Planning to modify a financed car? Learn the dos and don’ts to avoid potential issues in this quick guide.
If you’re thinking about making modifications to your financed car, be sure you understand the implications before going ahead with any changes. Let’s delve into the dos and don’ts of modifying a car on finance.
Car modifications refer to any changes made to a vehicle that alter its original condition. This can include aesthetic upgrades, performance enhancements, or functional changes. Lenders typically view modifications with a large dollop of caution, because they can affect the vehicle's value.
Different lenders may have different policies when it comes to modifications. Some might allow certain types of changes, while others may have strict restrictions. It's essential to check your finance agreement for specific guidelines on what modifications, if any, are allowed.
When you finance a car with an unsecured personal loan (UPL), you own the vehicle outright. This ownership gives you the freedom to modify the car as you see fit, without needing lender approval. Many car owners appreciate this flexibility, as it allows them to personalise their vehicles without restrictions.
However, it’s still wise to consider the potential impact of modifications on the car’s resale value. While you have the freedom to make changes, ensure that they won’t affect your long-term plans for the vehicle – i.e. make it harder to sell in the future.
A hire purchase (HP) agreement means that, for the duration of the loan term at least, you don’t actually own the car until all payments have been made. Because of this, lenders often impose strict restrictions on modifications. They may be concerned that any changes could affect the vehicle's future value or desirability when it’s time to sell.
Before making any modifications under an HP agreement, check over your contract very carefully. Any unauthorised changes could lead to penalties or complications with the lender.
Modifying a car on personal contract purchase
With a personal contract purchase (PCP) agreement, you don’t own the vehicle until the final balloon payment is made. As with HP agreements, lenders typically impose tight restrictions on any modifications because of concerns about the car's value at the end of the term.
If you’re thinking about making any modifications while on a PCP agreement, check your contract carefully for specific terms regarding changes. Unauthorised modifications could jeopardise your agreement and lead to additional costs for you.
Modifying a car on personal contract hire
With a personal contract hire (PCH) agreement, you never own the car; you merely rent it for a set period. As a result, modifications are generally not allowed. Lenders will expect you to return the vehicle in its original condition at the end of the agreement.
Attempting to modify a PCH vehicle without approval could result in penalties and additional charges when you return the car. It’s best to keep the vehicle as is to avoid any issues.
While many car owners want to enhance their vehicles, it’s hard to know whether any changes you make will make a difference to a car’s resale value. Some modifications may indeed increase a car’s value, but others could have the opposite effect.
For instance, performance enhancements – such as adjustments to the engine, exhaust, gearbox or suspension – might appeal to certain buyers, while others may prefer a more original vehicle. It’s important to carefully weigh up the potential benefits and risks of any modifications before you go ahead.
Can I make minor car modifications?
Some finance agreements may allow for minor modifications, particularly those that are reversible. These could include changing the floor mats, installing seat covers, or even adding a different stereo system. Once again however, you must first review your finance agreement carefully to ensure that any changes you plan to make comply with the lender's terms. If anything isn’t clear, give your lender a call and talk to them directly to be sure you’re not in breach of your agreement.
What happens if you modify a financed car and break the terms of your finance agreement?
If you go ahead and make modifications to a financed car against the terms of your agreement, you can expect to be penalised for it. The consequences will vary depending on your lender's policies. Typically, you can find these policies in your finance agreement.
Potential outcomes of unauthorised modifications could include:
Immediate withdrawal of finance: Lenders may terminate your agreement if they discover unauthorised modifications.
Repossession of the vehicle: If you modify your car and fail to keep up with payments, the lender might repossess the vehicle. If the car is sold for less than its outstanding value, you could be responsible for covering the difference.
As we’ve seen, understanding your lender’s policies on modifications is crucial before making any changes, however small, to a financed car. Each type of financing agreement comes with its own set of rules, and breaking those terms can have serious financial consequences. Always consult your lender for guidance and to be sure you stay within the boundaries of your finance agreement.
