Can I modify a financed car?
Whether you’re dreaming of adding a fresh set of alloys or a personalised wrap, making performance tweaks to the engine, or upgrading your stereo, there are a wide range of modifications that can take your car from a bog-standard runaround to something entirely unique and fine tuned to your exact personal taste and requirements.
However, when it comes to modifying a car on finance, proceed with caution. While you can do whatever you want to your own car (within reason), you need to be more considerate with someone else’s property.
When you choose a Hire Purchase (HP) or Personal Contract Purchase (PCP) agreement, your finance is secured against the car. That means you won’t be its legal owner until you reach the end of the loan term and have made all the required repayments (including the final balloon payment in a PCP).
During your loan, it might be helpful to think of yourself as the car’s caretaker instead of its owner. You’re the person responsible for taking care of the car, putting it through its annual MOT and service, and making sure it’s never running on empty, but making any changes that could impact its value are strictly off-limits.
You’ll need to check your finance agreement to get into the nitty-gritty of what is and isn’t permitted but, in most cases, you won’t be allowed to make any modifications during the loan term. The lender will want to protect their investment and even if you think you’re making improvements (who doesn’t love neon yellow?!), you could be affecting its future resale value and desirability.
If you’ve got your heart set on making a specific modification, you could talk to the lender directly. Even so, the old adage holds up; it’s better to be safe than sorry.
Once you’ve become the car’s legal owner, you’re free to get creative! Book in to your local body shop! Get that yellow roof! You deserve it!
What counts as a modification?
There are four main types of modification, ranging from high-shine spoilers to practical tow bars.
Performance
Performance modifications are those small tweaks you make under the bonnet to help the car unlock more juice or hit higher speeds. They might seem relatively minor, but these changes can put unnecessary stress on the mechanism or put off potential buyers who don’t want the potential added risk of a more powerful engine.
Cosmetic
Cosmetic changes are likely the first thing that comes to mind when you think about modified cars. This might include adding alloy wheels, swapping your standard lights for LEDs, investing in a wrap or window tints, or adding a body kit. All these things may cater to your taste, but they might not be everyone’s cup of tea.
Towing
If you fit a towing bar or trailer to your car, this counts as a modification.
Entertainment
Entertainment modifications can range from installing a high-end stereo to investing in a new sat-nav or adding a touch screen entertainment system for the kids to watch Moana (for the fourteenth time that week) in the back seats.
What is exempt from this list of modifications?
It’s always worth double-checking the terms and conditions of your finance agreement, but it’s likely that almost all modifications will be off-limits during your loan term.
This includes temporary modifications. These might seem harmless, especially if you plan to remove them before the loan term ends, but it’s unlikely that the lender will see them the same way.
If the car is involved in an accident or valued mid-term for any other reason, those modifications will be noted, be reported back to the lender, and impact the amount the car is worth now and in the future.
Can I repaint my car if it’s on finance?
Car colours are subjective, but they can have a surprising amount of impact on the amount your car is worth. Generally speaking, the more neutral, the better. Black, grey, and silver consistently top the charts as the most popular car colours in the UK. Other colours can have times where they’re on trend – green has had a moment recently – but they don’t have the same staying power as the more classic colours.
As colour can affect the car’s value, it’s unlikely that you’ll be allowed to repaint a car on finance. You might love a bright sunshine yellow or a striking electric blue, but the car’s next owner might not be so keen. Even if you plan to repaint the car at the end of your agreement, any changes you make that affect the car’s current value will likely be a no-go for lenders.
What happens if I modify my car on finance?
If you go against the terms and conditions of your car finance agreement and make a temporary or permanent modification, this could put you in a tricky position with the lender.
There are several different potential outcomes, but the lender can withdraw your finance. In that case, you’ll only have 14 days to pay the finance off in full. Depending on the lender, they could ask you to pay the settlement figure or the full amount that would have been repayable if your loan had lasted the full term. With a PCP, you’ll also be responsible for paying the final balloon payment.
If you can’t afford to pay this balance in time, the lender could move to repossess the vehicle. In this case, they’ll likely take it to auction to sell. This is where your modifications could cost you even more; if the car sells at a loss, you’ll need to pay the outstanding difference.
FAQs about modifying a financed car
Can I put a body kit on a financed car?
A body kit typically involves a whole host of modifications, so you’ll likely need to wait until the car is officially all yours before you can add one. In fact, if you go for the full works and end up with a new set of bumpers, side skirts, spoilers, and wing mirrors, your car will look completely different and likely have a completely different valuation too. Your loan will be based on a standard model, not a custom car, so body kit modifications will almost certainly be in breach of your agreement’s terms and conditions.
What if I am not happy with my car on finance?
Depending on where you are in your finance agreement – and your current circumstances – you might be able to terminate your loan or bring it to an end early so you can change cars.
As finance agreements are legally binding contracts, it’s not quite as simple as switching your current car for a new one, but you also don’t need to wait until the term comes to a natural end.
If you think you’ve made a mistake a few days into your contract, you do have the option to withdraw. This is called the cooling-off period, and, under the terms of the Consumer Credit Act 1974, you have the right to withdraw from your credit agreement within 14 days without facing any penalties. However, this doesn’t automatically mean you can walk away from the car too, especially if you’ve already committed to buying it.
Once you’re more than 14 days into your agreement, you can bring it to a premature end at any time by requesting a settlement figure from your lender. This is the amount you’ll need to pay to settle the finance and become the car’s legal owner. It’ll usually be made up of your outstanding repayments – minus any future interest – plus admin fees and an early termination charge. You’ll also need to pay the balloon payment in a PCP. Once the finance is settled, you’re free to sell the car, offer it as part-exchange, or make any modifications you like.
Can I give my car back?
If you’d like to hand your car back before this, you have the right to voluntary termination. Voluntary Termination is a legal right, set out under Section 99 of the Consumer Credit Act 1974, that allows you to end your loan and hand the car back to your lender at any point. You just need to tell the lender you want to voluntarily terminate and return the car.
It’s important to note that you’ll need to pay 50% of the total amount payable (including the balloon payment in a PCP). If you’ve made some payments, but not yet reached this point, you’ll need to pay the difference. If you’ve already paid over 50%, you can return the car without needing to pay anything more. Even so, extra charges might apply if the car is damaged beyond fair wear and tear.
