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Can You Modify a Financed Car? What You Should Know

Can You Modify a Financed Car? What You Should Know

We don’t see so many modified cars around anymore but there is still a tight-knit group of enthusiasts who can do amazing things to standard cars. One question our auto loans team was asked recently was about whether or not you can modify a financed car in Canada.


Modifications come in all shapes and sizes. While we immediately think of body kits, lowering kits, big wheels, and garish colours, a simple tow hitch or stereo upgrade can also count as a modification.


Modified Ford Pickup


Can you modify a financed car in Canada?




Modifying a Financed Car in Canada

Much depends on the type of finance you have on the car. If you’re using a personal loan or unsecured auto loan, you can modify your car. If you’re using manufacturer or dealer finance or use a secured car loan, you usually cannot modify the car.


It all comes down to ownership.


For unsecured loans, you own the car. You’re paying back the loan but the car is yours and your property to do with as you want. You can modify it or do anything you like with it.


When you pay for the car, you become the registered owner. This entitles you to full rights over the car. A lender may still be able to repossess the car if you default on the loan but if you keep up payments, it’s yours.


Car Ownership and Modification

With most manufacturer and dealership finance and secured loans, you are not the legal owner of the car. You only become the owner once the finance is paid off in full. You are not the registered owner in the eyes of the law so have to abide by any limitations within the loan agreement.


Most finance packages like this will include limitations on how you can modify a financed car. Some car loans even include things like changing car mats or wheels as unacceptable modifications!


Whatever you plan to do with your car, you should check your auto loan paperwork first. Even if you used an unsecured loan, a quick scan of the loan agreement should tell you in no uncertain terms whether you can modify it or not.


You can then use your judgment as to whether you change the mats or upgrade the audio system!


Should You Modify a Car?

This is a wider question and has as much about taste as it does about finance.


If you own the car outright or have an unsecured loan, you can do whatever you like with it. However, you need to make sure you can keep up repayments and that the modifications you do won’t reduce its value.


You also have to make sure that whatever you do to your car won’t reduce the chances of you being able to sell it or trade it in.


How Modifying a Car Affects it's Value

If you do plan to modify your car, always have an eye on future value. Not only for trading in or selling but also in case of repossession. If you lower the value of the car and repossession isn’t enough to settle the finance, you could be on the hook for the remainder.


While not something to stress about day to day, it is something to consider when you begin any plans for modification.


Trading in a Modified Car

Many dealerships don’t like taking modified cars as trade-ins. They are something of an unknown quantity and can require remedial work to bring them back to stock. As dealerships tend to resell used cars on their lot, any work they have to do will be reflected in the price they offer.


There is a lot to understanding auto loans and the various conditions. If you need help, contact our team.


We will use all our skill and experience to deliver the lowest possible Lincoln car loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.

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