Believe it or not, trading in a car that still carries outstanding finance is actually a common practice - a large number of motorists opt to change their cars part way through lease periods. However, while trading in a vehicle during the lease period is fairly common, that doesn’t mean that you don’t need to take the time to properly research the process and what is involved.
The fact is that when it comes to trading in financed cars part way through the leasing period, there’s a lot that needs to be considered. One of the most important aspects of which, is taking the time to look at the different options available to you. Once you have a better understanding of how the process of changing your car when you have outstanding finance works, you will be able to decide if it’s the right option for you.
How can you change your car when you have outstanding finance on it?
It’s important to be clear about one common misconception: trading your car in does not necessarily wipe out car finance. However, this is actually only correct if the remaining lease balance is less than the vehicle’s trade-in rate. If the car is worth a different amount, then you have to pay off any additional balance. However, there is also the option of having the outstanding finance added onto a new car loan, if you opt to go down this route. This reduces the stress of having two different vehicle loans to pay off and rolls both into one monthly repayment plan.
If the loan on your car is still fairly new, then trading in could be a mistake, it also may not be an option. The moment you drive a car out of a dealership, its value decreases, so you may need to wait a while for the value of your current car to even out, otherwise you could end up paying more back as a result.
You could also be made to pay a prepayment penalty if you choose to trade your car in too early. This is because dealerships earn their income from the interest on loans, and when a loan is ended too early, they lose this income, which is why a prepayment penalty can occur.
What are the options available to you?
It’s important that when it comes to trading your car in that you take the time to do a little research, to ensure that you are in the best position possible and are armed with relevant information.
Take the time to find out how much your vehicle is worth, to ensure that you don’t end up overpaying. Your car will be examined before being accepted back as a trade in, so it’s important that you are aware of the condition of your vehicle. It could be worth taking it to a local garage for a check-up, to ensure that you are aware of any issues and know what condition it is in.
It is also important to be aware that if you still owe money on your vehicle, that you will be expected to make larger monthly repayments with a higher rate of interest for the new vehicle that you opt for. As long as you are aware of this and are happy to accept those terms, you shouldn’t have an issue finding a dealership that will accept you.
One of the most important steps you can take is to read your contract. It is vital that you ensure that the terms and conditions of your contract allow you to change your care early, even if you have outstanding finance.
Best tips and pieces of advice for drivers wanting to change their car that has outstanding finance:
If you are in a position where you want to start a new car financing agreement, either because you can’t afford to keep paying for your current vehicle or because you want to upgrade, but still have outstanding finance to pay off, knowing where to start can seem extremely complex.
Be clued up regarding what the contract between yourself and your financing company says. Are there any terms that you would be breaching if you chose to change your car earlier with outstanding finance? Is there a penalty stated that would need to be paid? Does your lease period have to be at least halfway through? These are all important factors to check within your contract.
Get in touch with your finance provider and ask if it would be possible to have a meeting - or a phone call - to discuss the situation with them. You may be able to come up with an agreement that you are both happy with, such as them restructuring your finance loan and spreading it over a longer period of time while combining it with a new finance loan, for your new vehicle.
If this isn’t an option, then you could also opt to get in touch with a specialist car financing company that focuses on offering new finance to motorists who already have outstanding vehicle finance. There are a number of specialist companies around that can offer a variety of approaches to getting car finance when you already have an outstanding lease in place. You may be able to trade in your current vehicle and switch to a different one and then role the two loans required into one. You have plenty of options available, it’s just a case of finding a company that will be able to help you.
The idea of being able to change your car and upgrade to a newer model or upsize to a larger design, might seem almost impossible if you currently have outstanding finance. However, the fact is that is not the case - it is possible to change your car even if you have outstanding finance, it’s just a case of knowing how to approach the situation as well as what you should expect your options to include. Once you’re aware of the options that you have, the process of changing your car, even with outstanding finance, should be far easier and more straightforward than you imagined it would be.