Can I Part Exchange A Car On Finance?

The car finance space sometimes feels like a maze, especially when one wants to exchange a vehicle that is still financed with another car. Most car owners who may be asking, “Can I Part Exchange a Car on Finance?” want to know whether they could exchange their current vehicles for an upgrade or another one. 

Primarily, this guide covers the entire process, meaning that by the end of the guide, readers will have been guided on every aspect of part exchanging a car on finance. You will be aware of everything required, complexities that could be encountered, and eventual relevant steps that can help them achieve a part exchange.

What Is Car Exchange In Car Finance?

Part Exchange in car finance is when you offer your current car to use it as a trade-in for getting another vehicle. It is a typical approach for an individual who is going to buy a new or used car at a dealer’s. It is usually done in the following way:

  • Your Car Gets Valuated: A dealer first checks multiple aspects of your vehicle to determine the car value to give a trade-in for yours. Some of the factors checked are the brand, model, production year, state, and mileage. The dealer also checks the market demand and vehicle maintenance history.
  • Agreement on the Value: Once you get the dealer’s offer on your car, you can negotiate it directly until you agree on a sum which the car purchaser is determined to pay you.
  • Car Value Deduction from the Cost of the New Car: Right after making the agreement, the dealer deducts the agreed-upon car value from the cost of the new vehicle. Hence, you will have to pay only the remaining sum. If the price of the new car is $30,000 and the car you want to trade-in is evaluated at $10, 000, you will just have to pay $20,000.
  • Financing the Remaining Sum: If you do not pay in cash, you will get a loan from the dealer to provide the remaining sum. The conditions of the loans will be based on your credit history, lender, and other factors reflecting your reliability.
  • Complete the Deal: The final stage includes signing the documents, trading in the previous car, and driving away the new one. If you took a loan – you sign the loan agreement.

Part exchange is a simple and rapid way to sell your current car and buy another one immediately. It saves you from the hassle of selling it privately. However, you should know the car’s current market value; otherwise, you are likely to receive unreasonably low trade-ins from most of the dealers, who only want to gain profit.

Exploring Your Choices

When you’re looking to part-exchange a car you’re still financing, you’ll generally encounter one of two situations: positive equity, where the car’s worth more than what you owe, or negative equity, where you owe more than the car’s worth. Each scenario offers its paths forward, though they diverge in approach.

The Advantage of Positive Equity

In the fortunate event of positive equity, transitioning to a new car is pretty straightforward. The steps involve:

  • Obtaining a settlement figure from your current lender to understand what’s owed.
  • Get a professional or online vehicle valuation to ensure a fair deal.
  • Negotiating with the dealer on the trade-in value.

The trade-in settles your old finance, and any leftover value might help lower the new car’s finance costs.

Dealing with Negative Equity

Facing negative equity means you owe more on the car than it’s currently valued, but you still have options. It would help if you covered the ‘settlement gap’ between your car’s trade-in value and the outstanding finance. Solutions include paying this gap with cash or another loan, rolling the difference into a new car’s finance (increasing monthly payments), or negotiating with the dealer, who might offer to absorb some of the loss.

Types Of Finance Agreement

The types of finance agreements that are looked into are frequently used for new car purchases. With this finance option, you pay a deposit and monthly payments for the car. After some down payment, you can either return the vehicle at the end of the agreement, keep it in your possession by making amortized payments, or trade it in for a newer car. 

With HP, you pay a deposit and settle interest and the balance in monthly payments; at the end of all costs, the vehicle belongs to you. Mostly, you pay to lease the car per month per agreed duration and pay for the balance at the end of the agreement before the car is yours.

Can I Part Exchange a Car on Finance? Step-By-Step Process

  • Test Your Vehicle’s Equity

Establish whether you have negative or positive equity before determining if you can part-exchange a car on finance. Positive equity implies that the car’s value is above the remaining balance owed on the finance, while negative means that the amount you owe is higher than the automobile’s worth.

  • Settlement Figure

Contact the finance provider to get a settlement figure. This is the amount of money you would require to be able to pay your existing finance contract in full.

  • Value Your Vehicle

Get your car evaluated by the dealership from which you plan to get your new one. They will let you know how much you can expect to receive in a part exchange.

  • Difference

Subtract the settlement figure from the car’s value in part exchange. If it results in a positive number, you have equity that you can put toward the deposit on your new vehicle. If it’s negative, that money will come out of your pocket.

  • Transact

Finally, if you choose, the car dealer will take care of everything, including settling your current finances and using any equity toward your new agreement.

Key Considerations Before You Trade-In

  • Early Settlement Fees: Check the terms and conditions of your finance agreement for early settlement fees. If there are any charges associated if you pay off the rest of your loan or contract before the term ends. If there are, consider these fees as well.
  • Market Fluctuations: The car market is constantly changing. Before you trade in your old car or buy your new one, conduct due diligence on the current market conditions. You may not be getting a good deal on the trade-in or purchase of the new car.
  • New and Used Car Financing: Determine if you can get better terms and interest rates on both the trade-in and the new vehicle than the existing car loan you have. A new car purchase might be eligible for a better interest rate. The difference between negative equity and a lower interest rate could be evened out.
  • Total Deal: Furthermore, the sum you receive for the old car is only a small percentage of the total deal. Keep an eye on the new car’s overall insurance, petrol efficiency, and maintenance.


The “Can I part exchange a car on finance?” answer is positive. However, given an individual’s current financial situation and the particular terms and conditions of the existing finance agreement, such an option is only feasible if analyzed and thoughtfully considered. As a result, part exchanging a car to modify or purchase a more recent car is a reasonable option for individuals who need an upgraded vehicle earlier than their current finance agreement allows.

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