Part-Exchange Calculator: Equity on Finance

What is part-exchange equity?

Part-exchange equity is the difference between what your car is worth and what you still owe on the finance. If the car is worth more than you owe, the difference is yours to put towards the next car.

You can part-exchange a car that is still on finance — the dealer settles your outstanding finance from the sale and gives you any equity left over. To do it, you first need two numbers: the car's real value and your settlement figure.

Equity matters because it decides whether your old car is an asset or a liability at trade-in. Positive equity becomes a deposit and lowers the cost of the next car. Negative equity is a shortfall you must cover or carry, and it raises the cost of the next car.

The figure moves every month. As you pay the finance down, the settlement falls; as the car ages, its value falls too. Which falls faster decides whether equity is rising or shrinking — usually the settlement falls faster, so equity trends positive over time.

How to value your car for part-exchange

The part-exchange value is what a dealer will actually pay for your car, which is lower than a private-sale price and lower than the screen price you see advertised. Get two or three valuations so you know the range before you trade in.

Three figures are worth knowing: the trade value (what a dealer pays), the private-sale value (what another motorist pays), and the retail or screen price (what a dealer then sells it for). The trade value is the lowest but the easiest — no adverts, no viewings, no tyre-kickers.

Use free online valuation tools to set a baseline, then compare the dealer's offer against it. A dealer will move on the part-exchange price if you can show comparable valuations — and if they will not, another dealer may. Treat the valuation as a negotiation, not a fixed number.

• Trade value: what a dealer offers in part-exchange. Lowest, but instant and the finance is settled for you.
• Instant-buy value: from a car-buying service. Slightly higher than trade, still quick, but check for fees.
• Private-sale value: what you could get selling yourself. Highest, but you cannot sell a financed car until it is settled.

Getting your settlement figure

Your settlement figure is the exact amount needed to clear your finance on a given day, and you must ask the lender for it in writing. It is usually valid for 7 to 14 days, after which it changes.

The settlement includes the remaining balance, any interest up to the settlement date, and any fees. Under the Consumer Credit (Early Settlement) Regulations 2004, you are entitled to a statutory rebate on interest when you settle early, so the settlement is less than the sum of your remaining monthly payments.

Ask for both a monthly-figure settlement and the total, and request it close to the day you plan to trade in. A settlement that is two weeks old can be hundreds of pounds off, because interest accrues daily and the rebate shrinks as time passes.

Confirm the figure with the lender directly — do not rely on a dealer's estimate. Work out an indicative figure first with the settlement calculator, then verify it.

How to work out your equity

Take your car's part-exchange value and subtract your settlement figure — what is left is your equity. A positive number is a deposit towards your next car; a negative number is a shortfall.

Positive equity vs negative equity

Positive equity gives you a head start on the next car; negative equity means you owe more than the car is worth. The two lead to very different conversations at the dealer.

If you are in negative equity, check exactly how much with the negative equity calculator before you commit to a new deal.

What to do if you are in negative equity

With negative equity you can cover the shortfall in cash, carry it into the new finance, or wait until you have paid more off. Carrying it over costs more in the long run, because you finance the shortfall on top of the new car.

Rolling negative equity over feels painless because the monthly barely moves, but it stacks one car's shortfall onto the next. You can then be in negative equity on the new car from day one, and the cycle deepens. Always check the new deal's total amount payable against the car's price — if the total is well above the price, negative equity is buried in it.

• Pay the shortfall in cash so you start the new deal clean — the cheapest option overall.
• Wait and keep paying — equity usually turns positive as the balance falls faster than the value.
• Roll the shortfall into the new agreement — possible, but you finance the negative equity on top, raising the total amount payable and the monthly.

Part-exchange on PCP — the equity trap

On a PCP, equity can vanish at the balloon, because the car's value has to beat the Guaranteed Minimum Future Value before you see a penny. Mid-term negative equity is common on PCP, and dealers may offer to roll it into the next deal.

PCP keeps the monthly low by deferring a large balloon to the end, which means the balance falls slowly. In the first half of the agreement the car often depreciates faster than the balance, leaving you in negative equity. If you try to change cars then, the shortfall has to go somewhere.

A dealer who says they will 'clear your finance' is not necessarily paying the shortfall for you — they may be rolling it into the new agreement. That raises the amount financed above the new car's price, which is how drivers end up owing more than the car is worth on deal two.

Using your equity as a deposit

Positive equity works exactly like a cash deposit — it lowers your next monthly payment and the total interest you pay. A £2,000 part-exchange equity is a £2,000 deposit.

See the effect on a new deal with the deposit calculator: on a £20,000 car, £2,000 of equity cuts the monthly by around £50 and the total cost by roughly £400 over 48 months. Then compare finance types on the PCP and HP calculators.

Do not let a dealer absorb your equity without showing you the effect on the monthly and the total. Positive equity is real money off the next car, so it should reduce the amount financed by exactly that figure — check the paperwork confirms it.

Selling privately vs part-exchange

Selling privately usually pays more than part-exchange, but you cannot legally sell a financed car until the finance is settled. Part-exchange handles the settlement for you; a private sale means you settle first.

With a private buyer you keep the difference between trade and private value — often £500 to £1,500 on a typical car. But the buyer wants a car with clear title, so you must settle the finance before handing over the keys, which usually means finding the settlement amount temporarily, or using the buyer's payment to settle on the same day through the lender.

Part-exchange trades that extra money for convenience and certainty: the dealer settles the finance as part of the deal, you hand over one car and drive away in another, and the equity (or shortfall) is shown on the paperwork. For most people the convenience is worth the lower value, but it is an informed trade-off, not a default.

Read the full process in can you sell a car on finance.

Your rights when trading in a financed car

You must tell the dealer the car is on finance, and the dealer must settle that finance as part of the trade — these are legal duties, not courtesies. The finance company still owns the car until the settlement clears.

Under the Consumer Credit Act 1974, the lender retains title to a financed car until the agreement is settled. Selling it privately without settling is fraud, even if you intend to settle later. A reputable dealer handles this correctly, but you should keep the settlement figure in writing and confirm the lender has been paid.

Get a receipt or written confirmation that the finance has been settled, and check with the lender a week later that the account is closed. If the dealer delays or refuses to settle, contact the lender immediately — you remain liable until it is cleared.

Was your finance mis-sold?

Some car finance from 2007–2024 carried hidden commission that raised your interest rate — which kept your settlement figure higher than it should have been. If yours did, you may be owed redress.

The FCA's redress scheme follows the Supreme Court ruling of 1 August 2025. Estimate your position with the compensation estimator — an estimate, not a promise, and free to claim yourself with no claims firm taking a cut.