Can You Part Exchange a Car on Finance? A Comprehensive Guide

Participating in the car finance world may feel like navigating a maze, particularly the possibility of exchanging a vehicle still under finance for another car. This is predicated on the question of “Can You Part Exchange a Car on Finance?” being one of concern to many owners desiring to upgrade or even change their vehicle while on finance. 

This guide encompasses the entire process, and by the end, the reader will have adequate insight into all the dynamics of part exchanging a financed car. The reader will fully understand the requirements, the potential challenges, and an effective and smooth process guaranteeing a smooth transaction.

What is Part Exchange in Car Finance?

Part Exchange in car finance is an arrangement where you offer your current car as a trade-in, acting as a deposit towards acquiring another vehicle. It’s a standard method used by individuals looking to purchase a new or second-hand car from a dealer. This is typically how it is done:

  • Your Car is Evaluated: The dealer assesses a variety of factors in determining the trade-in value of your vehicle, including make, model, age, condition, and mileage. Other considerations include market demand, service history, and overall car condition.
  • Agreement on Trade-in Value: Once you have received the dealer’s offer for your car, you can directly negotiate it until a satisfactory agreement is reached. The dealer will then pay you the agreed-upon amount as the purchaser of the vehicle.
  • New Car Cost Deduction: The dealer deducts the agreed amount from the cost of the new car, requiring you to pay the balance. For example, if the new car costs $30,000 and your car is worth $10,000, you must pay the remaining $20,000.
  • Financing the Balance: If your Payments are not made in cash, you will get a loan from the dealer to finance the remaining amount. The loan terms will be determined by your credit history, lender, and other factors.
  • Complete Transactions: You sign documents, hand in the old car, and get the new vehicle. If you have taken a loan, you will sign a loan agreement.

Part exchange is a quick way to sell your current car and buy another one immediately. It saves one the burden of selling the current car privately. However, one should be knowledgeable and understand the current market value for their car since most dealers are likely to offer low prices to maximize their profitability.

Can You Part Exchange a Car on Finance?

What is Your Settlement Figure? How to work it out. What happens if you have negative equity?

The short response to can you part exchange a car on finance is yes – but there are several things to equate before deciding. When you purchase a financed car, you essentially agree to pay a loan for the car, and the agreed term’s interest. If you want to part-exchange it before the term, you will have to pay off the rest of the amount.

Work out Your Settlement Figure

Your first move will be to ask the finance corporation for a settlement figure. You will have to pay this total surplus to remove the car’s remaining finance. It is essential to remember that it may be higher than the car’s target value, mainly if you have just had the car financed.

Value your targeted Car for Part-exchange

To get your vehicle that you will use to part exchange valued, ask at the dealership that you wish to buy and trade from. They will determine its condition, physical condition, market value, and so on to offer a part-exchange estimate.

Calculating Your Equity

After getting an estimate for your car, equate that sum to your settlement figure. If the car is valued above the figure, you can gather positive equity and use it to part-exchange the car. If the vehicle is worth less, you need better equity to equate to what you need to have. This is an important aspect of exchanging a car for finance.

Making Your Decision

You are now able to decide with all accurate data. If you have positive equity, you can finish the part exchange directly. If you still need to, you must settle on the worth you may afford to part-exchange, and either get the money or acquire another way.

Benefits Of Part Exchanging A Car On Finance

Part exchanging a car for finance is the process of accepting your current car as part of the payment for a new one regardless of whether you have enough and repaid the current car finance agreement. 

Can You Part Exchange a Car on Finance? Yes, you can. Here are several worthwhile benefits make it an excellent option for car owners who want to change or upgrade their vehicle:


  • Simplifies the process: Part exchanging your car simplifies the purchasing of a new car and the disposal of your old car. You can do away with the two transactions, both the selling of the old car and buying the new car, at the same place hence saving time and energy.
  • Immediate transaction: This offers an immediate disposal transaction for trading in your vehicle without you having to look for a private buyer, a process that takes long and is uncertain.

Financial advantages

  • Offset the cost of the new vehicle: The value of the part exchange can reduce the cost of the new vehicle, reducing the monthly payments if you are taking up finance on the car.
  • Settling existing finance: The dealer can settle an already existing finance in taking up the existing finance which is an added advantage.

Avoids the hassle of a private sale and excess cost

  • No publicity is required: Selling the car privately requires you to make adverts that cost money and consumes time.
  • Overcomes time wasters: Most potential buyers may not be serious about buying the car or can offer a lesser amount than the car is worth.

Negative equity

  • Rolling over debt: This trading arrangement provides a means of rolling over the existing debt.

The Two Main Routes to Part-Exchange Success

Can You Part Exchange a Car on Finance? Yes, here are two main ways to deal with a part-exchange with a financed car:

Settling Your Current Finance

This involves paying off your existing loan in full before proceeding.

  • Contact Your Lender: Request a settlement figure from your lender. This figure will represent the total amount needed to pay off the remaining balance on your loan with an extra amount covering one-off fees.
  • Sell Your Car: As soon as you receive a settlement from your lender, you can get a part-exchange quote for your car from the dealership. The figure the dealership offers should at least meet the settlement amount.
  • Pay Off the Loan: If the offered part-exchange amount covers the settlement amount as it should, you can use it to settle the loan directly with your lender. This will lead to the title of your car being transferred to you, enabling you to carry on with the part-exchange at the dealership.

Dealer-Facilitated Settlement

Let the dealership handle your lender’s settlement with you.

  • Get a Valuation: The dealership will assess how much your car is worth and offer a part-exchange quote for it.
  • Dealer Pays Off the Loan: Upon your acceptance of the offer, the dealership will then pay off your lender the settlement figure.
  • Equity or Negative Equity: Your equity or negative equity status is determined by the remaining or additional payment owed over trade-in value:
  • Equity: if the trade-in value exceeds the settlement figure, the remaining sum can be used as a deposit for your new car.
  • Negative Equity: if the settlement figure exceeds the trade-in value, the difference is your negative equity, which you will need to pay. Additional payment can be included in the deposit payment for the new car or added to the finance agreement of the new car.


Can you part exchange a car on finance? Yes, with the correct amount of planning and research, exchanging your vehicle can, and should, be a realistic option for individuals. Before taking the necessary steps, it’s important to conduct the proper research regarding both your finances and the car in question. Transitioning to a new vehicle could be possible for you, whether that be for more space or efficiency, which is why part exchanging needs to be pursued.

Leave a Comment