How to part exchange a car

When own a car, but want to change it, you can use the value of your current car to cover the cost of your next one. This is called part exchanging and this guide will tell you how to part exchange a car, the steps involved, what to look out for and how to get the best outcome for you.

You may not realise, but you can also part exchange a car if it is on HP car finance. In this guide, we’ll explain how this works and what to expect.

Part exchanging can be a convenient way to get a newer car that better suits your needs, without having to wait until your current car finance agreement ends. However, there are some important factors to consider, particularly regarding your car's current value.

If your car has reduced in value since you purchased it, you may find yourself in a situation of negative equity, meaning you owe more than the car is currently worth. If this is the case, you'll need to settle this shortfall before going ahead with a new finance agreement.

How to part exchange a car you own

If you own a car with no finance helping you pay for it, then part exchanging is very simple. You can only part exchange a car with a car dealership, rather than a private sale.

Do your research to find a car you want to buy, and once you have you can discuss your part exchange options with the dealership you are buying from. Ensure the dealer provides clarity on how they arrive at the valuation for your car. Make sure the dealer explains clearly how they worked out the value of your car.

There are ways to approach getting the best offer on your current car that apply whether you own your car outright, or if it is on finance, so read on for more help in this.

How to part exchange a car that is on hire purchase (HP) car finance

When you part exchange a car, you will trade-in your financed vehicle as part of the payment for a new one. The dealership will work with your finance provider to clear the remaining balance on your HP agreement. This is a common process, but it’s important to fully understand your financial situation before proceeding.

If the current value of your car is more than the remaining amount you owe on your finance, you will be able to move forward with upgrading your car.

Here’s a step-by-step guide to part exchanging a car on HP finance:

1. Understand your agreement: Before making any decisions, review the terms of your HP agreement. This includes knowing how much you still owe, any potential early settlement fees, and the overall process for paying off your finance.
2. Contact your finance provider: The first step is to reach out to your finance provider. Inform them of your intention to part exchange your vehicle. They can provide you with the information you need, such as your current settlement figure, which is the total amount needed to pay off the remaining balance on your agreement. This figure will determine how much positive or negative equity you have in your car.
3. Your options: Depending on your financial situation and the current value of your vehicle, you may have a few options available to you. If you’ve built up enough equity in your car (meaning its value is higher than what you owe), you can use this amount as a deposit for your new vehicle. If you have negative equity (where you owe more than your car is worth), you’ll need to cover the shortfall either through an upfront payment or by rolling the shortfall into your new finance agreement. Be aware that rolling negative equity into new finance will increase your total borrowing and could result in higher monthly payments.
4. Gather necessary documentation: Make sure to have all relevant documents ready, including the logbook (V5), service history, MOT certificates, and spare keys. Vehicles with a complete service history are more likely to receive a higher valuation.
5. Find a reputable dealership: It’s advisable to find a reputable dealer when you want to part exchange a vehicle, whether it's on finance or not. Reputable dealers are more likely to offer you a fair trade-in value. Plus, you can have peace of mind knowing they will handle the payment to your finance provider for the trade-in amount, helping to clear or reduce your existing finance. Make sure to confirm that the finance has been fully settled to avoid any future liabilities.

How do I get the best part exchange valuation for my car?

To get the best part exchange valuation for your car, consider following these steps. It’s important to aim for the highest valuation, to avoid paying more for your next car in the long run.

Prepare your vehicle

• Repairs: Take care of any repairs that your car needs. Big or small, if you find someone to do the work you are in control of the costs and can approach multiple garages to get a fair price. A dealer will rely on their own team or preferred partner if they have to repair your car for sale. They have to be confident they cover the cost of work, parts and labour so may build in a buffer on the amount they reduce the car value by when negotiating with you, which could cost you more than you if you arranged to fix the car yourself.
• Clean the car: Give your car a thorough clean. A well-presented car can get a better valuation and prevent dealers from lowering the offer in case mud, dirt or dust is covering up other issues.
• Gather documentation: Make sure to have all relevant documents ready, including the logbook (V5), service history, MOT certificates, and spare keys. Vehicles with a complete service history are more likely to receive a higher valuation. Being well-prepared can help you get a better offer.

