Car finance can be a mind blowing topic, especially when you want to end your agreement early. In the UK there is a law which allows you to end certain types of car finance agreements early, known as Voluntary Termination. Our guide aims to educate you on your options and whether you will be able to get out of your agreement before the end of the contract.
Voluntary termination is the legal right for the borrower to cancel a finance agreement early and walk away in certain circumstances.
Circumstances can change after signing a PCP or HP agreement, such as losing your job or falling ill, meaning that you are no longer able to meet your monthly repayments. As such, you may want to cancel your car finance and simply hand your car back to the finance company.
Section 99 of the Consumer Credit Act 1974 provides protection to you if you can no longer afford the monthly repayments, whilst also providing finance companies protection that you’re not allowed to walk away from a finance agreement at any time. The law does this by allowing you (the borrower) to end your agreement providing you have already paid 50% of the total amount payable to the finance company, providing there are no damages to the vehicle when it is returned.
On a PCP deal, the total amount payable will include the balloon payment, also known as the Guaranteed Future Value, plus the amount borrowed, interest and fees. If you have financed your car on a HP agreement, voluntary termination will usually be available around the mid-way point of the agreement depending on the deposit paid.
Voluntary termination is available on both new and used cars, and you should be able to find the total amount payable in your finance agreement.
Personal Contract Purchase, also known as PCP, is a popular choice for UK motorists wanting to purchase a new or used vehicle. PCP agreements are usually structured so that you pay an initial deposit, followed by regular monthly payments for the duration of the term in your contract. At the end of the agreement you will have the choice of handing the car back to the finance company, or paying a balloon payment to own the car. You can learn more by reading our PCP Explained article.
If you want to cancel your PCP agreement, you can do through voluntary termination, providing you have paid 50% of the amount owed to the finance company. It is worth noting this won’t usually be at the mid-point of your agreement as the amount will include any interest, fees and the balloon payment. As well as paying off 50% of the total amount payable, the car will also need to be in good condition, otherwise you may be charged for any damages deemed above general wear and tear guidelines.
What happens if you haven’t paid off 50%?
You can still end your agreement early if you haven’t paid off 50% of your total repayments, but you would have to make up the difference.
On the other hand, if you have already paid back more than 50%, you can voluntarily terminate your agreement, but you won’t receive any refund from the finance company for the extra money.
Hire Purchase, also known as HP, is another popular choice for motorists financing a car. Similarly to PCP, you will need to pay a deposit and regular monthly payments for the duration of the agreement. At the end of a HP agreement, the ownership of the vehicle will be transferred without the need for a balloon payment. You can learn more by reading our Hire Purchase Explained article.
Similarly to PCP deals, you can end your Hire Purchase agreement through voluntary termination once you have repaid 50% of the total finance amount. This will usually be around the mid-point of your agreement, but could be earlier depending on how much deposit was paid.
If you choose to voluntarily terminate your agreement, you will again need to ensure it is in good condition. If there is any damage you may be charged by the finance company.
Personal Contract Hire is the most popular type of personal car leasing in the UK. Similarly to PCP and HP agreements, you will usually need to pay a deposit followed by regular monthly payments for the duration of the contract. At the end of the agreement you won’t have the option to own the car and will simply need to hand it back to the finance company. You can find out more by reading our Personal Contract Hire article.
Unlike PCP and HP, you cannot cancel your PCH contract through voluntary termination. Nevertheless, there may still be reasons you want to end your lease agreement early, such as a change in financial or personal circumstances.
If you want to end your PCH agreement early, you will instead need to request an Early Termination quotation from the finance provider. The total cost will vary depending on the finance providers policies, and it is advised that you contact them for a quote if you wish to end the agreement.
You will need to ensure that the car is returned in good condition, or you may be charged for any damages which are deemed above ‘general wear and tear’ guides.
You can sell your car with webuyanycar.com and we’ll help you to settle any outstanding finance on your vehicle. Furthermore, we’ll give you the remainder in cash (if there is any) directly into your bank account.
To get a finance settlement quote you will need to get in touch with your finance provider and ask them for a ‘settlement figure’. After you have received the settlement figure, they will send it to you and you will have a period (usually of 10 days) to pay the amount stated. Once you’ve received your settlement figure, you will need to provide us with the documents, where we will facilitate the payment to the finance company for your agreement.