How does part-exchange work on a car?

Part exchanging your car is when you trade in your current vehicle for another. Usually, it’s for a more modern car or an upgrade, but that’s not always the case. 

If you want to part exchange your current vehicle, it’s quite a simple process. 

How does part exchange work on a car?

The part exchange process can be broken down into four simple steps. 

Step 1: Find your new car

If you haven’t already, you need to find the car you want next before part exchanging your vehicle. If you’re still looking, you can use our handy search tool here

Step 2: Get your car valued

Once you’ve found the car you want, you need to get in touch with the dealer. They’ll either ask you to visit their showroom to take a look around your car or conduct a valuation online. 

Lady valuing car

Step 3: Agree the terms of your new deal

If you’re happy with the valuation, it’s now time to agree the terms of your new deal. This is where your current vehicle’s valuation is taken into account against the cost of your new car.

Step 4: Part exchange your car

Once your new deal is agreed, you then hand the car you’re part exchanging over and take delivery of your new vehicle. Usually, it happens at the same time – so you’re never without a car. 

Why do people part exchange their car? 

By part exchanging your car, you can speed up the process of getting rid of your current vehicle ahead of taking delivery of a new one. 

If you don’t have the time to sell it privately, don’t feel comfortable haggling with strangers, or you’re not the legal owner – if your vehicle is on finance, for example – then part exchanging is a simpler way to ease the stress of getting a new vehicle. 

Another big reason people may want to part exchange their car is to use it as a deposit. 

Lady with new car

If you own the car outright, the value of the vehicle you’re part exchanging will be taken off the price of your new one – making getting a new car cheaper. 

Even if you still have outstanding finance on the vehicle, if your car is worth more than the money you owe, you can still use that as a deposit on your next vehicle. 

How is my car valued? 

If you choose to part exchange your car, the dealership where you’re trading it in will value your vehicle before you agree a new deal. 

They’ll either do this in person at the dealership or online using pictures and videos.

Your sales executive or a member of the buying team will take a general overview of the vehicle, making note of any scratches, dents or marks which may lower the value. 

Man valuing car

If you visit them in person, they’ll also test drive the vehicle briefly to ensure there are no major mechanical issues they need to be aware of. 

Then, once they have all the information they need, including the car’s service history, how many keys you have, and tyre tread depths, you’ll be given a price. 

This usually derives from the Cap HPI guide which is updated quarterly and gives an industry estimation of how much each vehicle should be worth depending on its age and mileage. 

There are three valuation types in the CAP HPI guide; CAP clean, CAP average and CAP below. 

Most cars are around CAP average; where the vehicle is in average condition for its age and mileage and requires some work to bring it up to resale standard. 

However, any damage to the bodywork or interior, or any mechanical issues will also be taken into account. And if it’s going to cost to fix, that’ll be taken away from your valuation. 

How can I see how much my car is worth? 

You can get a rough guide of how much your car is worth by doing a little research before you part exchange it. In fact, it’s recommended you do before you get a dealer’s valuation to ensure you’re getting the most value from your vehicle. 

Seeing how much your vehicle is selling for is one way to gauge value. 

However, you have to remember that you’ll usually get more selling privately and that the dealership needs to make a profit when it comes to selling your part exchange – so it won’t be exactly the same. 

Also, when checking to see how much your car is worth, it’s important to compare like for like. 

If, for example, your vehicle has done 60,000 miles, don’t compare it against one which has done 20,000 – as the lower-mileage one will always be worth more. 

And the same goes for the specification. If you have an entry-level model, don’t compare it against a top-spec variant, because there will be a gulf in value. 

Can I part exchange my car if I still have finance to pay? 

With some types of car finance, you can still part exchange your car even if you have outstanding finance on the vehicle. 

If, for example, you have a personal contract purchase (PCP) or hire purchase (HP) agreement, you can part exchange your car at any time. 

Just remember that your outstanding finance will be weighed up against the value of the vehicle you’re part exchanging. 

So, if for example, your vehicle is valued at £10,000 but you still have £9,000 of outstanding finance, you’d only get £1,000 to use a deposit on your new car, because the vehicle’s valuation covers the outstanding finance. 

However, depending on when you want to part exchange your vehicle, you may find that its valuation is lower than the outstanding finance. 

If that’s the case, then you’ll either need to pay the difference as a deposit or add it to your new finance agreement – making the cost of your new vehicle higher. 

What happens to my existing finance if I part exchange my car? 

If you still have outstanding finance on your vehicle when you choose to part exchange it, the dealer you’re getting your new vehicle from will use your current car’s value to pay it off. 

