Can I change my car on PCP early?

PCP car deals are designed to last the full term, much like other types of car finance. But there are ways that you can change your car on PCP early.

Waiting until the end of your agreement is your best bet but there are often ways you can get out of your PCP agreement early whilst not having to pay additional fees.

So whether your needs have changed, you want a newer model or you’ve realised your car is in equity, there are a few ways you can change your PCP car early.

Explore below to learn exactly how to change cars on PCP, why you may want to do it and how to get the best deal.

Yes, you can change your car early on PCP. There are two main methods: 

1. Contact your finance provider and ask for a settlement fee. Pay this fee to end your PCP deal.
2. Return your car after you’ve paid 50% of the total finance (including balloon payment and any fees.)

You end the deal in both methods and are free to get your next PCP car.

You can end your PCP agreement early by paying the settlement fee. This payment covers the remaining cost of your finance.

If your car is in equity then you can put it towards the settlement fee. The process is pretty simple and goes as follows:

1. Contact your finance provider
2. Get the settlement fee
3. Value your vehicle
4. Pay the settlement fee (whether it's cash or your car’s equity)
5. Get your next PCP car

First, you get in touch with your finance provider. Ask them to provide you with a settlement fee which is the outstanding amount of finance left including fees.

Next, value your vehicle. If your car’s value is higher than the settlement figure, you’re in positive equity. You can put it towards the deposit on your next car.

If your car’s value is lower than the settlement fee, you’ll have to make up the difference. This is where the costs can start to stack up as you’ll have to settle this on top of paying for your next vehicle.

It’s usually better to wait until the later stages of your agreement to change cars as you’ll have paid more off, meaning the settlement fee is lower.

How is the PCP settlement figure calculated?

It’s based on three things:

1. Total loan amount
2. Your contract length
3. How much you’ve paid off

You’re provided with a figure, which includes fees and interest, which you must settle to end the deal.

You cannot sell the car to a third party to fund the settlement fee as you’re not the legal owner until you’ve paid the balloon payment.

The best way to swap PCP cars is to wait until the end of your agreement. The final year is where you’re most likely to be in equity.

Your car loses the most value at the start of the agreement. Then towards the end of your PCP deal depreciation happens at a slower pace.

Due to this drop in value upfront, it’s best to wait until as late as possible in your contact. Typically the last year is best in terms of value.

When you hit this sweet spot you may find you have equity in your deal which means it’s the perfect time to change PCP cars.

There’s another way you can end your PCP agreement early to change cars. The Consumer Credit Act 1974 gives you the right to end your PCP deal early as long as you’ve paid at least 50% of the total finance amount.

This includes fees, interest and the balloon payment.

Once enacted, you hand the car back and end the deal. It’s that simple.

However, it’s not as easy as waiting until halfway through your term. The balloon payment usually equates to around one-third of your total finance amount.

Your initial payment also plays a part, so if you put down less upfront you’ll have to wait longer.

Once you’ve paid 50% of the finance you can terminate the contract, hand the car back and get your next deal.

Keep in mind that you’re ending the deal so you have to hand the car back. You won’t have the opportunity to part exchange or sell the vehicle with this option.

If you’re set on changing your PCP car early, this is one of the most effective methods.

Wait until the end of your agreement to get your settlement figure. The longer you wait the lower your settlement fee, and the steadier your car’s depreciation. The last year of your PCP deal is typically when you’ll begin to break even so hold out until at least then.

You may find your car is worth more than the GFMV which means you won’t have to pay anything when swapping cars. You can then put this equity towards the deposit of your next PCP.

This may be the best option instead of changing your PCP car early.

Depreciation slows down as time goes on. That means you may break even when you get closer to the end of your agreement.

When you hit this point you won’t have to pay a settlement fee so it’s the best time to get a new PCP car.

You can also swap cars early by refinancing the outstanding finance on your old car.

However, this is an expensive way to do it as you’re paying off both the finance of the old model plus your new PCP deal.

You should only do this if you have no other choice and it makes financial sense to pay for both a new PCP deal on top of your refinanced payments.

There are a few reasons why you may want to change your PCP car early. This includes:

PCP car deals tend to last anywhere from three to five years. A lot can change in that amount of time!

Your current car may no longer be suitable for your lifestyle. You may need more space for a growing family. You may be after a smaller car after moving into the city. You may even need something with better running costs.

If you’re going to a bigger car, your next PCP deal is likely to cost more. The same is true if you’re trading in for a plug-in hybrid version of a car for lowered running costs.

Downsizing to a smaller model may see your overall costs decrease. Just keep this in mind when searching for your net vehicle and considering changing your PCP car early.

You might have spotted a better deal elsewhere, or you may no longer be able to afford your original agreement due to lifestyle changes.

Either way, you can always go for a more affordable car. This may be the same model but with a lower spec or smaller engine. Or it could be a new model or different car make.

New cars come out every year alongside model updates and facelifts. Going for an upgrade is another popular reason to cancel a PCP deal. But bear in mind that your costs are likely to go up. Even more so if your current PCP car hasn’t held its value very well.

Whilst you can’t negotiate the settlement fee, there are a few ways you can make your money go further when changing PCP cars early.

Make sure that you get the best part exchange value for your vehicle. Some dealerships value certain makes and models higher than others so keep this in mind when shopping for valuations.

If you want the latest models for the best value, consider nearly new cars. Pre-registered, delivery mileage or cars under a year old represent amazing value for the latest vehicles.

Used cars are also a great choice as they’re more affordable and their depreciation has steadied. The sweet spot is anywhere from five to eight-year-old cars.

If you can afford to put down a higher initial payment, you may be able to find low or no-APR PCP deals. This means you pay little to no interest on your car but have to pay a higher proportion upfront. This is ideal if your current PCP car has positive equity.

Take good care of your car during your agreement. This will help to maintain its value. This includes paintwork, the interior, tyres etc.

Keeping to your mileage limit means you’re not hit with additional costs at the end of your agreement. If you breach the limit you’re liable to pay per mile before you can end the agreement. Keeping your mileage under 10,000 a year retains its value over the years.