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. My car goes back to merc in a couple of weeks, the car is in great condition apart from a thumb size dent will they charge for this?

  2. Stuart Masson

    Hi Jamie. Depending on where the dent is located, and the opinion of the inspector, they may count it as fair wear and tear. It is impossible to predict.

  3. Hi Stuart, my husband has a van on HP with black horse, his work situation has now changed and as he’s more than half way through contract BH has agreed he can VT with no additional payment. We received a letter from them dated 19th April with a form for us to sign and send back with £75 for them to arrange collection of the vehicle. They will hopefully receive this on 26th April, are we therefore ok to cancel our direct debit now which is due to be paid on 28th April ? It says on the form that it can take up to 14 days for them to arrange collection.

  4. Stuart Masson

    Hi Marie. Once you have informed the finance company in writing that your are exercising your right to VT the vehicle, you can cancel the direct debit, as you are terminating the agreement immediately. It doesn’t matter how long it takes for the collection to take place.

  5. Help please, I have had a letter from a receiver company on behalf of Peugeot finance, telling me the car i handed back, had an inferior repair to its paintwork ( car was keyed by vandals, and repaired by local mechanic ) and billing me for over £700 to put it right. I am no longer the registered keeper of the car, my payments were up to date, and only handed it back under the 50% rule, as we no longer needed 2 cars as partner got job local to home. Do I have to pay this company the £700? If I ignore the letters, could charges increase?

  6. Stuart Masson

    Hi Ruth. The relevant section of the legislation only refers to “damages if you have failed to take reasonable care of the goods (over and above normal wear and tear)”. This is a very elastic term, which leaves the door open for finance companies and their collections agents to exploit anything they think could charge you for.

    If you are adamant that the repair work was of a suitable standard, you can stick your guns and ultimately face them down in court if necessary. If you know the job wasn’t up to factory standards, you should probably try to negotiate with the collections agency. Regardless of what they tell you, this £700 is completely negotiable and their goal will be to get as much of it from you as possible.

    Ignoring the letters is not wise, as it will simply escalate the matter. Set out your argument or offer clearly in writing. For more advice, I suggest visiting the excellent consumer advice site http://www.legalbeagles.info

  7. Hi Stuart – I am in the process of voluntarily terminating my car and I have a form to sign (so glad I’ve came on here before I’ve done so), they’re saying that I need to pay any excess mileage and for any services that aren’t in accordance with the manufacturers guidelines. I get that they’re trying to pull a fast one with the servicing issue. I have a friend who works at another dealership of a different car and he has given me some advice but I’m just concerned about the excess mileage thing – do you know if there is anything written in law to say I don’t have to pay it?
    They’re also trying to get me to pay to have the car collected.
    Your advice is appreciated.

    Thankyou.

  8. Stuart Masson

    Hi Lucy. They will always to claim charges for excess mileage, but if you stick to your guns then you should be OK.

    The finance company can expect you to deliver the car to a reasonable location (usually considered no more than half an hour’s drive away). If a reasonable location is not available, it is their responsibility to collect the vehicle, not yours.

    Have a read of this excellent thread over at legalbeagles, which discusses the ins and outs of VT in great detail.

  9. Hi Stuart,
    I recently just took out a lease on a Mercedes car. I paid them £300 deposit and £300 setup fee. The next payment was to be the 9 months down payment on receipt of the car. In the meantime whilst waiting for the car I have became unable to work due to a back issue. I still haven’t received the car yet though. Where do I stand? Can I get out of this.
    Regards james

  10. Stuart Masson

    Hi Jeremy. In theory, the dealer and/or leasing company can hold you to your agreement, but in reality there’s not a lot they are likely to do if you cancel before the car. There may be a hefty cancellation fee, but it’s likely to be a lot less than trying to get out of it once the car has been registered.

  11. I voluntary surrendered a car back in 2014 all my surrender paper says I enclose my insurance policy and certificate for the vehicle and agree that they are entitled to deal with my insurers on all matters relating to the insurance of the goods do I still have to pay the finance on this car

  12. Stuart Masson

    Hi David. Voluntary surrender of the vehicle is a different legal concept to voluntary termination, and I am not familiar with the details. With voluntary termination, you don’t need to provide insurance information or anything along those lines. I would suggest you visit the excellent consumer legal advice website at legalbeagles.info.

