Car finance: Voluntary termination of a PCP or HP

Car finance advice

One of the most misunderstood aspects of car finance is how you can end your agreement early if you need to.  We have previously explained the ins and outs of settling a PCP early. Today we will look at a consumer right that is built into every regulated personal contract purchase (PCP) and hire purchase (HP) car finance agreement – your right to voluntary termination (VT).

Voluntary termination of a PCP or HP is the legal right of a borrower (you) to cancel your finance agreement early and walk away in certain circumstances. Car finance companies don’t like it, plus it is usually explained poorly (or not at all) by dealers. Luckily for you, The Car Expert is here to help!

Often people’s circumstances can change over the course of a car finance agreement:

  • They can lose their jobs
  • Personal circumstances can change
  • Unforeseen factors might make it difficult to keep up with their monthly car payments

Depending on the circumstances, you may be eligible for voluntary termination of your car finance agreement.

In this article, we will explain what a voluntary termination is, why it exists and how to go about cancelling your agreement by voluntary termination. We’ll also answer a couple of the most common questions about voluntary terminations:

UK law provides you with the right to voluntarily terminate a regulated HP or PCP agreement (Consumer Credit Act 1974, Section 99). Your contract documentation will detail your rights.
Voluntary termination may be an option to prematurely end your PCP or HP car finance agreement

The law is there to protect consumers who can no longer afford their monthly payments. Equally, it provides protection to finance companies to ensure borrowers can’t simply walk away from their obligations at any time.

Voluntary termination clauses in car finance agreements are there to protect consumers. But there’s no doubt that some borrowers will exploit the clause to allow early cancellation of a PCP or HP if the numbers are favourable.

Although voluntary termination provides a safety net for consumers, it generally loses the finance company money. Usually, you haven’t paid off enough to cover your car’s depreciation, so the finance company is taking back a car which is worth less than the outstanding finance amount.

Understandably, finance companies do not like this one bit. But there is nothing they can do to stop it as the law protects termination rights.

There is a lot of confusion about voluntary termination, and that suits the finance companies just fine.

The reality is if you do voluntary termination properly, they can’t stop you. What’s more, voluntary termination will not affect your credit score or credit rating. However, some finance companies may decline any further finance applications from you.

How voluntary termination works

You can end your agreement and return your car to the finance company as long as:

  • You repay 50% of the Total Amount Payable (not the total amount borrowed, as you need to include interest and fees)
  • There are no damages if you have failed to take reasonable care of the goods (over and above normal wear and tear)

Assuming you have complied with both of the above, you’ll have nothing further to pay.

The Total Amount Payable is the total amount borrowed plus interest and fees. It also includes the Guaranteed Future Value (GFV) on a PCP. This means that you usually don’t reach the voluntary termination point until very late in a PCP agreement. For a regular HP agreement, you will usually reach the 50% repayment point about halfway through the agreement.

The Total Amount Payable and termination amount must both be clearly shown on any applicable car finance contract, so you should be able to find it easily enough. You must pay off the termination amount specified to enact a voluntary termination of a PCP or HP.

It makes no difference if you bought your car new or used; the law is exactly the same for both.

Voluntary termination of a PCP or HP: Where do I start?

There are a few problems people run into when trying to exercise termination rights.

Firstly, finance companies and car manufacturers generally dislike voluntary termination and would prefer the clause be removed from the law. You can expect them to show little interest in helping you.

Often, this means they’ll try to drag the process out as long as possible. Also, they may try to make you do a lot of running around. This is because, until you terminate the agreement, they can keep charging you.

Luckily, there are some good resources around like this one from LegalBeagles. It contains a template letter you can send to your finance company.

Be clear in your language and do not get sidetracked by anything unrelated. You don’t have to sign forms or other documentation. Simply send them your letter (email is acceptable, but recorded delivery is better) and stick to your guns. Do not fill out any “Voluntary Termination packs” they send you, even if they insist that you have to. You don’t – it’s a trap to get you to sign away your legal rights.

Secondly, the damage clause is a little vague. It states that there must not be any “damages if you have failed to take reasonable care of the goods (over and above normal wear and tear)”, but there is no definition of what that means, or what constitutes “normal wear and tear”.

As a result, the finance company can and will try to claw back money from you. They will charge you for damage that would not be considered “reasonable care”, and will often use this clause as an excuse to try to pin you for excess mileage.

Usually, this involves threatening letters and large invoices for minor scratches or excess mileage. There will often be various forms and legal jargon to try and scare you into paying up.

LegalBeagles has some excellent advice about documenting your car’s condition with dated photographs to prove it is in “reasonable” condition when you hand it back.

Finance companies cannot charge you for excess mileage (which we will cover in more detail on the next page), although you can be sure they will try.

Thirdly, if you have defaulted on your loan prior to your attempt to terminate the agreement (ie – missed payments), they can potentially refuse to allow it.

If you want to terminate your PCP or HP, plan it in advance. Keep paying your monthly bills until you can exercise your termination rights. The rules are very different if you are terminating the agreement from a position of strength, rather than the finance company cancelling the contract and claiming costs because you have missed payments.

If your financial position is looking wobbly, it is better to be decisive and act early. If your situation collapses and you are no longer able to pay your bills, you may well end up unable to terminate your car finance agreement either. You may have to go down the path of Voluntary Surrender, which is very different to Voluntary Termination and nowhere near as beneficial.

Leases do not have voluntary termination rights

There are many types of car finance, and not all of them are equally protected. If you have a lease (such as a contract hire or operating lease), then you are more limited in your options.

It’s expensive getting out of a lease early, and there is limited support available to help you. You are simply renting the vehicle, with no intention of eventually owning it. As a result, you are not covered by VT rights like you are with a PCP or HP.

If you are a private borrower financing your car from a manufacturer finance company, you’ll generally have a PCP or HP. Therefore you should have voluntary termination rights to end your agreement.

Lease agreements (usually a form of contract hire) are usually preferred by business users. However, a number of finance companies are now promoting personal leasing for private individuals. This is partly due to the absence of voluntary termination rights in a lease.

