Many people who have bought a car with car finance wonder when they can upgrade or change their car. If you financed your current vehicle and have owned that vehicle for in excess of 2½ years it is likely that you could now be in a position to upgrade to a far newer car with far less mileage for a similar monthly payment. There is a common misperception that you have to wait until the end of your finance agreement before you can change your car. However, as long as you have positive equity* in your car you can consider changing at any time, possibly 2-3 years before the end of your existing finance agreement.
A few questions we will ask or be able to help you with are:
Even if you haven’t yet considered changing your car, it’s definitely worth exploring whether you are in a position to do so should you want to in the near future. Why not take a look at the cars we have on offer at Imperial Cars on our website now.
- How much is your current car roughly worth (the trade value)?
- What amount is outstanding with your existing finance company?
- Would you have a cash deposit to place into the deal as this sometimes helps with certain finance companies?
- How much are you looking to finance on a new car and what is your monthly budget?
*Equity refers to the difference between the car finance agreement and the value of the vehicle. For example, if your car is worth £5,000 and there is £2,000 left to pay on the car finance agreement, there is £3,000 equity left in the value of the vehicle. This means that having cleared your finance settlement figure you still have money left over, putting you in a position of positive equity. Equity is referred to as negative equity when the amount left on the car finance agreement is more than the value of the car. For example, if your car is worth £4,000 but there is £6,000 left to pay on the car finance agreement, there is £2,000 of negative equity.
There are a number of situations when the equity left in the value of your vehicle may become an important figure to note. If for any reason you need to settle your car finance agreement early, you may need to sell or part-exchange your car in order to pay the settlement figure (the amount of money still owed on the car finance agreement, plus any early settlement fees). If your car is worth more than the settlement figure, then you will be able to pay the settlement figure using proceeds from the car with some equity left over to use as a deposit.