How trade-ins work with different vehicle finance types

Trading in a commercial vehicle is essentially using the part-exchange value of your current van or truck to reduce cash you must pay when taking a new vehicle on finance. Acceptance and mechanics vary by product:

• Hire Purchase (HP) — common for vans and trucks. If you own the vehicle outright, a dealer’s or buyer’s trade-in valuation can be used as a deposit. If there is outstanding HP, the settlement figure must be paid (often by the dealer) before ownership transfers.
• Finance Lease / Contract Hire — manufacturers and leasing companies may accept part-exchange, but often dealers buy your vehicle and the leasing company will require clear title. Part-exchange is more a dealer arrangement than a finance company rule.
• PCP (commercial use — less common) — can use trade-in to reduce deposit, but the balloon or guaranteed future value must be considered.
• Chattel mortgage / commercial asset finance — generally flexible. A trade-in value can be applied toward the deposit or to reduce the amount financed.

Because acceptance policies differ, using a broker or matcher helps direct your enquiry to lenders or brokers familiar with trade-ins for commercial vehicles.

When a trade-in reduces your deposit — positive equity explained

Positive equity exists when the market/trade-in value of your vehicle exceeds any outstanding finance. In that case:

1. The dealer or buyer pays the settlement to your current lender (if applicable).
2. The remaining trade-in value is credited as a deposit or reduction to the new vehicle’s financed amount.
3. Result: lower initial cash deposit, smaller amount to finance, and usually lower monthly payments.

Valuation methods vary: dealer part-exchange offers, independent appraisals and auction results can all influence the final figure. Getting two or three valuations helps ensure you’re receiving fair market value.

When a trade-in increases your finance or won’t help — negative equity & restrictions

Negative equity occurs when the settlement on your existing finance is greater than the vehicle’s trade-in value. Options include:

• Pay the difference in cash at settlement so the trade-in clears the old finance.
• Roll the negative equity into the new finance (subject to lender approval) — this raises the amount you borrow and increases monthly payments and total interest.
• Sell privately or to a specialist buyer who may offer a higher price than a dealer Part-exchange.

Some lenders refuse trade-ins with significant negative equity. Other reasons a trade-in may be declined include very poor condition, heavy mileage, bespoke conversions that reduce resale value, vehicles under non-transferable finance agreements, or vehicles registered to a different owner.

What lenders and brokers check when accepting a trade-in

Before allowing a trade-in as deposit, lenders and brokers typically verify:

• Ownership and title — V5C in the business name or correct owner details; proof of company ownership where relevant.
• Outstanding finance — a settlement figure from your current lender and any early termination fees.
• Vehicle condition — service history, MOT records, photographs, bodywork and mechanical condition.
• Mileage and usage — commercial mileage and whether the vehicle has been used for heavy-duty or specialist operations (which can affect resale).
• VAT status — whether VAT was reclaimed on the original purchase and how VAT should be handled on sale (speak to your accountant for tax treatment).

Dealers, auction houses or specialist remarketers may be used to provide a trade-in valuation. Confirm with your new lender or broker that they accept the chosen route for using trade-in value as deposit.

Practical steps — from valuation to settlement

Follow these steps to maximise the chance your trade-in helps with the deposit:

1. Check ownership and finance: request a settlement figure from your current lender and confirm who can legally sell the vehicle.
2. Obtain multiple valuations: dealer part-exchange, independent appraisals and online guides. Aim for 2–3 quotes.
3. Decide sale route: part-exchange (fast, convenient), broker-assisted sale (may secure higher price) or private sale (often highest net return but slower).
4. Confirm with the prospective lender/broker: get written confirmation that they accept trade-in value as deposit, and clarify how outstanding finance will be handled.
5. Settle outstanding finance: typically the dealer or buyer obtains the settlement figure and pays off your old lender at completion; obtain written confirmation the old account is cleared.
6. Gather paperwork: V5C logbook, company registration docs, service history, MOTs, invoices for repairs and ID for the authorised signatory.
7. Record VAT/tax details: discuss with your accountant whether VAT or capital allowances apply when you trade in a business asset.

Tip: take clear photos of the vehicle, keep a file of service/MOT records and be transparent about previous damage or modifications — full disclosure prevents valuation disputes at handover.

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Common scenarios — quick examples

Example 1 — Positive equity

Owned van (no finance) valued at £6,000; dealer offers £5,500 as part-exchange. New lender accepts this as deposit — you need little or no additional cash and your financed amount is reduced.

Example 2 — Negative equity

Outstanding balance £4,000; dealer offers £3,000. You have £1,000 negative equity. Options: pay £1,000 at settlement, or request the new lender to roll the £1,000 into the new finance (if approved) — expect higher monthly payments.

Example 3 — Fleet replacement

Fleet manager trades multiple older vans. Broker conducts combined valuation and uses the aggregate trade-in value toward the deposit for the fleet replacement finance — often better outcomes than individual dealer deals.

Why use a broker/matcher like UK Business Loans?

Finding a lender who will accept a trade-in as deposit — and at acceptable terms — takes time. UK Business Loans can:

• Match your enquiry quickly to specialist vehicle finance brokers and lenders who understand commercial vehicle trade-ins.
• Save you time by sending your details to the most relevant partners, improving the chance of a good outcome.
• Help you compare options for HP, leasing, chattel mortgage and fleet finance for deals from around £10,000 upwards.

We introduce your enquiry to lenders and brokers; any finance offer, credit decision and regulated advice comes from those partners. Start with a quick, no-obligation Free Eligibility Check to see which partners can accept your trade-in.

For a broader look at vehicle options and asset finance, you may also find our specialist vehicle finance page useful.

Frequently asked questions

Next steps & compliance

If you want to see whether your van or truck can be traded in and used as a deposit, complete our short enquiry — a few details helps us match you quickly with the right brokers and lenders. It’s free, and submitting does not commit you to apply.

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Important: UK Business Loans introduces enquiries to selected brokers and lenders. We do not provide regulated financial or tax advice and we do not lend. Any finance offer, credit decision and regulated advice will be provided by the broker or lender who contacts you. For tax or VAT queries speak to an accountant or HMRC.

We typically assist with vehicle finance from around £10,000 and above. Enquiries are matched to lenders/brokers who may call or email to discuss your options — submitting an enquiry is not a formal finance application.