Make sure you understand what type of finance agreement you are being offered before you sign on the dotted line.

Next page: Will a VT affect my credit rating? Can I be charged for excess mileage?

Stuart Masson
Stuart is the Editor of The Car Expert, which he founded in 2011, and our new sister site The Van Expert. Originally from Australia, Stuart has had a passion for cars and the car industry for over thirty years. He spent a decade in automotive retail, and now works tirelessly to help car buyers by providing independent and impartial advice.

608 Comments

  1. stuart

    Hi Hannah. Yes, you should be able to sell your car and pay off the settlement to the finance company. Make sure you contact the finance company before you do this, as they may have some requirements. For example, some finance companies insist that your buyer pay them direct, rather than paying you and then you paying them.

  2. Sorry – just checked my paperwork and it is a 36 month credit agreement HP.
    The total amount payable is £10761.06. So I am only about 30% through the agreement.

  3. stuart

    You can still settle the agreement, regardless of whether you are eligible for voluntary termination. As of right now, you are 11 months into your agreement. Of the £10,761.06 total payable, you have paid off less than £3000, and if you settle now you will have to pay £7183.09. You can sell the car, but if you get less than £7183.09 then you will have to make up any difference. So if you get £6000 from a buyer, for example, you will have to pay the finance company an extra £1,183.09 to clear your debt. Have a read of this article about settling a PCP (or HP) early.

  4. HI Stuart,
    I purchased a 6 month old vauxhall astra from a main dealership with a r year finance deal. The vehicle obviously came with the original three year warranty but I was concerned that should anything happen after that period I would have to foot the bill. To cement the deal, the dealership gave me a Network Q warranty to cover the remaining two years, which unknown to me, was of no use whatever because I was using the car as a driving tuition vehicle. The dealership knew that it was going to be a training vehicle as we had purchased from them before.

    There was no charge made for the Network Q warranty and I can only presume that they provided this at their expense to ensure the deal was made.The vehicle has now got major engine problems which run well into 4 figures and both the dealership and Vauxhall just say it is out of warranty. GMAC the finance company, agree that one of the faults was indeed identified in inside the manufacturer’s warranty period. I have even taken this to the ombudsman and they say that they cant help as the original dealership is no longer trading.
    Can I VT this vehicle as I have paid more than half the amount owed and I cant afford the repair bills..

  5. stuart

    Hi Peter. Firstly, if there are records showing that a fault is identified/reported within the manufacturer’s warranty period, it shouldn’t matter whether the original dealer no longer exists. Any Vauxhall dealer should be able to undertake the warranty work and claim the costs back from Vauxhall. If you have evidence of an issue being reported under warranty, contact Vauxhall head office and ask them how best to proceed. If you kick up a fuss (politely, of course!) and refuse to be fobbed off, you should eventually get somewhere.

    The Network Q warranty issue is a lost cause, unfortunately. Your beef there is with the dealership and they no longer exist. It may be worth checking to see if they were part of a larger group, as there may be be a head office for them if they have showrooms elsewhere. Don’t like your chances of getting anywhere, however.

    As for VTing the car, the finance company simply won’t accept the car with major engine problems. In their defence, it’s absolutely nothing to do with them (GMAC is a separate company to Vauxhall, even if they are both ultimately owned by GM).

  6. Hi, sorry you probably get asked this all the time, my wife and I voluntarily terminated our Clio on a hp scheme, they inspected the vehicle and found no damage and we thought that was it, now they’re asking £440 in excess mileage, I know you’ve stated that they cannot charge us for excess mileage but is that laid down in any government legislation? Legal beagles refer to the consumer credit act 1974 but I’ve had a look at that and I cannot find anything referring to excess mileage on it, I can’t turn round to renault and say I’m not paying because everyone on the Internet says I don’t have to, I’ve considered legal representation but that would cost more than just paying renault.

  7. stuart

    Hi David. It’s a common question, but there is no provision for a finance company to charge for mileage on a Voluntary Termination. They almost always try, but that doesn’t mean you have to pay it.

    Hold firm and point out that they have no legal basis for their claim under the VT clause. http://www.legalbeagles.info has some more information, but the legislation you refer to only requires that you have cared for the car in a reasonable manner.

    The VT clause in your contract should also state this.

  8. I bought a car from CAR TIME show room from Bury, UK, they misrepresent the car information on the advertisement and also during the process of sale sales executive hide the facts. During the sale I particularly asked Sales Executive that car has any damage repair and repainted, he said car is in genuine condition and no repair or repaint be done. But when they hand over the car I get car checked by local garage and they informed me that car has damaged repair and repainted front and back bumper and also side doors. Car Time garage also damage the driver side door while fixing the driver door rattle noise. I have already launched complaint with finance company. Now car time offered me £500 pound to close this complaint. But my concern is they misrepresent the car in advertisement and during the time of sale where they did not disclose damage repair, repaint and any other faults which should be checked at their garage before advertisement. I want to ask what my rights are and where I stand? Your advice will be appreciated…….Please let me know how can cancel my agreement and return the car?

  9. Hi there I’ve currently got a 63 plate Ford Fiesta 1.25 zetec on pcp payments £260.81 per month for differing reasons I would like to change my car but don’t mind retaking out a new pcp as this kind if works well for me. Could you please tell me the pros and cons and whether it is actually worth changing my car now. It’s not for financial reasons that I need to change it. Rachele.

  10. Hi Stuart,
    I have 3 more payments to make on my car to go past the amount required to VT. Can I pay these early in one sum and immediately VT the car?

  11. stuart

    You will be locked in a battle of what you said vs. what they said, so unless you have anything in writing, you have no grounds to return the vehicle.

  12. stuart

    Hi Rachele. Yes, you can change if it suits your needs. Be aware that you will probably have some negative equity that needs to be cleared, so it may be a bit of an expensive exercise. Add upp your costs and decide if it’s worth the cost for you to change it now.

