Refinancing a car

Cut your monthly finance payments or keep your vehicle at the end of a PCP by refinancing your car

BuyaCar team
Sep 30, 2018

Whether you're looking to reduce your monthly payments or to keep your car beyond its current finance agreement, then refinancing can help.

Instead of having to come up with a large amount of money to pay off a lump sum and keep your car, refinancing can spread the cost. It will normally work out cheaper than returning your car at the end of a Personal Contract Purchase (PCP) agreement and getting a brand new one.


Refinancing at the end of a PCP agreement

If you want to keep your car at the end of a Personal Contract Purchase (PCP) finance agreement, then you’ll have the option of buying it for a lump sum.

But this can be a hefty amount, easily reaching £10,000 or more for some family cars. If you like your vehicle so much that you want to keep it, but can’t stretch to the lump sum payment, then refinancing allows you to spread the cost.

When you refinance a car, you’re effectively buying it on finance again - as a second-hand model. You’ll have a new finance agreement for a set term and a new monthly payment.

The major difference is that the payment will usually be considerably cheaper than before because you’re only financing the cost of that lump sum.

Most finance providers will be able to refinance your car. As with any credit, you should compare quotes based on the APR interest rate, which includes all charges and fees.

BuyaCar works with a panel of lenders that can offer finance tailored to your circumstances. If you’d like more advice or a no-obligation quote, call on 0800 050 2333 or send a message.


Refinancing your car early

You don’t need to wait until the end of an agreement to refinance: it may be possible to reduce your monthly payments by cancelling your current arrangement and taking out a new one, which might offer a lower interest rate or spread the cost over a longer period.

As well as PCP finance, this is also an option if you have Hire Purchase (HP) finance, which results in you owning the car at the end.

It’s worth doing your sums if you decide to refinance before the end of a PCP or HP agreement. Although you may be able to cut the amount that you spend each month, you may end up paying more in the long run, particularly if you have additional charges for cancelling your finance early.

You’ll find a range of finance providers, including BuyaCar’s panel of lenders, willing to provide a quote for refinancing before the end of your loan.


Refinancing a leasing agreement (also known as Personal Contract Hire or PCH)

You can’t change the payments you make when you’re leasing a car because this is a form of long-term hire, with a set monthly rental cost.


Refinancing a car that’s less than four years old

You should be able to refinance by taking out a PCP agreement if your car is less than four years old.

Your monthly payments will be lower than if you took out HP finance, and you’ll have three options at the end: you can hand it back and walk away with nothing more to pay or trade it in for a different model. The option of buying the car for a lump sum will still be available. The cost is based on a rough estimate of the car’s value at the time, so should be much more affordable once you’ve been through two finance agreements. You may also have the option to refinance again, depending on the model.


Refinancing a car that’s more than four years old

PCP is less common on cars that are more than four years old because lenders find it difficult to predict how much they are going to be worth in the future. This means that your refinancing options on older models are usually restricted to Hire Purchase.

Because monthly payments on older cars are usually much cheaper than with newer models, you should still find yourself paying less - even if you come to the end of a PCP deal and refinance to HP. And at the end, you’ll be the car’s owner.


Refinancing your car loan: the good

✔ If you can take out finance at a lower interest rate, you may pay less each month, and over the full term as well
✔ Refinancing over a longer term should reduce your monthly payments
✔ Refinancing at the end of a PCP allows you to keep a car without paying a lump sum all at once


Refinancing your car loan: the not so good

 You may need to pay penalties if you refinance mid-way through an agreement
✘ Refinancing for a longer term usually means paying more overall
✘ Maintenance costs usually increase the longer you keep a car, and you’re less likely to be covered by a warranty.


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