A normal car finance contract will last anywhere from three to four years. A lot of things can change during that time frame, like starting a new family or needing to make a longer commute. So can I change my car on PCP early? Luckily if you have a PCP deal you are allowed to change cars and they make it super easy for you. The most straightforward way of swapping or upgrading your car is to wait until the end of the agreement. But there are options to make that change in the middle of the contract as well.
Swapping cars on PCP finance – Settlement Fees
Wanting to end the contract early or getting a PCP early upgrade will usually involve some kind of settlement fee. Included in this fee is the amount of money you have yet to pay off with the car, which will include the balloon payment as well. You will have to pay interest on this amount as well, but not as much as you would have paid if you continued with the monthly payments.
Your finance company will provide you with the final numbers for the settlement fee, which will then be communicated to the person who owns your new car. Once they know this, they can work out what your new monthly instalment amount will be.
When is the Best Time to Swap Over?
Right at the beginning of the finance agreement is when a car loses the most value. After the start of the contract, the value starts declining at a much slower speed. All of your PCP payments will be fixed so they won’t match the reduction with the car’s worth. But at the end of the agreement, the balloon payment and interest added is designed to cover that loss. This is why the settlement fee will be less the closer you are to the end of the contract.
The best time to swap a car on PCP finance is the break-even milestone when the remaining debt you have on the car is equal to the vehicle’s value. This is the best time to make the swap because it actually won’t end up costing you anything. Getting to this break-even point normally only happens in the final year of the contract. You can also gain equity in the car if the value of the car is more than the amount you have left to pay. In this situation, you can still swap your car and put the money towards the new deposit, or have it repaid directly into your bank account.
PCP Early Upgrade – How To Get The Best Deal?
A finance company simply won’t negotiate on the amount the settlement fee is. However, you have a certain amount of say when it comes to the other costs included in swapping or upgrading a car on finance. Check out the points below that allow you to get the best value and a great deal.
- The value of your current car.
The more your car is worth at the time of swapping or upgrading to a new car, the less there will be to pay towards the settlement fee. Push as much as you can to get a great price at trade-in. If you are going through a car retailer they will be able to settle your old finance for you. - The price of the new car.
Choosing a cheaper vehicle will mean your new finance repayments will be lower. - The new interest rate on the loan.
If you’ve been a rush to swap or upgrade it’s very easy to overlook the interest. Having a low-rate interest on your finance agreement has a huge influence on the cost of your monthly repayments. Always shop around the for the best deal when it comes to APR and doesn’t just jump at the first car dealer you see.
Reasons for Swapping or Upgrading Early a PCP Financed Vehicle
There are multiple different reasons why you may want to swap or upgrade your car. Here we’re going to look at some of the most common ones and give you advice on each.
Swapping to save money on your car
If you want to swap your car to reduce the PCP monthly instalments then choosing a cheaper model can help you do that. However, you current car has to have a value that is much less than what the settlement fee is.
In this situation, you have to pay the difference as the settlement fee, which is a very important thing to remember. This fee can easily wipe out any savings you could be getting with a lower monthly payment on the new car.
Swapping a PCP vehicle for something more suitable
There may be no choice in getting a new car if your circumstances change. If this is the case then you have to go through the normal process of paying off the settlement fee and trying to find the best deal on your next car’s monthly repayments.
Getting a better car by Early Upgrade
There’s always new cars being launched with funky technology and modern gadgets. A car manufacturer knows how they want to present these designs to you, and tempt you to make the leap and buy a new one.
Everyone feels that pull, and there’s absolutely no shame in succumbing to the jargon and wanting to upgrade to a shiny new model. However, you need to be completely aware of what the costs will be and if you can actually afford it.
Generally speaking, upgrading your car for a brand new model will cost you more in settlement fees and monthly repayments. It’s always better to try and wait for the end of the contract so that you don’t get stuck with massive bills to pay.
Swapping the car at the end of the PCP contract
Waiting until the end of your PCP agreement will always be the easiest option if you have a choice of upgrading or swapping your car. All you have to do is find a new car you want, and then let the retailer of that car know that the PCP contract on your current vehicle is about to end.
The key here is that it doesn’t have to be the same retailer or finance company that gives you a new PCP agreement. You can still settle the old contract and enter into a new one no matter who you choose to go with.