  13. stuart

    Hi Alan. Yes, this should be possible. The law only states that you have to hit the 50% mark, so you should be able to pay the balance and VT the car immediately.

  14. Oh great thanks for your help Stuart.

  15. Hi stuart i just recently took out a hp car finance with creditplus for a bmw 1 series which altogether the end result of the payment is around £13000. i can pay it off monthly but im feeling like i have made a mistake. im 3 weeks into the contract and i wanted to know what would happen if i just stopped paying for the car or whether it was possible to just allow them to cancel the contract and take the car back because i want a way to cancel the contract without having to put any other property or belonging of mine at risk due to settlement issues with the company. i’ve always been told that on a hp finance, if you cant pay or stop paying they just take the car back. is that true? what are your thoughts? i really need help

  16. stuart

    Hi Pius. Not true at all. You may have bought a car and now changed your mind, but that doesn’t mean you can walk away from your commitments. Have a read of this article about settling your HP early, but you can expect that it will cost you a fair amount of money to get rid of the car.

  17. Hi Stuart, Please let me know If I get independent Assessor report on car damage which was not disclose by the CAR TIME during the sales. Can I challenge them in the court? While HPI is clear on the vehicle. That mean the honour repair the damage and sold car to CAR TIME and they did not disclose to me even I particularly asked if any damage repair or repainted. As local garage advised me to get Independent Assessor certification then you can challenge them in the court and they have to take the car back…Your advice will be highly appreciated

  18. Hi, I have a PCP contract for my car that runs over 36 months. After which I have the option to hand the car back or pay off/re-finance the rest of the optional final payment. My question is, can you VT half way through your initial agreement (i.e 18 months into my initial three year agreement), or does it have to be half of the full amount payable? Thanks for your help!

  19. Good article. I’ve found that the sales reps at the dealerships deliberately try and mislead you with PCP contracts, saying things like ‘When you are half way through your contract, you will be able to hand back the vehicle without charge, or change to a new car without charge’ when this is clearly not the case and could be many months or years until you reach 50% paid. They seem to be twisting the 50% of total amount payable into ‘50% of the monthly payments’.

    They also talk a lot about ‘equity’ with regard to upgrading early, making out that ‘the car maybe worth more than the payment outstanding, so you will have a nice deposit on the upgrade car’ seriously? has this ever actually happened to anyone?

  20. stuart

    The HPI has nothing to do with any minor damage or repairs. It will only advise if the car has been written off and repaired. You don’t have a case.

  21. stuart

    Hi Andy. Yes, there is too much confusion about the 50% mark. 50% of the Total Amount Payable on a PCP is normally only reached at about 75% of the way through the agreement.

    And I always recommend that people expect not to ever get any equity. Consider it a bonus if you have anything left over at the end.

  22. hi Stuart – l know it is repetitive – does the 50% payable include the balloon figure on the end ?? Thanks Paula

  23. stuart

    Hi Paula. Yes it does. The VT figure should be listed in your contract.

  24. Hi Stuart I’m currently in a personal lease with audi and they are terminating the contract because the car was seized by police and compounded. But I borrowed the car to a friend who was Insured to drive it but got the car taken of him for another reason.I want to keep the car, anyway of getting audi to allow me to keep the car without termination.

  25. stuart

    Hi Ahmed. You will need specific legal advice if you wish to challenge the finance company over this matter.

  26. Hi Stuart,

    I have a 5 year HP repayment period on a used Jaguar, I’m now a month or so over my first year anniversary of repayments. I’ve added an extra 20K of mileage over that period, pushing it to 118K… I’m aware this is going to kill the car value in depreciation soon, if not already. I accepted that though as this was a ‘until end of [car] life’ agreement I made with myself. I’ve just parted with £850 to get new tyres for the car, that was the only MOT caveat this January. Other than that, it’s is pristine condition.

    The problem: I’ve had an offer to move to HQ in the USA (promotion), and the perks outweigh the benefits of remaining here in the UK, the car included. Clearly I’m below 50% of the period, but I read in one of your other articles that you can sell your car to make up 50% of the ‘total’ value of the finance. That would mean I’d have nothing to physically give back to the finance company, so I feel I’m perhaps misunderstanding you. Henceforth, are you able to inform me of my option given my situation? I’d hate to be in San Francisco paying for a car sitting on a driveway in the UK :)

    Thanks in advance, and thank you for this amazing resource.

    Best,
    Nathan

  27. stuart

    Hi Nathan. I think you are misunderstanding me. Once you have paid off 50% of the Total Amount Payable, you can Voluntarily Terminate the agreement, which means giving the car back with nothing further to pay. So you have paid off half of what you owe and surrendered the car.

    In your circumstance, you can sell the car, but your settlement is going to be be quite high and probably quite a bit more than the car is worth, so you will have to pay out the balance. Have a read of this article about settling your agreement early. It’s based on a PCP rather than an HP, but the principle of early settlement is the same.

  28. Hi Stuart,iapplied for vt but change my mind have i any chance of cancelling vt,they have my v5.

  29. I have just paid £1500 for my car to be collected under a VT and now another company have contacted me telling me I have to pay £250 damage costs as I have a few scratches on it. Is this right?

  30. stuart

    Hi Colin. It is likely to depend on whether the finance company has processed the termination. In theory, they should be happy for you to keep paying them money, but they may have already ended the agreement.

  31. stuart

    The issue of “reasonable care” is always open to dispute. However, any dispute should be between you and the finance company and no-one else.

  32. This aid a company called RMS, I’ve never had anything to do with them before?

  33. stuart

    You can always check with your finance company, but third parties have nothing to do with VTs. You can refer RMS back to your finance company if they have any questions, since the finance company is the owner of the vehicle.

