Can you part-exchange a car on PCP or lease?
Personal Contract Hire (PCH) and Personal Contract Purchase (PCP) are two of the most popular ways to get yourself a new car, which is no surprise considering the wide range of low deposit and low rate deals available.
However, when the time comes to sell your car, it’s not always simple to do so when you’re on one of these contracts. So, what do these contracts mean?
Yes, you can often part-exchange a car that was financed through a Personal Contract Purchase (PCP) agreement.
However, you cannot part-exchange a car that’s leased or financed through a Personal Contract Hire (PCH) plan.
In this guide we’ll cover the differences between PCP and PCH agreements. We’ll also outline the process to follow when part-exchange your PCP-financed motor.
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Personal Contract Hire (PCH) vs Personal Contract Purchase (PCP)
There is one big difference between PCH and PCP. With PCP you have the option to purchase the car at the end of the agreement and become the registered owner, whereas with PCH you have no option but to hand it back.
The key difference between PCP and PCH is that only a PCP plan allows you to purchase and own the car.
PCP involves a final lump sum payment called a ‘balloon payment’. This payment is also known as the Guaranteed Minimum Future Value (GMFV). This optional, larger payment at the end of the term allows you to pay off the remainder of the loan to become the legal owner.
The amount you pay per month is determined based on how much value your car is expected to lose during the term of the agreement.
If the car that you buy is expected to depreciate at a slow rate, then the monthly payments will be lower than a car of the same value that is expected to depreciate quickly. This means that there are often good deals on popular makes like Mercedes, BMW, and Audi.
When you come to the end of your PCP plan, if you don’t want to purchase the car, you can just hand it back and walk away.
| PCP | PCH | |
|---|---|---|
| Car ownership | Option to buy the car at the end with a final balloon payment. | The car must be returned at the end of the contract. No option to own it. |
| Monthly payments | Based on the expected depreciation of the car during the term of the contract. | Usually fixed and often lower than PCP because there are no ownership costs. |
| Upfront costs | A deposit is typically required. | Often requires an initial rental payment of between 3–6 months. |
| Mileage limits | Limits apply. Excess mileage may incur fees. | Limits apply. Excess mileage may incur fees. |
| Repossession rules | A court order is required for repossession after one-third of the total amount is paid. | Car can be repossessed at any time without a court order. |
| Best for | People who want to own the car or need flexibility. | People who want a simple, hassle-free way to drive a new car without ownership. |
How to part-exchange your car on PCP
Want to part-exchange your PCP financed car for a newer model? Here is the process to follow:
1. Get a settlement figure
Get in touch with your finance provider, let them know that you’d like to part-exchange your car, and request a settlement letter. The figure shown in your settlement letter is the amount you’ll need to settle to pay off the loan in full. It will cover all your remaining payments, the interest, and any administration fees involved.
2. Get a car valuation
Use our free car valuation tool to find out how much your car is currently worth. Knowing the value of your car will help you understand how much money you can put towards a new motor.
3. Understand if you have positive or negative equity
Positive equity refers to when your car is worth more than the settlement amount. In this case, you can pay back the amount you owe on your previous car and use any of the remaining money from its value to put towards your new car.
For example, if your current car is worth £5,800 and your settlement amount is £3,000, you’ll have £2,800 to go towards your new motor.
However, if your car is currently worth £4,000 and your settlement amount is sitting at £4,500, you have £500 of negative equity. In this case, you can still part-exchange your car for a new one but you’ll have to pay the £500 in addition to the cost of your new car.
4. Make sure all your documents are in order
Just like with traditional car selling, it’s important to have the right documents and accessories when part-exchanging your motor. The dealership may request the following:
- V5C logbook.
- Photo ID (passport or driving licence).
- Bank statement or utility bill.
- Service history or repair invoices.
- MOT certificates (optional, as this information is available online).
5. Seal the deal
Finally, the dealer will settle your existing finance, taking into account whether you have positive or negative equity, and add any additional funds or debt to your new agreement.
Now, you can sign your new agreement and drive your new car home!
Selling to webuyanycar: A hassle-free alternative to a part-exchange deal
While part-exchange can be a convenient way to switch to a new car, dealership trade-in values are often less than what you could get selling your old motor elsewhere. Your choice will also be limited to the cars they have on their forecourt.
Here at webuyanycar, we offer a hassle-free alternative. We can often beat part-exchange quotes, leaving you with more cash to put towards your next car, and the process takes just an hour from quote to sale.
Here’s how it works:
- Obtain a current settlement letter and figure from your finance provider.
- Get a free car valuation from webuyanycar.
- Book an appointment at any of our 500+ UK branches.
- Travel to your appointment.
- The buyer will guide you through the process and settle any outstanding finance on your behalf.
- If you’re happy to proceed, we’ll send the cash straight to your bank. (If the car is in positive equity.)
With webuyanycar, you’ll also benefit from a guaranteed sale. While dealerships will sometimes reject older or damaged cars for a part-exchange deal, we can buy your old motor regardless of its age or condition.
Frequently asked questions
The first step is to get a settlement figure from the lender. This is the amount you owe and will need to pay off to end your finance agreement early. Knowing this figure and the value of your car will allow you to part-exchange it.
When you part-exchange your car, the dealership or buyer will settle the PCP agreement as part of the process.
This puts you in negative equity. In this case, you will have to pay the difference to the dealer. In some cases, the dealer may allow you to roll the negative equity into your next finance deal. This can be a risky choice as it may increase your monthly payments.
Yes, you can trade in your PCP car before the agreement ends. Just get a settlement letter and figure from the lender, compare it to your car’s current value, and bring this information to the dealership to arrange a part-exchange deal.
Yes, we can settle the outstanding finance on your PCP financed car. This will allow us to purchase the car.
If you’re in positive equity, we’ll send you the cash to put towards your next car! We can also settle the outstanding finance if you’re in negative equity, but you’ll have to pay the balance.