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The growing popularity of PCP finance in the UK is no secret. More and more consumers are opting for PCP finance instead of conventional car loan options. One of the main reasons behind PCP's tremendous success is a part exchange option available to consumers.

### What is Part Exchange?

You can settle a PCP deal upon the end of its term in three ways:

• You can return the car to the dealer and collect the GMFV (subject to conditions)
• You can pay the balance GMFV and take ownership of the car
• You can return the car and exchange it for a new one.

The final method of settlement is a part exchange. It is the most-popular way of settling PCP loans.

### What is part-exchange value?

When you are buying a new car under the part exchange method, the dealer will offer you a valuation for your old car, which may be higher or lower than its GMFV. Because, remember, the GMFV is dependent on certain conditions such as mileage, condition of the car, among others. So, if, for example, you have maintained your old car well, the dealer may offer you a higher value. This exchange amount offered by the dealer on your old car is a part exchange value.

#### Example 1:

Suppose you want to buy a new Vauxhall Zafira worth £15,779. The dealer has given you a monthly installment amount of £305.49 for 48 months at an interest rate of around 21.5%. You are being offered a GMFV of £4008.76. Deposit amount is £2,000.

You want to purchase this car by part exchanging your old car. Your old car has a GMFV of £3,000. The dealer may offer you £4,000 if you buy a new car from him. This amount is a part exchange value.

### How is the part exchange value useful?

The part exchange value helps in reducing your overall liabilities on the new loan. Continuing with the same example, you can use this £4,000 to reduce your liability on a new car. The extra amount can reduce your monthly installment to £180.23.

This is one example of how part exchange value can impact your PCP deal. You can use our free PCP calculator to make calculations under different scenarios.

### iCalculator tip:

You do not have to part exchange your old vehicle with the same dealer. You can go for a part exchange even with a new dealer. As a best practice, it is always good to get a quotation from more than one dealer before part exchanging your car.

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