  34. Hi Stuart, you kindly replied to me on one of the threads above and I’m looking for a bit more advice please. I’ve just VT’d my car and its now at a handling agent awaiting auctioning off tomorrow. The finance company have just written to me today and demanded £750 in excess mileage fees and an astonishing £328 for “stone chip damage”. More alarmingly, they want to charge me £44 for “jetwash”. Are these people for real? Surely they cannot charge me £44 to have the car washed? Note, prior to the vehicle being collected I did have the car fully valeted inside and out and have photographic evidence to prove this. Surely I can contest this? Additionally, you told me previously that I would not need to pay any excess mileage given i was VT’ing the car. Is that still the case and on what grounds do I have to refuse payment of this? Finally, and most importantly, the £328 charge for stonechips is absolutely absurd. Any motor dealer or mechanic will tell you, a vehicle which has covered 81,000 miles is bound to have stonechips. How can the finance company put me at blame for this, surely it should be classed as wear and tear? I note your comment above saying reasonable care is always open for dispute but surely this is ridiculous? I am considering taking legal advice on this because I have in no way shape or form neglected my car and always looked after it and had it serviced at main dealers. I’d be most grateful to hear your comments on this please.

  35. stuart

    Hi Andrew. Yes it is ridiculous, but it’s not that surprising. Stand your ground, and quote the terms of your contract (and the law) which give you the right to return the car without any charges for mileage or damage beyond reasonable care.

    Just because they have written a demanding letter/invoice doesn’t mean that you are obliged to pay it. Stay firm and make it clear that you understand the law and your contractual position, and they are likely to back down – at least on the mileage and jetwash(!). The stone chip damage is going to be a matter of interpretation, but £328 is not unreasonable if the car needs any paintwork. Again, it depends on what you and they each consider to be “reasonable”, and it is a grey area of the law.

    For more information, especially if you are considering taking legal advice, check out http://www.legalbeagles.info. There are people on that forum who discuss VT issues on a regular basis.

  36. Hi Stuart, we are just about to VT our BMW and have followed all protocol with regard to ensuring the car is in showroom condition when it gets handed over. We have however done over the total mileage suggested on the contract and I know as you have made clear we are within our rights to not be liable for this aspect. In order for the collection be instructed though we have to fill out a form (and sign it) which says ‘Your maximum total mileage is stated on your agreement. If you have have said agreement this will be prorated to the date you return the vehicle and an invoice will be sent for any mileage charge due’. It then has a section for you to record ‘mileage at last srrvice’ and at the bottom says ‘please sign details below to confirm that you have read and understand the consequences of ending the agreement. My question is by signing this agreement, does it then make us liable for th excess mileage as we have then ‘agreed’. If we don’t sign it however, they won’t ‘instruct collection’. Not sure what to do? Maybe sign it and not put the mileage?

  37. stuart

    Hi Mandy. You don’t have to use their form – it’s a trap. You may exercise your legal right by informing them in writing that you are voluntarily terminating. As soon as you sign any kind of form agreeing to pay for mileage, you will be drawn into an argument over it and can reasonably be expected to be billed for it. Advise the finance company (in writing) that they are free to collect the car on whatever dates you have available, or you can deliver the car to them. For more info, visit http://www.legalbeagles.info, where they have draft templates you can use and there are plenty of stories of people who have successfully VTed their car.

  38. Hi Stuart, unfortunatley i have only read the above after i VT’ed the car and paid £98 in excess Milage. However i wrote to them with regars to the value of the car which was in excess of the final settlement figure, asking them do i get money back that they might make for the sale of the car, and was told no. Is this correct?

  39. stuart

    Hi Andrew. They are correct – Voluntary Termination gives you the right to return the car in lieu of any further payments. The value of the car against the amount outstanding on the finance is irrelevant, so in this case the finance company has come out in front. Normally it’s not the case, and the car is worth less than the amount outstanding. Plus they got an extra £98 out of you for excess mileage, so they’re probably delighted with how it’s worked out.

  40. Hi Stuart, I would just like to clarify something with you. I have a PCP contract on a 2 year deal. The total amount repayable is £15000 (inc interest and fees) the GMFV of the car at the end of the 2 years is £9000. When it says in the article you have to pay at least 50% before you can VT, is that 50% of the amount I would be due to pay over the 2 year contract therefore half of £6000 or is it half of the total amount borrowed therefore half of the £15000? I am 12 months into the contract now and have paid just over £3000. Can I VT now or not until I have paid £7500 which would actually be 6 months after the 2 year contract has finished anyway?

    Cheers

    Joe

  41. stuart

    Hi Joe. The VT point is half of the Total Amount Payable (ie – half of £15,000, which is £7,500).

  42. Cheers for the reply

  43. I recently took a car out on a PCP with arnold clark. I just lost my job so i wont be able to afford the monthly payments to the finance company. i am still within my 14 day withdrawal period, what do i do? any advice? Im sure i can get out of my financial agreement with the finance company but what will arnold clark do? I have already informed them about this. Surely they have to take the car back off me if i cant afford to pay for it? Thanks

  44. stuart

    Hi Cal. Unfortunately there is no easy way out of the situation, regardless of the cause of your problems. Yes, you can cancel the finance, but then you will have to pay for the car, as you can’t cancel that. The dealer is under absolutely not obligation to take it back, as they have sold it to the finance company and you have taken delivery of it. If you stop paying the finance company, they can take you to court. Your credit rating will be affected and you could even be declared bankrupt.

    Your best bet is to get in touch with the finance company straight away and explain your situation. They may be able to reduce your payments for a period of time and extend the term or increase subsequent payments, however they are not under any obligation to do so. You always take out a finance agreement at your own risk.

  45. Thanks for the reply. Its the dealership that i need to speak to then, because i can cancel the finance but i need to convince the dealership to take the car off me. Can you offer any advice on how i can get them to do this? I have paid a deposit of £850, will that not be an acceptable price to pay in order to get them to take it back?

  46. stuart

    Your chances of getting to by your used car (because that’s what it now is) are very slim. If they do agree to buy it back from you, it will be for much less than you paid for it – for various reasons. Have a read of this article about why your car loses so much money so quickly (if it’s a new car, the biggest chunk is VAT, but it affect used cars to a large extent as well). So you may be able to get rid of the car, but it will likely cost you thousands of pounds, not just your £850 deposit.