Get multiple valuations

• Visit multiple dealerships: Contact or visit several dealerships, especially those where you plan to buy your next car. Some dealerships may prefer to inspect your car in person, before giving a part exchange valuation. We recommend taking your car for an on-site inspection, to avoid any disappointment if the valuation changes once they see it. However, some dealerships may also provide a valuation based on detailed photos of the car’s exterior and interior, along with proof of its current mileage.
• Online valuations: Check online car valuation sites to get an estimated value, based on the information you provide. Remember that these sites generally assume the vehicle is in "good" condition. While online valuations can give you a rough idea of your car's worth, it's advisable to take your vehicle to the company you enquire to, for a more accurate in-person estimate.

Compare offers

• Review valuations: Compare all the valuations you receive to decide which dealership offers the best part exchange value.
• Negotiate: Don’t be afraid to negotiate. If one dealership gives you a better offer, use that to negotiate a better price with the other dealerships, particularly if the car you really want is for sale somewhere else.

Positive and negative equity

Positive and negative equity can be confusing when it comes to part exchanging your car on finance. Understanding the difference between the two is important to ensure you make the right decision.

Positive equity

Positive equity occurs when the market value of your car exceeds the remaining balance on your finance agreement.

For example, if your car is worth £8,000 and you only owe £5,000, you have £3,000 in positive equity. This difference can be a valuable asset when you decide to upgrade to a new vehicle.

You can use this positive equity as a deposit towards your next car, effectively reducing the amount you need to finance. This can lead to lower monthly payments and less overall interest paid on your new agreement.

Additionally, having positive equity can give you more negotiating power at the dealership, as you have a clear financial advantage when trading in your vehicle.

Negative equity

Negative equity arises when you owe more on your car than it is currently worth. For instance, if your car's market value is £4,000, but you still owe £6,000 on your finance agreement, you have £2,000 in negative equity. This situation can be challenging when you want to part exchange your vehicle, as you’ll need to clear this shortfall before moving forward.

You can either pay the difference upfront or, in some cases, roll the negative equity into a new finance agreement. However, rolling the shortfall into a new agreement will increase your overall borrowing, which could lead to higher monthly payments and more interest paid over time.

Things to consider when part exchanging a car on HP car finance

Part exchanging a car that’s under a finance agreement is quite common and often depends on your current situation and how quickly you need a new vehicle. In some cases, waiting until your HP agreement ends may be a better option.

During the part exchange process, the dealership will need a settlement quotation from your finance provider. Once the dealership accepts your financed vehicle in exchange for a newer one, they will handle clearing the existing finance on your old agreement.

However, don’t just hand over the keys and walk away. It’s important to follow up with both the dealer and your previous finance provider to confirm that the part exchange value has been paid, to avoid any unexpected surprises, such as discovering an outstanding balance on your previous agreement later on.

Can I sell a financed car without part exchanging?

You cannot sell a financed car without permission from your finance provider. However, it is possible to sell a financed car without part exchanging it, as long as you have explicit consent from your finance provider. Each provider has its own rules regarding the sale of a car with outstanding finance, so it's important to understand their requirements.

To learn more about selling a car that is on finance you can read our guide Thinking about selling a finance car?

Upgrade your car with AutoMoney

If you are looking to upgrade your car through a part exchange and looking for a few HP finance agreement, AutoMoney may be able to help, subject to credit and affordability checks.

Call our friendly team on the free phone number above, or click through to apply for car finance with us.

Representative example

You could borrow £10,000 over 60 months with an initial payment of £490.66 (including £199 Admin Fee) followed by 58 monthly payments of £291.66 with a final payment of £490.66 (including optional £199 Option to Purchase Fee).

Total amount repayable will be £17,897.60.

29.3% APR, annual interest rate (fixed) 24.7%.

This example uses the representative APR. This is the rate at least 51% of customers are expected to get.

Lending is subject to status and additional affordability checks. Rates quoted are subject to change and will depend on lending amount and personal circumstances.

FAQs