinancing your existing vehicle, click here.

We’re here to help you explore these options and ensure a smooth transition to your next set of wheels. Your financial journey doesn’t have to come to a screeching halt; it’s just a matter of choosing the right path. Safe driving!

Representative Example

Rates from 12.9%

Representative example: borrowing £10,000 over 60 Months with a representative of 23.0% APR, an annual interest rate of 23.0% (fixed) and a deposit of £0.00, the amount payable would be 59 repayments of £269.58 per month, with one final repayment of £279.58 (which includes the option to purchase fee of £10.00), with a total cost of credit of £6,184.80 and a total amount payable of £16,184.80. Marsh Finance Limited are a lender, not a broker. 

Marsh Finance Limited are a lender, not a broker.

This is for illustrative purposes only and is not a quote or an offer of finance.