  47. Can someone offer advice, my daughter is 3 months into a PvP and hates the car, she's just passed her test and is struggling to drive, so much so her confidence has took a battering.
    I expect a financial nightmare on the cards, she wants to swap it ideally for a slightly bigger 1.2 engine…

  48. Stuart Masson

    Hi Rob. The best solution to help your daughter is probably with some additional driver coaching and lessons to help her with her confidence, rather than replacing the car. It’s unlikely that the car is why she is struggling with her driving, even if it’s what she currently believes. Plenty of new drivers struggle with confidence issues once the instructor or helpful parent is no longer present and they have to battle traffic on their own.

    If you want to sell the car, it will be expensive. Have a read of our post about settling a PCP early.

    And there’s no guarantee that going through that hassle and expense will make her feel more comfortable on the roads than she is now.

  49. Ha ha….. Plonker

  50. Hi I have been accepted for finance but already have a car on finance with negative equity, when iv payed half I intend to hand it back and take the new agreement with a different lender, the original agreement is 50% interest it's financially better for me to take new agreement at 7 % iv never missed a payment and all been on time but bit worried doing this may affect new deal iv got 5 more payments to reach halfway.its a 3 yr deal thanks.

  51. Stuart Masson

    Hi Kev. Make sure your finance agreement does allow you to voluntarily terminate (usually it has to be a PCP or HP); your contract should have the relevant information. The contract should also tell you exactly how much you need to have paid to be able to VT, as the amount is not the halfway point of your finance term, but half of the Total Amount Payable. If you have a PCP, it is often quite close to the end of the agreement rather than halfway through.

    Assuming you do have the right to VT, then it is your legal right to do so and cannot be used to negatively affect your credit score.

  52. Hi Stuart, I got a finance for a 5 year old car at the time, I had too take up a vt and was advised to do a vehicle inspection on the car. I was unable to do this but I returned the vehicle in a good condition and it just passed the mot.
    When the recovery guys came, I was given a form to sign as they've checked that there was no damage on the car.
    To my surprise, few weeks later, the finance company wrote to me demanding a sum of £4000 for cosmetic damage on the vehicle and that's what they need before the car can be in satisfactory condition for sale, which I did dispute. They said they only rely on the independent search and that I'm now liable to make this payment.
    This is rather ridiculous, as the car I bought was a used one and I asked that they return the vehicle to me and I can carry on with the payment, but they told me that they've sold the car. In other words, they've made their money back on the car and still charging me a sum of £4000 for the car that I can't get back. This is a complete rip off. can someone help pls. Thanks

  53. Stuart Masson

    Hi Favour. Disputes over vehicle condition are reasonably common when VTing, unfortunately. The legislation is vague, only mentioning "damages if you have failed to take reasonable care of the goods (over and above normal wear and tear)”. There is no determination of what that means, so it is open to interpretation and therefore abuse.

    You can certainly challenge them to explain how they have come up with a figure of £4,000, as it is almost certainly an over-inflated estimation. They will be hoping that you pay up to avoid being taken to court. They may be prepared to settle for a lesser amount, or you can stick to your guns and face them in court if they want to take it that far.

  54. Hi stuart,
    I was advised by car salesman to vt my pcp as my car will be worth much less otherwise. my car has a small scratch on the bumper and it was a new car. i was wondering would they charge me for the scratch?

  55. Stuart Masson

    Hi Waqas. I would recommend getting the scratch repaired before VTing the car. If it is only minor, it won’t need the whole bumper painted and should be quite inexpensive. If you don’t fix it and the finance company tries to charge you for it, it will be for a lot more money.

  56. Hi Stuart
    i handed my car back to RMS on 09/10/15 with the last paymen of £350.
    I have just received a letter saying under the terms and conditions with Peugeot they are required by law to issue a notice damage above wear and tear and excess milage. Also full vehicle polish Alloy wheel refurb total £120. My mileage on the car was 6519 and i signed the paper work that i was given by the man who picked it up.I am 65 lady driver and have kept this car in perfect condision as i have done with all my other cars This car was cleaned inside and out costing me £15 .I just cannot afford this ammount can you help me please

  57. Stuart Masson

    Hi Kathy. It depends on the circumstances of how the car was handed back. If it was a voluntary termination, they can’t charge you for excess mileage (although they may well try), but they can charge you for damage above normal wear & tear (which is a very loose description, and allows them to charge you whatever they want and force you to dispute it).

    If you reached the end of a PCP and were returning the car, I can’t see there being a problem with excess mileage if you have only covered 6,519 miles. As for condition, it should be specified in the agreement and they should have a schedule of charges for repairing any damage. The guaranteed minimum future value (GMFV) assumes perfect condition, so they can charge you for any repairs required according to the contract.

  58. Hi Stuart
    There was no damage and i was at the end of my contract and just had to pay £350 for what they called Gap Insurance. What they want off me now is( Full Vehicle Machine Polish=£65 + Alloy Wheel Refurb+£55 Total £120) A week before they picked it up I had it fully cleaned inside and out this cost me £15 well worth it.I put the car in the garage fully covered it. The car was in perfect condition. There was nothing in the letter for claiming for damage just the the above .

    Many thanks for your reply Kathy

  59. Hi Stuart,

    I have recently sent Mercedes finance a letter to end my hire purchase agreement under the half rule.
    I’ve recieved a letter back asking me to sign a voluntary termination confirmation before they will give me a date for collection. I’m very hesitant to sign this but they said I can’t end the agreement without signing and returning the letter. Any suggestions?

  60. Can Mercedes refuse to end the agreement if I don’t sign their voulantary termination agreement?

  61. Stuart Masson

    Hi Danny. No, you are not required to sign their forms. As long as you have given them written notice, you have done all you need. If you have a look at the forums at http://www.legalbeagles.info, they are adamant that you should definitely not sign the Mercedes forms, as you may be agreeing to charges that you should not have to pay.

