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To change your car early on PCP (Personal Contract Purchase), you’ll first need to agree a settlement figure with your lender and make sure the V5 certificate is in your name. If the car is worth more than the settlement figure, you can use this money towards the deposit on your new vehicle.

If your car is worth less than the settlement figure then you’ll need to pay the difference on top of the price for your new car. This can make swapping your car costly, so it’s worthwhile waiting until you’ve paid off more of the finance before changing your vehicle.

How does PCP work when changing the car early?

The most common way of changing a PCP car is waiting until your deal has finished and doing a straight swap for a newer model. Most PCP agreements are designed so that the vehicle will be worth more than the GMFV (Guaranteed Minimum Future Value), otherwise known as the 'balloon payment'.

So, when it comes to swapping your car, it won’t cost you any more money and you can use the extra cash you have in equity to pay part or all of the deposit on your next model.

However, if you want to change your car early, you’ll have to pay a settlement fee and settle any outstanding finance on the vehicle. Don’t worry too much if you can’t afford to pay off the remaining balance on your vehicle, because you’ll have the option to refinance it.

Your monthly payments will be more expensive if you swap a car early using a refinance option. This is because you’ll be paying the finance off for your old car, plus the new payments for your newer model.

What is the settlement fee when changing my PCP car early?

There’s no way of telling how much you’d have to pay for a settlement fee in order to terminate your PCP contract. Your finance provider will calculate what the settlement figure will be based on the total loan amount, contract length and the amount you’ve paid off already.

If you want to end your agreement early, the first thing you should do is speak to your finance provider who will be able to give you a quote.

Paid 50% of your PCP finance? Returning your car is an alternative option

Under the Consumer Credit Act 1974 you have the right by law to terminate your PCP finance agreement early if you’ve paid 50% of the total finance. Importantly, this includes the final balloon payment, plus any additional fees.

It’s important to remember that you likely will not have paid off 50% of the finance when you get halfway through your agreement. This is because the balloon payment at the end can be as much as a third of the value of the car at the time you start your agreement. So, you’ll want to check your contract and work out how much you’ve paid so far in relation to the total finance before setting your heart on terminating your PCP deal.

When is the best time to change my car on PCP?

If you can wait until the end of your PCP agreement before changing your car, this is usually the best option. Unlike when you change your car early, you won’t need to pay early termination fees or face increased monthly payments if you were to refinance the balloon payment.

On the other hand, you may not have to wait until the end of your contract in order to swap your car without paying anything. The way a PCP agreement works means that as your deal goes on, depreciation slows right down and eventually you should break even (i.e. the amount owed on the car is the same as its current value). Once this happens, you can change your car without paying any settlement fee.

How to get the best deal when changing your car on PCP

While you won’t be able to negotiate the settlement fee when changing your car on PCP, there are other ways you can get the best deal.

  1. Push to get the best trade-in price: if you can get as much money for your existing car as possible when trading it in early, your settlement figure will be cheaper.
  2. Look for cheaper vehicles for your next car. Although fairly obvious, you’re guaranteed to get lower monthly payments on a PCP agreement if you look at vehicles that are cheaper and within your budget. Comparing prices online from multiple providers is the easiest way to ensure you get the best offer.
  3. Consider the interest rate on your new deal. Remember to check the interest rates on your new PCP deal. A lower interest rate will have a massive impact on the price of your monthly repayments, so remember to shop around for the best rates available at that time.

Reasons to change your car on PCP

Changing your PCP car to save money

In theory, if you change your current PCP car to a new model that’s cheaper, your monthly payments should be lower. However, this might not be the case if the value of your existing car is worth a lot less than the settlement figure. In this instance you can either pay it off in one lump sum or use negative equity finance to continue paying off the remaining debt owed on the vehicle.

Negative equity car finance can make your monthly payments more expensive if you begin financing your new vehicle, because you’ll be paying for two cars.

Changing your PCP car for a more suitable model

If your current car is no longer serving the purpose you need it for, you may have no choice but to change your car early. For example, your small hatch might not be fit for a family you’ve started, so upgrading to an SUV could be necessary.

You’ll have to follow the standard procedure in this instance, getting a quote for your settlement figure and comparing it against the value of your car. Your monthly payments can be higher or lower depending on the price of the new car that you’re looking at.

Getting a better car by upgrading early

Manufacturers release brand-new cars regularly (often each month there’s a new model being revealed) and you may see a vehicle which tickles your fancy.

Upgrading to a newer car – even one that’s a similar size and spec – can cost more if you’re not at the end of your PCP agreement, where you can usually break even (i.e. the remaining finance is no higher than the current value of the car).

Remember that you have the option to trade-in your existing car to another dealer if it means that you get a better price. You’ll need to have the permission from your lender as they own the car, not you. Should you get more money for your current vehicle, you can use any leftover cash to put towards your new agreement, which should lower your monthly payments.

Changing your PCP car at the end of your agreement

As we mentioned earlier, changing your car on PCP at the end of your agreement is the easiest option. You simply find a new or used car you want next and tell the dealership/online car supermarket that you’re coming towards the end of your PCP deal.

It shouldn’t matter if you want a different model from another manufacturer. Any good retailer will be able to settle the existing finance on your current vehicle for you. In the best-case scenario your car will be worth more than the final balloon payment, leaving you with surplus cash to put towards the deposit on your next car.

Want the best deal on your new car? Moneyshake saves you time and money, simplifying your search for a brand-new vehicle.

Compare the best lease deals