Can I modify my car on a PCP finance agreement?

Tempted to modify a financed car? Best check the fine print first
Lending company remains the legal owner of the car until balance is paid
Changing too much can cause problems and cost you dearly

Can I make minor modifications to a car on PCP?

Written by Tom Wiltshire Updated: 22 January 2024

Whether it’s fitting a new stereo, attaching a tow bar, or fitting a new exhaust, modifications are a popular way of personalising your car. But, if it’s financed, and before you change anything, you need to ask yourself the following: ‘Can I modify my car on a PCP finance agreement?’

Modifications with finance plans such as Personal Contract Purchase (PCP) or Hire Purchase (HP) can cause problems because, under most finance agreements, you don’t own the car until the balance is paid up. This means you’re bound by the terms and conditions of the contract.

So, what modifications can you make to a financed car – and what are the potential consequences if you go above and beyond?

Why can’t I just modify a car I’ve got on finance?

When thinking about modifying a car, it’s important to know the distinction between owner and keeper. Generally, if you buy a car on finance, you’re the registered keeper of the vehicle, giving you the right to use it and ensuring correspondence goes to the right place – if you get a speeding ticket, for example.

However, until the balance of outstanding finance is paid in full, the lending company remains the legal owner of the car. This means they can place conditions on your time with the car, such as mileage restrictions, servicing requirements, and, yes, whether it can be modified.

If you think about it, it makes sense. Finance agreements are usually taken out when the motorist doesn’t want to pay the whole cash price up front – hardly an uncommon situation, with the average price of a new car exceeding £30,000. This means that, until the balance is paid, the finance company must assume the worst to protect its investment, and be prepared to take the vehicle back from its keeper at any time if payments stop.

That’s not forgetting that on a lot of PCP deals, the motorist hands their car back at the end of their agreement and finance a new one – leaving their old vehicle to be resold. In some cases, the drivers might even choose to terminate their car finance early, so the finance company ends up dealing with the car earlier than they expected.

For this reason, it’s in the finance company’s best interest to ensure the cars it receives back are in good condition and ready to be resold. And this means no major modifications to the car’s engine, interior, or body are allowed, as they would make it more complicated to sell and diminish its value to the next buyer, as well as potentially creating warranty issues.

Can I make minor modifications?

If this has got you panicking about changing anything at all on your vehicle, don’t worry. Minor modifications – reversible ones, that is – are absolutely fine. Anything you can remove is fair game, so if you want to install items such as seat covers, phone holders, or sun blinds, you’re good to go.

Changing consumable items is also fine – so you don’t need to worry about replacing items such as bulbs or tyres, though you may have to use approved parts.

Anything more extreme than this and you will have to contact your lender and get their permission. Remember, the finance company owns the car and its interest will be protecting its investment. Any modification that could negatively impact the car’s resale value will likely not be approved. Think of it like renting a flat: you can put any items of furniture you like inside it, but swap out the kitchen for a sauna and your landlord won’t be best pleased.

What can happen if I modify my car?

If you make major modifications to your car and the finance company finds out, you’re liable to have your agreement terminated and to be presented with a hefty bill.

That’s what one YouTube personality found out after heavily modifying a BMW M4 with various body and engine upgrades; BMW sent out a letter threatening to recall the car if the finance was not settled.

Riccardo Senior, better known as the face of the YouTube channel LivingLifeFast, had his finance agreement cancelled by BMW following a series of pricey modifications – watch his video here.

Senior had installed aftermarket turbochargers, a performance exhaust system and methanol injection. As a result, the car was reportedly producing as much as 720hp – a huge increase from the standard 444hp. It was also fitted with various body modifications. As a result, BMW demanded the full payment of the remaining balance within a week, and threatened to repossess the car if it wasn’t paid.

In the contract Senior would have signed, BMW states that: “Until the Vehicle is returned to us at the end of this agreement or you become the owner of the Vehicle, you must not alter the Vehicle in any way without first obtaining our prior written consent, and if we consent you must restore the vehicle to its original condition (at your cost) before returning the Vehicle to us.”

Senior decided in the end to pay off the remainder of his outstanding finance, thereby becoming the car’s legal owner – but if he hadn’t done so, BMW would have repossessed the car, sold it at auction, and demanded further payment for any gap between the auction proceeds and the remaining finance payments.

What if I want to keep my car at the end of the agreement?

It’s worth noting that Riccardo Senior’s situation was unusual – as a popular YouTuber, his vehicle was easily recognised and BMW was clued up to its modifications. For most people, this won’t be the case.

Instead, the finance company will potentially find out about the modifications at the end of the PCP deal – and that’s likely to cause problems if you intend to hand the car back or trade it in. Most will insist that the car is returned to factory spec before being handed back, and there could also be other problems.

If you intend to purchase the car at the end of the agreement, then your modifications should present no issue. But financial circumstances and plans can change, and it’s probably best not to make modifications on the assumption that you’ll pay a substantial balloon payment when the finance arrangement comes to an end.

Read the contract carefully

As with all major financial commitments, it’s important to read your contract very carefully. If it states that you must not modify the car, there’s not likely to be a huge amount of wiggle room – most manufacturer finance providers sell vast numbers of cars and really don’t need to concern themselves with individual exceptions.

If you’re intent on buying a car to modify, then you may need to resort to a personal loan. This may not offer as competitive a rate as a PCP agreement, but you will be both the owner and the keeper of the car. This will subsequently allow you to modify it to your heart’s content.

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