  62. Stuart Masson

    Hi Danny. See previous answer, but no they can’t.

  63. Hi Stuart this is going to be a rather interesting one. I bought a citroen c5 on finance over 2 years ago ( of a 4 year period) so have paid over half the finance amount. However the car has suffered from a broken (hydraulic) suspension issue about 6 months ago, so has obviously been off the road since, I have continued to pay the finance as I was unaware I could potentially return it until now, the repair cost for the car is in excess of £1000 and am unable to afford this cost as I have my second child due at the end of January, I tried recently to cut my losses and get finance on another car and trade in the c5 but because the car was in such a high amount of negative equity I was unsuccessful, I would just love to be rid of the car now tbh but I’m pretty sure they would refuse a vt without me having to pay an extortionate amount of money on it, just wondering if there is any advice you could possibly give me, thanks in advance

  64. Stuart Masson

    Hi Scott. In terms of your eligibility to VT the car, you have to have paid more than half of the Total Amount Payable, which is different to simply being halfway through the agreement (and very different if it’s a PCP). Check your finance contract, and it should tell you the exact figure.

    You won’t be able to VT the car if it has major mechanical problems. I am assuming that you bought the car used, rather than new, otherwise it would still be covered by the New Car Warranty and you wouldn’t be having this problem.

    Unfortunately, you don’t have any good options – Citroën residual values are generally terrible, which means you are likely to be in significant negative equity for a long time. I would get some more quotes on the repair work, as an independent specialist might be able to fix it for a lot less than a Citroën dealership.

  65. Hi Stuart,

    I am looking to purchase a new car in the next couple of months and I’ve been doing some research on finance solutions. My mileage is a sticking point as it is entirely unpredictable. I do a lot of contract work so I am worried about being hooked in on a 10k a year mileage deal if I end up doing a lot more, on the other hand I don’t want to be paying out more if I do less.

    By the sounds of what you are saying, if I was to take out the finance on a 10k mileage deal, even if I ended up doing up to 25k, I would have the option of VT once half the finance is paid, even with excessive mileage?

    My question then is why does anyone ever pay excessive mileage at the end of their term? If you are able to VT once you have paid off half, then surely that option is available during the final month of the contract?

    Thanks

  66. Stuart Masson

    Hi Duncan. You are correct. The only catch is the vague reference to damage above normal wear. If you have done massively more mileage than your contract specified, the finance company will be able to chase you for damage (ie – wear) that would not be considered reasonable on a car with much lower mileage.

    Eventually a finance company will challenge the exact scenario you are describing, attempting to make a case for fraud. If you enter into a finance agreement and knowingly underestimate your mileage, and then do not take steps to rectify it with the finance company at any point during the contract, they could argue that you have deliberately misrepresented your mileage, which is considered fraudulent. To the best of my knowledge, it hasn’t happened yet, but if everyone was to do what you are suggesting, it would happen eventually.

  67. hi stuart,

    I am in the process of a vt, and I have just had the car assessed and taken back to the finance company today, but the quote the assessor gave me was disgusting. He said it would cost nearly £1,700 to get the car back to when it was new. But I bought the car second hand (5 yrs old,and had general wear and tear) He quoted me nearly £500 for a new windscreen (the stone chip was repaired by auto glass) The car was in very good condition inside and out. If they stick to there guns and demand £1,700 off me, which I can not afford, can I say “ok,I will pay the £1,700, but I will pay you £10 a month”.

    I can afford more but if they are going to be awkward with me, can I be just as awkward back??????????

    End of the day they will get there money back, well end of the decade!!!!!!!

  68. Stuart Masson

    Hi Chris. Unfortunately, the definitions of ‘damage’ and ‘normal wear & tear’ are vague, so it gives finance companies the opportunity to try and lever more money out of you in the hope that you will pay up to avoid legal action or any effect on your credit score. You can certainly argue with them for as long as you like; they will be hoping to wear you down so that you pay up to finalise the matter.

  69. Hi.

    I took out a used car on bad credit finance about 9 months ago & the repayments are stupidly high. I’m wondering if I could cancel the agreement after 16 months which is halfway into the agreement and ill of paid haof of the money.

    I was stupid to get the car and now realise it would be much cheaper to save and buy a used car.

    I have never missed a payment and it’s though a company called thecarfinancecompany

    Thanks for any help or advice :)

  70. Stuart Masson

    Hi Ben. You may or may not have the right to voluntarily terminate the agreement. Your finance contract should explain any VT rights and the amount you need to pay to be able to do it. Check the wording carefully.

    If you do have the right to VT the car, it is once you have repaid 50% of the total amount payable, which is not necessarily the same thing as the halfway point in terms of time.

  71. Hello I’m looking for help or advice. I’m planning on moving to a different state in a few months so I’m trying to figure out what i can or shouldn’t do with my vehicle. Looking over my bill of sale. Here’s where I’m at: total price was $7500, with a down payment of $1,000. After interest the final cost would be about $8600.(high interest rate) My payoff balance on my monthly bill shows amount due $4000 and I have confirmed all interest has been paid. Can I use my rights under the “half rule” CCA 1995*??? If I’m eligible to do so it’s from my understanding all additional payments will cease, and i would only have to pay for some damages (if any) to the vehicle and that’s it??? And say if I am not at the halfway point i still have the right to do all this i would just half to pay the additional payments until it’s at the halfway point AND I’d have to pay for whatever damages(if any). If I’m correct i am eligible and entitled to such law. I would also like to know the additional steps in going about this process correctly.( I have just downloaded an example document to send out or bring to the dealer stating i want to use said act/right. Please forgive me as I’m only 21 years young and do not know much.. ALSO I LIVE IN PENNSYLVANIA IS THERE A DIFFERENCE…

  72. Stuart Masson

    Hi Tony. We are a UK-based site, so I’m not familiar with the situation in the US, although I understand it can vary significantly between the different states.

