Can I modify a financed car? 

Window tints, custom paint jobs, or spoilers can customise your car but modifications can also affect the value of the car and aren’t always allowed if you have a finance agreement in place.

Key takeaways

• Car modifications can impact the value of the car and car finance companies don’t always allow them.

• If you have a car finance agreement such as PCP or Hire Purchase (HP) you won’t become the legal owner of the car until it ends.

• Common car modifications include alloy wheels, spoilers, personalised registration numbers and window tints.

Can I modify a car if I am not the legal owner? 

If you’ve bought a car from a finance company you may not be able to make modifications until all outstanding payments have been made, the finance agreement has ended, and you become the legal owner of the car.

That’s because while the contract is active, and you are paying your finance provider, it is the legal owner of the vehicle.

What changes are considered to be modifications? 

A car modification refers to anything that changes a new car after it is first made. There are lots of different modifications available. Cosmetic changes can alter the way a car looks while modifications known as performance upgrades can change the way a car works, aiming to improve the way it functions.

Some common examples of cosmetic changes include:

• Alloy wheels

• Body kits

• Custom paint jobs

• Sunroofs

• New headlights

• Tinted windows

• Personalised number plates

While modifications which are meant to improve how a car operates include:

• Conversions (such as to camper vans)

• Engine remapping

• Changes to the suspension

• Filtration

• Spoilers

• Turbochargers

• Upgraded exhaust systems

How do modifications work with different types of car finance agreements?

If you buy a car with a finance agreement, the lender remains the legal owner of the car until the final payment is made and the end of the agreement. Modifications are usually not allowed if they change the car in any permanent way as they can impact the resale value of the car.

Personal Contract Purchase (PCP)

If you buy a car with PCP, you usually pay a deposit at the start of the agreement and then monthly payments to a lender. At the end of the finance agreement, which is usually three years, you can decide to pay a balloon payment to keep the car, you can return the car, or you can start a new finance agreement, usually with a different car.

Lenders calculate things like the monthly repayments and settlement figure of a car by looking at the value of the car at the start and end of the contract. They expect the car to be returned in its original condition and that’s why modifications usually aren’t allowed.

If you have made a modification that changes the car’s resale value, this may lead to you having to pay extra charges.

If you’re thinking about a modification, always check the lender’s terms and conditions first and speak to them. Anything that makes a permanent change is usually not allowed, such as spoilers or window tints, but smaller changes such as seat covers or inserting phone holders may be allowed.

Hire Purchase (HP)

If you have a HP car finance agreement, the lender remains the legal owner of the car until all repayments have been made and the credit agreement ends. At this point with most agreements, you become the legal owner of the car and you own the car outright.

When it comes to modifications, a lender may be more willing to allow you to make modifications than with other types of car finance such as PCP. That’s because HP car finance agreements are designed for drivers who will end up keeping the car at the end of the contract.

However, any modifications need to be agreed by the lender while it’s still the legal owner. So, if you want to make a modification, always check with the lender first.

Leasing

When you lease a car, you’re technically borrowing it from a lender and they remain the legal owner of the car. 

At the end of the contract you give the car back to the lender, and they will expect it to be in a similar state to when they first gave it to you. If it isn’t you may end up paying additional charges or you may invalidate the car’s warranty.

Therefore any modifications that permanently change the car will probably not be allowed. Small modifications, which are reversible, may be permitted. These include dash cameras, tow bars, or seat covers which can all be removed before you return the car.

Why don’t finance companies like modifications?

If you buy a car with a finance agreement, the finance company technically owns the car until the agreement comes to an end.

Even though you use the car, pay for things like the insurance, road tax, and petrol, it’s not legally yours while the agreement is in place.

So if you decide to modify the car in any way, this can significantly impact the car’s value, and modified cars can create complications when the agreement ends.

What happens if you make modifications without the finance company’s permission?

If you have spoken to your lender and it has agreed to allow you to make a modification to your car, you will be allowed to do so.

This could affect the amount of money you are paying the finance company and any changes to the repayments will need to be including in an updated finance contract.

However, if you make a modification without the lender’s permission, this means you have gone against the terms of your agreement and there could be serious consequences. Car finance companies need to follow strict rules, which are outlined by the Financial Conduct Authority (FCA), but borrowers must also agree to the terms of a credit agreement. If you go against one, the consequences could include:

• The lender may ask you to make a payment for the full amount for the car within 14 days

• You may be asked to pay additional charges when the contract ends

• The lender could end the car finance agreement early

Lenders often sell modified cars that have been returned to them at auction, and if the car’s resale value has gone down because of modifications you have made, you may be asked to pay the difference in value.

If the car was worth £12,000, for example, but sells at an auction for £10,000, you will be asked to cover the £2,000 difference.

Even if the car’s resale value has increased, you won’t be paid this money as the lender will keep the extra amount.

Will my car’s value increase with modifications?

Some types of modifications can increase the value of a car. These can include modifications which improve the safety of a car, such as a new alarm system, for example.

Cosmetic changes, such as a custom paint job or tinted windows, may also push the car’s value up. They could make the car more desirable and this could push up the car’s resale value.

But, modifications can also push a car’s resale value down. Some people want to drive a new car which doesn’t have any modifications, and is as similar to the original condition when it left the manufacturer’s as possible.

There are other things to consider too, such as what an insurance company may say. In some situations if the car’s value increases because of cosmetic changes, for example, the risk of it being stolen may also rise and this could push up your insurance premiums.

Do I need to tell my insurance company about modifications?

You may need to tell your insurance company if you make a modification to your car. However, this will depend on the type of modification.

Major modifications, which significantly alter the car from it’s original condition such as engine remapping will need to be reported to your insurer. That’s because upgrades like this may change the value of the car and also the risk of it being stolen or damaged.

But small modifications such as if you attach a tow bar or make small cosmetic changes may not have any impact on your insurance premiums.

It’s important to be upfront and honest about any types of modifications you make to your car, as if you don’t tell an insurer this could invalidate your insurance policy.

Before you make any modification, it’s worth speaking to your insurance company to find out how your premiums could change.

Can I make modifications when my car finance agreement ends?

When you have paid off any outstanding finance on your car, such as the remaining balance or the balloon payment, and the agreement comes to an end, you are then the legal owner of the car.

At this point you are free to make any modifications you like as it is your car. Similarly, if you buy a car with a personal loan, you become the legal owner from the start and you are free to make modifications if you want to.

However, even though you are allowed to make modifications, keep in mind these may increase your insurance premiums.