For example, if your vehicle is valued at £12,000, but you still owe £11,500, then the dealer will use £11,500 of the £12,000 valuation to settle your finance. Then the remaining £500 could go towards your new deal as a deposit. 

If, however, your vehicle was valued at £11,500, but you still owed £12,000, then the full £11,500 valuation would go towards paying off your outstanding finance. 

The remaining £500 you still owed would then either need to be paid directly or added to your new car’s finance – making the price of your new vehicle £500 more.

Before you part exchange your car, the dealer you’re using will ask you to gain a settlement figure from your finance company – usually in the form of a letter or email. 

This is so they know exactly how much money you still owe on your finance. 

It’s easy to get a settlement letter from your finance company. Just send them an email or give them a call, and they’ll provide one to you, usually, the same day. 

When it comes to your settlement figure, it needs to be accurate. So, an out-of-date settlement figure, i.e. one that came before you made your last payment, won’t be permissible. 

When’s the best time to part exchange my car? 

There’s no magic timeframe in which it is best to part exchange your, as each vehicle is different. 

Also, each finance agreement is different, so if your vehicle is still on finance, you need to factor in how much you still owe before making a decision. 

However, as a guide, you want to make sure that you’re not going to lose too much money – so part exchanging early either into your finance agreement or recently after you’ve bought the car isn’t advised. 

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That’s because either your finance isn’t old enough to have become less than the car’s valuation – because you haven’t made enough payments to counteract the interest – or you won’t get back what you paid if you own it outright – because cars lose value the more owners they have. 

Really, if you’re going to part exchange your vehicle, any time before two years isn’t usually recommended, unless you’re on a two-year finance agreement. 

After that, it depends on the vehicle and your circumstances. 

If you leave it too long, for example, the vehicle won’t be worth much – and you won’t get a lot for it. And unless you’ve got every last ounce out of it, i.e. its got around 200,000 miles on the clock, the likelihood is it’ll be worth more to you than a dealer. 

If you’re unsure whether part exchanging your vehicle is right for you, you can always speak to a member of our team who’ll give you a no-obligation valuation over the phone. Just click here

When can’t you part exchange your car? 

You can’t part exchange your car if you’re on a personal contract hire (PCH) agreement. 

That’s because, with a PCH, you never own the vehicle, so it’s not yours to sell. Instead, it’s a long-term rental. 

You can hand it back midway through your contract if you wish. But depending on how many payments you have left, you’ll likely face large early repayment charges and be expected to cover the remaining cost of the contract. 

Selling your car vs part exchange

If you’re the legal owner of the vehicle, i.e. you have no finance tied to the car, you can sell it privately if you wish. 

You’ll usually get more money if you sell your car privately than you would through a part exchange; however, there’s also typically a lot more hassle when doing so. 

Instead of taking it to your dealer and them doing all the admin involved, that responsibility falls to you. 

That includes advertising the car – which can cost money – organising viewings and then transferring ownership when you’ve found a buyer. 

The process of selling privately is also quite long-winded and can often take weeks or months, rather than getting your valuation and swapping your car in with a dealer when your new one is ready to take. 

Also, because of the time it can take to sell your vehicle privately, if it does take a while, you may end up getting less for it than you would by part exchanging, as vehicles drop in price every few months. 

What documents do I need to part exchange? 

When the time comes to part exchange your vehicle, you’ll need a valid MOT test certificate – although most dealers can now access these online – as well as your V5C. 

A V5C – otherwise known as the vehicle’s log book – is the red-faced certificate you’ll have received from the DVLA when you became the registered keeper of your current vehicle. 

It’s usually four pages long with your name and address on the front. 

A dealer won’t accept your part exchange without a valid V5C document, so if you’ve misplaced yours or if you don’t think you ever received one, you can order a replacement here

On top of that, you’ll also need a stamped service book to prove your vehicle’s service history – if it has one. 

Advantages & disadvantages of part exchanging your car

Of course, with any decision you make, there’ll be advantages and disadvantages, and part exchanging your car is no different. 

Advantages of part exchanging your car

  • Quick and easy way to sell your car
  • Don’t have to worry about the headache of selling it privately
  • Can still swap your vehicle even if it’s on PCP or HP finance
  • Can change your car before the end of your agreement if you’re on a PCP or HP finance 
  • Usually helps bring down the cost of your new car

Disadvantages of part exchanging your car

  • You might not get as much for it as you would if you’d sold it privately
  • Can mean more negotiating with the dealership – something some don’t enjoy

If you’d like to know more about part exchanging your car, you can speak to us here