Do I Have To Pay To Upgrade My Car Early?
Posted: 8th May 2017
Sometimes we want to end our time with our car early. We have become bored with our current model or we have grown out of it in terms of space due to family or hobbies and we require a fresh model.
The answer to the question of do you have to pay to upgrade your car early is no.
However, you do have to pay to end your current leasing or finance agreement early. Ending your agreement and then upgrading are two separate things, which is why there is a cost for ending the agreement and no cost for the upgrade.
Ending your agreement early
Ending your lease early
If you are looking to end your lease early, it isn’t as easy as ending your finance agreement. There isn’t a specific settlement fee available to pay. Instead, you may be required to pay off whatever is left of your whole lease agreement and then hand the car back. It might not be worth ending your lease early because you have to pay the full amount and have nothing at the end and may have to pay a deposit to start a new lease.
If you have the funds available to do that, then the option is open to you. However, if you don’t, it may be well worth considering continuing with your lease for longer.
Ending your Hire Purchase agreement early
With finance agreements, there are two options for ending your agreement early. If you can’t afford to continue with your finance agreement and have paid over 50% of the Total Amount Payable, you can go through a voluntary termination. That works by you writing to your finance company and as long as you have remained within the wear and tear guidelines, you can hand the car back without any further payments.
However, if you are looking to keep the car and use it as a part exchange, it is better to go through the settlement fee option. You can pay off the remaining finance requires with any applicable fees or interest rates set out in the initial HP contract. You will then be the full legal owner of the car.
Ending your Personal Contract Purchase agreement early
Similarly to a Hire Purchase agreement, a PCP agreement has two options for ending the agreement. You can go through the voluntary termination route that works the same way with PCP as it does with HP and you have no car at the end.
The early settlement fee does work differently with a PCP agreement. A Personal Contract Purchase agreement works by you paying monthly payments to cover the depreciation on the car for the duration of the agreement and at the end, you pay the Guaranteed Minimum Future Value (GMFV).
With the settlement fee for a PCP agreement, you have to pay off the remaining unpaid monthly payments with applicable fees and interest rates plus the GMFV in order to take ownership of the car. The GMFV is calculated at the start of the lease and is the predicted value of the car by the end of the agreement that you have to pay if you want to take ownership.
Upgrading your car
Once you have paid the final settlement fee and taken ownership of the car early, you can do what you want with your car. If you decide you want to upgrade, there isn’t a further charge. In fact, you can use the car you have just taken ownership of as a part exchange.
If you do choose to use it as a part exchange, it can form your deposit and the more the car is worth the higher the deposit it can make. The higher the deposit you pay, the lower the remaining payments of the new agreement will cost.
In summary, there is no cost to upgrading early because you can use the car to part exchange on a new car. However, to end the previous agreement before you do upgrade will cost you to take ownership of the car. You will be required to pay that settlement fee. The amount you will pay will entirely depend on how much time is left on the agreement.
If you are looking to upgrade early and you want a new car, browse through our site. If you see a car you like, enquire with us and our staff will find the best deal to suit your requirements.