Part-Exchange: Car Finance Jargon Busters
Are you thinking of selling your car to buy a new one? 🚗 You may want to consider part-exchanging it to a car dealer instead of trying to sell it on your own. Most car dealers accept a part-exchange arrangement. If you've found a car dealer you like but are unsure if they'll take your car, you can ask their representative. The money you'll get from your old car depends on the value the dealer thinks it's worth, so be sure to shop around to seek out the best deals.
So, how does part-exchange work, and can you part-exchange a car that is on finance? Discover everything you need to know in this in-depth blog.
How Does Part-Exchange Work?
When you part-exchange your old car, the value of your vehicle will be used as part of your payment or deposit for a new car. The dealer will assess your vehicle to know what it's worth before they buy the car from you. Instead of giving you cash for the car, the dealer will subtract the old car's value from the price of the new vehicle you want to buy.
For example, the new car you're looking to buy has a price tag of £20,000, and your old car is valued at £7,000. You may part-exchange your vehicle with the car dealer, and when everything's been agreed upon, you only need to pay the remaining amount, which is £13,000.
It's important to remember that just because a dealer has assessed the value of your car, it doesn't mean you can't check out offers from other dealers. If you think the valuation is lower than it should be, you can try negotiating. The dealer is usually willing to do some negotiating if they want to sell the new car to you. Or shop around if you want to ensure you’re getting the best deal.
There are also many sites where you can check an approximate valuation of your vehicle. Keep in mind the final valuation will depend on the car’s condition, so it could decrease once it's been seen.
Checklist for Part-Exchange Valuation
Car dealers consider several factors when evaluating and calculating how much your car is worth. Here's a list of what dealers typically look for when assessing a vehicle for a part exchange:
- Make and model
- Service and maintenance history
- Mechanical health of the vehicle
- MOT history
- Any damage to any part of the car
- Modifications and added features
The car dealer enters the information into a database, which helps them place a value on your car based on its current market value. One of the ways that you can get the best price when part-exchanging your car is to take all the documents relating to your vehicle, especially the ones on its service history, maintenance, log book etc.
Before taking your old car to the dealership, it can help to have it cleaned thoroughly inside and out. You want the car to look its best. If it is dirty, it will make a poor first impression, and you can almost guarantee that its valuation won't be as high as a car that looks like it's well taken care of.
What Happens to Your Old Car?
As you are driving your new car home, you might be wondering what happens to your old, beloved, now part-exchanged car. The fate of your old car depends on various factors, including where you part-exchanged it, the condition of the vehicle, and its age.
The dealer might sell it if they think there's a demand for that specific model. Cars with higher mileage, or that are older and in poor condition, are typically auctioned off. It's easier and more cost-effective for car dealers to dispose of old cars through auctions, rather than letting them sit on their forecourt, waiting for a buyer.
It's also possible that the dealer will scrap the old car and take salvageable parts. Vehicles that have been written off can still be part-exchanged, but often, the most you can get out of them would be in the low hundreds.
Should I Part-Exchange My Car
There are several advantages to part-exchanging your old car. The best one, perhaps, is convenience. If you choose to go it alone to sell your car for a great price, you'd have to put up ads and wait for the ideal buyer to purchase. However, this could take a long time. By part-exchanging your car at a dealership, you choose the new car you want to drive and then leave your old vehicle with the dealer.
Of course, there are also some disadvantages to this arrangement. If you compare the money you'll get from your old car, you'll most likely get more out of it by selling it yourself than by part-exchanging it. This is because car dealers need to give some allowance to their valuation to earn a profit when they sell the car. This is always a risk you take - whether you sell it quickly or for the price you want. Also, be aware of the many scams out there if you do decide to sell privately.
Can I Part Exchange a Car That Is On Finance?
If you are wondering, when can you part-exchange a car on finance, you can usually only do it when it is worth more than you still owe the lender. So, it would help if you asked the lender for a settlement figure in advance. The car dealer will then be the one to pay off the outstanding balance you have to the car finance company, and the difference will serve as a deposit or part deposit on the new car you're buying.
Here's an example - If the old car's value is £10,000 and you still owe the car finance company £7,000, the dealer will pay that off. The difference, which is £3,000, will be deducted from the price of the new car you want.
That’s a Wrap!
Part-exchanging your old car for a new one is a good option if you want to skip the long waiting game and hassle of selling it on your own. It would be a good idea to research the car's value first, so you'll know if you're getting a fair quote from the car dealer.
Don't be afraid to say no to a deal if you feel it isn't good. If you're not sure, sleep on it first! Also, feel free to shop around until you find a dealer willing to offer you a reasonable price. The figure you can negotiate will largely depend on how keen they are to sell the car to you, and the price of the new car you are looking at, alongside their monthly and quarterly targets. Best of luck! 👍
Once you have an idea of what you want to buy and the part exchange value of your old car, you will be needing to bridge the gap to cover the cost of the balance. If you need to raise finance to pay for that, why not check out our car finance options to see whether this could be a better alternative to part exchange. Not sure what you could afford to borrow? Get an idea by using our car finance calculator! Now you're set to go! 👍🚘