  73. Hi I’m after some advise I handed a car back to the finance company after 4 years they came and inspected the car and gave me a bill for £680 for damages so I’ve agreed to pay them £100 a month to pay this off but they have refused my offer and say they want more ,can they refuse my offer

  74. Stuart Masson

    You can try to fight it with them, but there is no clear definition of wear & tear, so it’s your opinion vs. theirs on whether any damage is acceptable for the car’s age and mileage. The finance company is normally prepared to keep fighting it, because they know most customers will give in and pay up. They are unlikely to agree to any payment plan, as they know customers are likely to stop paying and they have to chase the money all over again.

  75. Hi Stuart, I have read many of your comments and youll be glad to hear i will not be asking similar questions that you constantly get.. My query is linked to the Bavarian & Italian motorcycle sector that utilise Black Horse Finance for their HP,PCP & Personal loans. Have you had any complaints or queires regarding those that have VT’d their Motorcycles or Cars for that matter?

  76. Hi, Wondering if you can help. I have handed by car using the VT Clause. I have received a letter from the company telling me I need to pay excess mileage. My total mileage for the whole term was 23700 and limit was 2400. The excess mileage charge is calculated pro rata. Do I need to pay this could I fight it.. | They are telling em I need to look at my contact.Which I cant right now but will l when I get home.

  77. Stuart Masson

    Hi Gwen. No, as stated in the article above, you do not have to pay for excess mileage on a PCP. The law only makes provision for damage over and above normal wear & tear. It’s very common for finance companies to try and charge for excess mileage on a VT, but they cannot enforce it.

  78. Stuart Masson

    Hi Gordon. No, I haven’t had any specific feedback about Black Horse Finance, for either cars or bikes. The same principles apply when dealing with any finance company. Be polite, but stand your ground and don’t be pressured into abandoning your legal rights when VTing your car (or bike).

  79. Hello,
    just about to start proceeding with a VT, Finance company will send me an info pack. However they already let me know that I have to pay for an additional product that I took, being GAP insurance. I have paid over 50% back already. Is this right that they ask me for this additional sum of money?

  80. Hi Stuart,

    After a year into a 3 year PCP plan, we are considering VT. The vehicle, a Skoda Yeti 2.0 has been affected by the VW emissions scandal (we received a letter from Skoda a couple of weeks ago informing us of this). Is there scope here to cancel the contract as the product spec wasn’t as advertised at the time of signing?

  81. hello, i have a question if you could please help with it, i am looking to VT my car agreement but am around £1500 short of the 50%, i should be able to raise this but do i need to pay this first befoer sending the VT letter from legalbeagels website giving the finance company 14 days notice or can i send the letter then pay the balance?

  82. Stuart Masson

    Hi Anthony. Check your contract to see what payment arrangements were made for your GAP insurance. It is entirely possible that the payments were added onto your monthly car payment, and as such you may not have paid for the entire value of the GAP insurance. Unlike the car, you can’t VT the GAP insurance. However, make sure they are correct in saying that you haven’t paid all of your GAP insurance, rather than just taking their word for it.

  83. Stuart Masson

    Hi Jason. As far as I know, no-one has yet tested the VW dieselgate issue in court with regards to this. You are extremely unlikely to be able to cancel the contract and walk away scot-free, as you have had full use of the car for a year. Unless you can prove that the emissions were the key reason in you choosing the Yeti over another car (which you almost certainly can’t, unless you have a verifiable email trail discussing the matter in writing with the Škoda dealership before making your purchase), you can’t use it as an excuse to try and have the contract cancelled. And besides, no-one actually knows what the emissions results will be if/when the Yeti is re-tested after the recall update has been carried out; it may be that they are only slightly increased rather than drastically affected.

    You can’t use the emissions issue as an excuse to cancel the contract because you simply don’t want the car anymore. If you want to claim compensation for reduced resale value arising from the dieselgate scandal, or reduced performance or economy as a result of the recall modifications, you will certainly be able to do that if you can prove it.

  84. Stuart Masson

    Hi Stephen. Legalbeagles can probably advise better, but I would have thought you should have repaid the full 50% before initiating your VT, so that you have fulfilled your obligations and they can’t use it as an excuse to deny/delay the process.

  85. Hello Stuart,

    I have been trying to source information regarding the VT on my vehicle, Land Rover Discovery.

    To summarise it short, I bought the car June 2014 on a 36 months agreement and just now I am at the 50% mark to enable a VT.

    There were issues with the car mechanically, which I had to pay repairs/replacement, the garage washed their hands off it and i went nowhere with them. to date, I have paid over 1,500

    Issues starting to pop up along the months, replacing some issues myself.

    Last November, I took ill, and had to go to the hospital, and found that i had a breathing issue, which i am currently undergoing test, which will be reviewed later this month that I potentially have an asthma. I have since found that the vehicle have a lot of hidden mould sprouts. Someone pointed me out that I should check the MOT history which I have done so and was alarmed with the history and don’t know how they managed to keep the vehicle on road. So I sorn’d the car last November basically because of health issues, which I don’t want to affect my family and mechanically of the car.

    Since I sorn’d the car in November, to the day I type this comment, the inside of the car is full of moulds/meldrews.

    I felt that the car is not fit for purpose and shouldn’t be on road.

    I need advice on this one as i felt it is a bit different from the usual VT processes?

  86. Stuart Masson

    Hi Martin. It is unlikely you are able to VT the car at this point as you are 50% through the term rather than having repaid 50% of the Total Amount Payable (I may be wrong, depending on how you set up the contract, but the VT point for a 3-year PCP is usually quite close to the end date).

    I am assuming you bought a used car, rather than a new one (which would still be under warranty). Given that you have had the vehicle for 18 months and have been driving it until very recently, you are going to find it difficult to prove that the problems you now have already existed when you bought the car. You are unlikely to be able to prove that mould was there when you bought the car, as opposed to developing since you bought it.

    Unless you have solid physical evidence, you will not be able to claim that the car was not fit for purpose when sold as a used car 18 months ago.

