Part exchange explained: getting a fair price

Part exchange means a dealer takes your old car as part payment for the one you are buying. It is quick and saves you selling privately, but it makes the deal harder to judge, because two prices are mixed into one figure. The fix is simple: agree the price of the car you are buying first, as if you had no trade-in, and then agree what the dealer will pay for yours. Compare that allowance with what you could get elsewhere before you sign.

How part exchange works

1. You choose a car at a dealer.
2. The dealer inspects your current car and offers a part exchange allowance.
3. The allowance comes off the price of the new car. You pay the difference, by bank transfer, card or finance.
4. On the day you collect, you hand over your old car, its keys and documents, and you tell DVLA you have sold it to the motor trade.

If your old car has finance on it, the dealer usually pays off the lender from the allowance. More on that below.

Judge the two prices separately

A dealer can make a deal look generous in two ways: a high allowance with little off the new car's price, or a big discount with a low allowance. The number that matters is the cash difference you pay.

• Price the car you are buying first. Negotiate it as a cash buyer. Our guide on how to negotiate the price shows how to use evidence to do it.
• Then ask for the allowance. Ask the dealer to put both figures in writing.
• Compare the allowance with other options. Get a valuation from at least one car buying service and look at what similar cars sell for privately. A part exchange allowance is usually lower than a private sale price, because the dealer has to prepare and sell the car and make a margin. The convenience is what you pay for.
• Watch the difference, not the headline. If a better allowance comes with a smaller discount, the cash difference may not change at all.

What dealers look at

The dealer is working out what your car will cost them to prepare and what they can sell it for. Expect them to check:

• The MOT history. They can read it on the GOV.UK service with your registration number. Recurring advisories, recent fails and a short MOT lower the offer. Our guide on how to read MOT history shows what they will see.
• The service record. A full history with invoices helps. Missing services and a cambelt that is due lower the offer.
• Damage and wear. Dents, scratches, kerbed wheels, tyre tread and the interior.
• The mileage against the car's age.
• Keys and extras. A missing spare key costs the dealer money to replace.
• Warning lights and anything that does not work.

Be honest about known faults. If the dealer finds something you did not mention, the allowance can change on the day you collect, and that is a worse moment to argue. Ask for the allowance in writing, and ask whether it is subject to a final inspection.

The paperwork to hand over

Bring:

• the V5C logbook
• all keys
• the service history and invoices
• the locking wheel nut key, if fitted
• any finance agreement number and settlement letter

Telling DVLA

When you sell or part exchange a car to a motor trader, DVLA must be told. GOV.UK explains that you can tell DVLA online and then destroy the yellow motor trade section of the V5C, or post that yellow section to DVLA once the dealer has filled it in. Either way, the rest of the V5C, including the green new keeper slip, goes to the dealer. The dealer may do the online notice with you. Either way, make sure it is done before you leave, and keep the confirmation. Until DVLA is told, you are still the registered keeper and can be held responsible for fines and tax. Our guide to the change of keeper explains each part of the V5C.

Your car tax

Vehicle tax does not transfer with the car. Once DVLA knows you are no longer the keeper, it cancels the tax, refunds any full months left and cancels any Direct Debit automatically. Our guide to the car tax refund explains how it is worked out. The dealer, or whoever buys the car next, must tax it themselves. See does car tax transfer. Remember to tax the car you are buying before you drive it away.

Private number plates

If your old car has a private number you want to keep, take it off through DVLA before the part exchange. Once the car has gone, the number goes with it. Our guide on how to transfer a private number plate explains how.

Part exchanging a car with finance on it

You can part exchange a car that still has finance on it, but you do not own it until the agreement is paid off. On hire purchase and PCP, the finance company is the owner. Our guide to registered keeper and owner explains the difference.

The usual process:

1. Ask your lender for a settlement figure. You have a right to one under the Consumer Credit Act 1974. It is the amount needed to clear the agreement on a given date.
2. Give it to the dealer. The dealer pays the lender directly from your allowance.
3. Work out the equity. If the allowance is more than the settlement figure, the difference comes off the new car. This is positive equity.
4. If the allowance is less than the settlement figure, you have negative equity. You must pay the gap, either in cash or by adding it to new finance. Adding it to new finance means you pay interest on a car you no longer have, so think carefully.
5. Get written confirmation from the dealer that the old agreement will be settled, and check with the lender afterwards that it has been.

Until the lender confirms the agreement is closed, you are still responsible for the payments. Keep paying until you see it in writing.

When a private sale makes more sense

Part exchange suits you if you value time and simplicity, if your car needs work you do not want to arrange, or if it has finance that is easier for a dealer to settle. A private sale usually suits you if your car is in good condition, has a full history and you are happy to deal with viewings and payment. Our guide to paying for a used car covers how payments work from the other side too.

Frequently asked questions

Do I get a better price if I part exchange?

Usually not on your old car. A part exchange allowance is normally below a private sale price, because the dealer has to prepare and resell the car. What you gain is time and convenience. Judge the deal by the cash difference you pay.

Can I part exchange a car that is not paid off?

Yes. The dealer pays your lender the settlement figure from the allowance. If the allowance is lower than the settlement, you pay the difference.

Who tells DVLA when I part exchange my car?

The keeper is responsible for telling DVLA, though the dealer may complete the online notice with you. Make sure it is done before you leave, and keep the confirmation.

Do I get my car tax back when I part exchange?

Yes, for any full months left. DVLA cancels the tax and sends a refund once it knows you are no longer the keeper.