Trading in your old car as part of a new finance deal can feel straightforward. You hand over the keys, the dealer values it, and that figure is used towards the deposit or to reduce the amount you need to finance.

In practice, the part exchange process can make a car finance agreement harder to understand, especially where your old car still has outstanding finance, where negative equity is rolled into the new deal, or where the dealer’s commission arrangements were not clearly explained.

How Part Exchange Fits Into a Finance Agreement

When you part-exchange a car, its agreed value is usually used as a deposit or as a reduction in the amount financed on the new agreement. If your old car is worth more than the finance still owed on it, the equity can reduce the amount you borrow. If it is worth less than the outstanding finance, the shortfall may be added to the new agreement.

That is where problems can begin. If the part exchange value is unclear, the negative equity is not properly explained, or the total amount financed is not presented transparently, you may not fully understand what you are agreeing to.

A dealer who undervalues your part exchange may increase the amount you need to borrow. That can mean higher interest payments over the term of the agreement. Before January 2021, some motor finance agreements also involved discretionary commission arrangements, where a broker or dealer could receive more commission if the customer was charged a higher interest rate. These arrangements were banned by the FCA in January 2021.

Our article on negative equity roll over explains how part exchange situations can result in outstanding debt from one agreement being folded into the next, leaving borrowers worse off without realising it.

Where Things Can Go Wrong

There are several ways part exchange can become part of a wider mis sold pcp finance complaint:

• Undervaluing your trade-in and increasing the amount financed

• Failing to explain how the part exchange figure affected your borrowing

• Rolling negative equity from your existing finance into the new agreement without making this clear

• Presenting the monthly payment without properly explaining the total cost of credit

• Not making clear whether your old finance agreement had been settled in full

• Commission arrangements that may have affected the interest rate or overall cost of the deal

• Failing to provide a clear breakdown of deposit, part exchange value, settlement figure, amount borrowed and final balance

Our article on whether your car finance commission was hidden covers how these incentives worked and why part exchange deals can be particularly difficult to review without the full paperwork.

What You Can Do

If you part-exchanged a car as part of a PCP or HP agreement, it is worth having the full deal reviewed. This is especially relevant where the agreement was taken out before January 2021, when discretionary commission arrangements were still allowed, or where you do not remember being clearly told how your old car’s value affected the new finance.

The key documents to check include:

• The finance agreement

• The part exchange valuation

• The settlement figure on your old agreement

• The deposit breakdown

• Any pre-contract information

• The total amount payable

• Any commission or broker disclosure wording

If you do not have the original paperwork, you can usually request copies from the lender. You can also ask for information about commission arrangements and how the finance was structured.

Claim fast with Claim First — we’ll assess your agreement at no cost and advise you honestly on whether you have a case.

We also handle payday loan claim cases, housing disrepair claims uk, and romance scams uk recovery — all on the same No Win, No Fee basis.

For more on how compensation works in car finance cases, see our article on what compensation might look like in mis-selling cases, and our overview of PCP mis-selling tactics that breach UK standards.

FAQs

Does the part exchange value appear in my finance agreement?

It should usually be shown as part of the deposit, settlement or amount financed breakdown. If the figure was not clearly documented, or if you cannot see how your old car’s value was used, that is worth reviewing.

Can I claim if I no longer have the original paperwork?

Yes. You can request your agreement and associated documents from the lender. You may also be able to request details of any commission arrangement and the way the finance was calculated.

Does this affect HP as well as PCP?

Yes. Part exchange issues can apply to both PCP and HP agreements. The key question is whether the value of your old car, any negative equity, the amount borrowed and any commission arrangement were explained clearly enough for you to make an informed decision.

Think Your Part Exchange Was Used Against You?

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