  87. Thanks Stuart. I hope this by goes smoothly looks like a hit and miss thing when it comes to things like fair wear and tear issues. One thing I am worried about is stone chips . in order to keep warranty on paint work valid they had to be repaired, which i did. However the show up as a slightly different colour. Can I argue my case that I followed. Manufacture’s requirements and therefore avoid any extra charges?
    Brgds
    Tony

  88. Stuart Masson

    As you say, issues about damage and wear & tear are very hit and miss. You will probably be OK regarding the stone chips, but it depends on how much fuss they want to cause. There is no official legal advice one way or the other. As long as you set your case out that you did everything to follow their requirements, and stick to your guns, you should be OK.

  89. Hi Stuart. I have a question to ask you. I got a new car on lease, I only had the car for two months until I voluntary returned the car to the owner due to not afford the car. Now I got a letter with a early termination liability balance of 20,000 from the car. There’s no way I can pay that. That’s why I returned the car in the first place. What can I do? The guy that sold us the car from the dealer suggested me to avoid the letter and don’t pay the 20,000. My credit score already dropped, which I knew that was going to happen anyways. Should I fill bankruptcy ?

  90. Stuart Masson

    Hi Luisa. Leases do not have provision for voluntary termination, and you don’t have the right to give the car back after two months because you can’t afford it. For advice on your legal options, you can visit legalbeagles.info, but you may also need to get professional legal advice.

  91. Patronising prick

  92. How exactly ‘Jungle’? This individual has clearly showed no intention of honoring her legally binding contract and wanted to know, quote “whats the way to get out of this”.
    She also blatantly ignored the mileage clause which she was trying to then avoid paying for. Its people like her who caused the credit crisis and frankly I hope Ford took every penny from her they could or drove her bankrupt.

  93. Hi Stuart,

    I recently began a hire purchase agreement over the course of 3 years; I have paid off just over 1/3 of the total repayments (including interest) due to a £1,800 deposit and have only had the car since October but due to a change in jobs this year I do not want to/can’t afford to be paying this much for a car. Is the only option the ‘half rule’? Without losing out on money AND a car as I do need a car, this one is just turning out too expensive.

  94. Stuart Masson

    Hi Ellie. Your only other option is to try and sell the car privately, which may give you enough money to cover most of the settlement to the finance company. But you are still likely to have to come up with some additional cash to cover a shortfall, and that’s before you start to work out how to finance your next car.

    It may be that your best bet is to stick with this car until you hit the VT point. If you have a hire purchase, that may only be another six months or so.

  95. So just confirm…
    FCA have sent me a document, saying i have to sign it to arrange the hand back of my car. You’re saying I shouldn’t sign this? Yet they’re saying I can’t do anything without signing it…is it because I rang rather than sending a letter? Also there is damage to the car which I was quoted around £200 for from a garage. It was done by a friend when jacking the car!
    Do you reckon I should get this repaired before taking it back as they might charge me lots more?

  96. Stuart Masson

    Hi Samantha. You do need to claim your VT rights in writing, but you do not need to fill in their forms. Voluntary termination is your legal right (assuming you have a PCP or HP agreement), and the finance company cannot insist that you fill in any of their forms.

    It is usually cheaper to get the repairs done before you VT the car, but make sure they are done to the highest standard or else the finance company will try and charge you to have it re-done.

  97. Hi Stuart

    I am currently fighting BMW over an excess mileage charge of £1600, I have my VY notice as per template on legal beagles and sticking to my guns with there been no legal provisions to charge me but they have come bac saying the below; The CCA clearly states that any pre-termination liability is not affected by termination and that they can lawfully recover any excess mileage in addition to the 50%. They are saying as my mileage was accused before I ended the agreement that they are able to invoice me for this. They go on to say they have no control over the termination wording, and that the excess mileage puts the car out of good condition. The car is mint, the inspection report shows this and the guy that carried out the report even said it was mint.

    Please advise

  98. Stuart Masson

    Hi Rob. If the car is in ‘mint’ condition, you should have nothing to worry about. They can’t charge you for excess mileage, only condition/damage – and they are playing on the vagueness of that wording in the hope that you will pay up. They are highly unlikely to want to pursue the matter via court if the car is in mint condition as they would almost certainly lose. An excess mileage charge of £1,600 is fairly significant, which is why they are bothering to chase and threaten.

    At the usual average of about 10p/mile, you are about 16,000 miles over your allowance by the VT point and that’s why they’re annoyed with you, as it suggests a clear disregard for the conditions of the contract or an intention to VT from the beginning and never intend to complete the term. BMW Finance is normally fairly relaxed about VT issues, based on feedback from others over the years.

    If you are looking for specific legal advice, try the LegalBeagles forum or engage your own legal counsel, as we can’t offer legal advice.

  99. Hi Stuart

    Thanks for the quick reply. The point that is confusing me in all this is that within section 99 of the CCA, it clearly states the following;
    (2) Termination of an agreement under subsection (1) does not affect any liability under the agreement which has accrued before the termination.
    This is what they are trying to catch me out on and it all looks a bit confusing to me, BMW’s wording is that any pre-termination liability is not affected by termination and this means they can recover excess mileage costs??? They are also saying that my car wont be classed as ‘good condition’ due to the mileage, even though the inspection report said otherwise and the car was honestly mint / fully serviced / fully valeted etc.

    They say this is there final position so trying to scare me I think.

    What are your thoughts on the above point.

    Thanks
    Rob

  100. Stuart Masson

    You will need proper legal advice to argue these points with them. Pre-termination liability is usually used to describe money owned for arrears or overdue payments, not mileage arguments.

    The mileage part is easier to argue than the pre-termination liability part – condition is not a function of mileage, even if it is linked to the car’s value. What they are saying is that the car’s value is reduced because of the mileage, but that’s different from condition. If the car is in excellent condition, you can easily argue that you have taken “reasonable care” of it.

    These are the two sections of legislation:
    http://www.legislation.gov.uk/ukpga/1974/39/section/99
    http://www.legislation.gov.uk/ukpga/1974/39/section/100

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