Can I modify my car on a PCP finance agreement?

  • Modifying cars on PCP finance is a murky affair
  • Lending company remains the legal owner of the car until balance is paid
  • Changing too much can cost you dearly

Modifying cars is an enormously lucrative and widespread business, and one that's very popular in the UK. Whether that be as simple as hanging an air freshener from the mirror or as complex as fitting a body kit, plenty of motorists enjoy their modded motors.

However, plenty more motorists purchase their car through a finance plan, such as Personal Contract Purchase (PCP) or Hire Purchase (HP). And where those two meet, there's potential for problems.

That's because, under most finance agreements, you don't actually 'own' your vehicle until the balance is paid in full. This means you're bound by the terms of a usually lengthy contract dictating what you can and can't do to it.

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

Why can't I modify a car 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, when and where it’s serviced and yes, whether it can be modified.

An unmodified BMW M4 with 444hp

If you think about it, it makes sense. Finance agreements are usually taken out when the motorist can't afford 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 finances a new one - leaving their old vehicle to be resold.

>> Voluntary Termination: can I terminate my car finance early?

For this reason, it's in the finance company's best interest to ensure the cars it receives back are in good, original 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 diminish its value to the next buyer.

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 switching out items such as bulbs or tyres, though you may have to use approved parts.

Anything more extreme than this, 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 do 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 a hybrid turbocharger, 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 well-known and BMW was clued up to its modifications. For most people, this won't be the case.

Modified Porsche Cayenne

Instead, the finance company will 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.

If you intend to purchase the car at the end of the agreement, then your modifications will present no issue. But financial circumstances can change, and it's probably best not to make modifications on the assumption that you'll pay a substantial balloon payment in 2-3 years time.

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 – allowing you to modify it to your heart’s content.

Further reading

>> Best cars for £90 per month
>> Best cars for £100 per month
>> Best cars for £150 per month
>> Best cars for £200 per month
>> Best cars for £300 per month

>> Best cars for £400 per month
>> Best cars for £500 per month
>> Deal Watch: top cash, finance and leasing offers