A Guide to What You Can and Can't Do With Car Finance

Car finance can be a smart way to buy the vehicle you really want and pay for it over instalments, thus easing the financial burden of what is typically an expensive purchase. But what can and can't you do with a car bought using finance? Can you modify it? Transfer ownership? Reduce monthly payments if needed? That's the purpose of this guide, which covers everything you can and can't do with car finance.

Can I modify my car if I've got car finance?

Many car owners want to make changes to their vehicles. But what if the car is still being paid off? Essentially, it comes down to the terms and conditions of the contract signed with the lender. Modifying a car bought with hire purchase (HP) or personal contract purchase (PCP) might prove difficult as the lender typically prohibits aesthetic changes to the vehicle, whether it's brand new or second-hand. The car is financed, which means you're not the actual owner of the vehicle, and therefore it's harder to make modifications.

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Can I transfer my car finance to another car?

If you've found a better ride than the one you own, you may be wondering if you can transfer your car finance to another vehicle. Unfortunately, the short answer is no. If you decided to change cars, you would need to sell your current model and pay the finance off in full. It's not possible to transfer the finance from one vehicle to another. Lenders consider many factors when deciding to lend, including the type of car you're buying. Therefore, the agreement is on that particular car and not a different make or model. 

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Can I transfer my car finance payments to another person?

In some cases, you may find yourself in a situation where you can no longer afford your car finance repayments. One solution might involve transferring the car finance into someone else's name. In most cases, this isn't possible, but it's still worth talking to the lender to see if they'll make an exception. For example, they may allow you to add a guarantor who can step in to cover the payments on your behalf. No matter what you decide, transparency is always the best route forward. Open a dialogue with the lender and see which options are on the table.

Find out more about if you can transfer your car finance payments to another person. 

What happens if I can't keep up with my car payments?

Sometimes the unexpected happens, and we're forced to have a rethink financially. It could be from being made redundant or having to make a significant financial outlay that's caught you off guard and left you a little short. In such a scenario, it's reasonable to ask what might happen if you can't maintain the car payments. First of all, it's important to know your rights. They may vary depending on the type of finance agreement you have, which is why it's necessary to read the small print (as boring as it may seem). Most lenders adhere to the  Financial Conduct Authority (FCA), meaning if you do find yourself in arrears or defaults, the lender will ensure that you're treated fairly while trying to find an amicable resolution that suits everyone. Some lenders may also consider suspending interest payments and partial repayments if you can't afford the entire amount. 

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How can I reduce my monthly car payments?

There are a few things you can do if you'd like to reduce your monthly car payments. These include overpaying on some months, extending your loan (although this may add interest), reviewing your options with the lender, refinancing your loan, reviewing your credit score, buying a used car, paying weekly and shopping around for the best deals. You can also use Carmoola and check out our calculator to get an idea of how much you could pay each month if you finance your next vehicle with us. 

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Will I incur a penalty if I want to pay off my car finance early?

In the world of finance, you typically need to pay an early repayment charge (ERC) if you want to settle the balance early. This is especially true with mortgages, which are known for their ERCs. But when it comes to car finance, fortunately, you don't need to pay a penalty to settle your car finance early. Instead, you simply ask for a redemption statement, which is the amount you'll be asked to pay to cover the entire amount on the car. Once you've made this payment, you'll be the outright owner of the vehicle.

Find out more about penalties for early car payments

How much car finance car I afford based on my salary?

Generally speaking, people with higher income have better credit scores and are therefore more likely to be able to borrow more and get a better interest rate. It doesn't always work exactly like that, but it's more or less what you can expect. The best way to find out your affordability involves using a repayment calculator, where you can input the amount needed and see affordability. According to experts, you also shouldn't spend more than 10% of your net income paying off your monthly commitment for the car finance repayments. It's also a good idea to have a purchase price target that considers your other finances. 

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Can I get car finance with Meezan bank?

Meezan Bank offers a Residual Value Ijarah for new cars. It is different from the regular Ijarah model, where you don’t have to pay any amount to Meezan Bank when you acquire the car upon the Ijarah period’s completion. With the Residual Value Ijarah, you will pay a monthly rental, but the amount is much lower than that of the regular Ijarah. As an asset-based contract, the car Ijarah allows the lessor to have ownership of the car during the contract period, although the arrangement is different from the usual lease contract because it doesn’t differentiate the nature of the liabilities.