Can I part exchange a car that has finance on it?
Yes, once the finance is cleared. The lender owns a car on hire purchase or PCP, so ask it for a settlement figure. If the dealer values the car at less than that, you pay the shortfall.
Last reviewed . The official sources it draws on, and the date each was read, are listed at the foot of the page.
Why the finance has to be cleared
On hire purchase or a PCP the finance company owns the car until the final payment, and nidirect says you cannot legally sell goods under a hire purchase agreement until it has been paid off. A part exchange is a sale of your car to the dealer, so the agreement has to be settled as part of the deal.
What the dealer allows for your car, set against what you owe, decides what happens next.
Get your settlement figure first
If your agreement is a regulated consumer credit agreement, you can ask the lender for a statement of the amount needed to clear it, with particulars showing how it is worked out. It must be given within 7 working days of your request, and you do not have to ask in writing unless the agreement is secured on land.
Having the figure before you talk to a dealer lets you compare it with their offer. The statement is in a form the regulations prescribe, so it shows the same items whichever lender you ask.
Equity or a shortfall
| If the dealer’s allowance is | What it means |
|---|---|
| Higher than the settlement figure | There is equity. The FCA describes a PCP customer using equity built up during the agreement towards a new agreement. |
| Lower than the settlement figure | There is a shortfall. The settlement figure is what discharges your agreement, so the difference still has to be paid. |
You do not have to part exchange
You can settle the agreement yourself under section 94 at any time by giving notice and paying everything due, less the early-settlement rebate and plus any compensatory amount the lender is allowed to claim, and then sell the car privately or to a dealer. Handing a car back to the finance company is different again: voluntary termination is a separate right with its own answer.
Where this applies
The Consumer Credit Act sections used here extend to the whole of the UK, including Northern Ireland.
Sources
- Financial Ombudsman Service: Car financeRead on 6 October 2026. With hire purchase and PCP the dealer sells the car to the finance provider, which owns it; you become the legal owner by making the final payment.
- nidirect: CreditRead on 6 October 2026. You cannot legally sell goods under a hire purchase agreement until the agreement has been paid off.
- FCA: Our work on motor financeRead on 6 October 2026. A PCP customer can enter a new agreement using any equity built up over the existing agreement.
- Consumer Credit Act 1974, section 97 (duty to give information)Read on 6 October 2026. The lender must give a statement of the amount needed to discharge the debt and how it is arrived at; a request need not be in writing unless the agreement is secured on land.
- Consumer Credit (Settlement Information) Regulations 1983, regulation 4Read on 6 October 2026. The period prescribed for giving the statement is 7 working days.
- Consumer Credit Act 1974, section 94 (right to complete payments ahead of time)Read on 6 October 2026. The right to settle a regulated agreement at any time by notice and payment, less the rebate allowable under section 95.
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