  13. Hi Stuart.
    My partner and i recently called our fiat car finance team to sort out a vt on our car finance. We have paid over 50% of the agreement and the milage is well under the allowance and the car is in excellent condition apart from a tiny car park door dent and a couple of alloy scuffs. They quoted sending a pack out for us to sign to proceed. Would signing this be ok as the milage is well under? Im just concerned they will try and bill us for the very minor issues which i would consider normal wear with car being 3 years old. Any advice would be great before we proceed. Thanks

    Rob.

  14. Hi,

    I have a car on a 4 year pcp deal, I am only 6 months into the deal, can I simply hand the car back at the half way (2 year point) ?

    Thanks
    Gordon

  15. Stuart Masson

    Hi Rob. You don’t need to sign any of their forms – you have cancelled the agreement. Anything you sign may potentially waive your rights, so be careful before signing anything. For more detailed legal advice on proceeding, visit legalbeagles.info, which is an excellent source of consumer legal information.

  16. Stuart Masson

    Hi Gordon. No, you can’t. You have to have repaid 50% of the Total Amount Payable, which includes the balloon payment at the end of the agreement. On a four-year PCP, this normally means your VT point is sometime after three years (depending on your deposit and the size of the balloon/GMFV amount)

  17. Ah, thanks Stuart, a little longer than I’d thought ! GFV is around £20000, I put £5000 down with a £5000 contribution from the dealer

  18. Hi Stuart, please could you help! I want to VT my BMW, I have £640.25 to pay until I’m at 50% so I can VT as long as I pay that, I asked them if I could make that payment now and they said no, I have to sign the VT paperwork that they’ll send me. I know that I don’t have to sign any paperwork they send me. Am I ok to include on my letter of termination to them that they can invoice me that amount and that I will be stopping the direct debit effective from today? Also they are saying I will be charged the excess mileage and that this is a condition of any VT; I’ve seen that excess mileage is not legally required to be paid but could they have included a specific clause somewhere that for BMW it is payable?
    Thank you!

  19. Stuart Masson

    Hi Danielle. You do not have to complete their forms. When you write to the finance company to voluntarily terminate the vehicle, you are ending the contract. You don’t have to fill anything subsequently unless you are signing a form to confirm that you agree with their inspection of the vehicle when you hand it over (and if you don’t agree with it, don’t sign it or make your own corrections before you sign it).

    As stated in the article above, excess mileage is a contentious issue and the default position from the finance company is that you have to pay it. However, the weight of legal opinion is against them and they have never taken it to court (no finance company has, because they know they would be likely to lose). BMW Finance has had a ruling from the Ombudsman in the past regarding excess mileage, but this has no legal weight and is very different from a court ruling. For more information about this topic, have a look through the LegalBeagles link in the article.

  20. Hi, I am looking to try and Voluntary Terminate my current car that is on a PCP agreement. I have paid over 50% of the agreement as the 3 year contract ends next month. There are no excessive marks on the car at all that isn’t ‘general wear and tear’. However, it did miss its 1st ever service, i have had the second one done and the next is due next month when the contract is up. I am also around 12,000 miles over the agreement, and with a 14.9p per mile rate that is taking me well over £2k which is the reason i am looking into the voluntary termination option. Where do i stand with this? Am i right in thinking i will not owe mileage? But what about the missed first service? Also, i read somewhere on here that they have to arrange to collect free of charge, however they have already stated that would be a £70 fee, if you could please advise on all of this, it would be greatly appreciated.

    Thank you

  21. Stuart Masson

    Hi Katie. The finance company may dispute the VT because of the missed service, but it should be OK. They may try to impose a charge on you for it, but it is not really enforceable. The law only states that the car must not have “damages if you have failed to take reasonable care of the goods (over and above normal wear and tear)”, but this is not described and is therefore open to interpretation.

    Likewise, there is ongoing debate about the validity of excess mileage charges. The prevailing consensus seems to be that the finance company’s contract cannot take precedence over the law, therefore excess mileage cannot be charged. No finance company has been game to take it to court because the likelihood is that they would lose, although one or two have claimed favourable opinions from the Ombudsman and used that as a threat against customers (even though it carries no legal weight).

  22. Good afternoon Stuart.

    I am currently in a PCP with Peugeot, and I have two issues.

    1. Whilst discussing terms prior with the salesman, we verbally agreed on 9k miles per year. We shook hands then he left to double check with manager. When he returned with paperwork I signed after flicking through, without noticing that his manager had changed the mileage to 6k miles a year, and without being told anything by the salesman or manager. I returned the next day after noticing, was told nothing could be done and I got much the same from finance company. Obviously I felt frustrated, and that I should have scrutinised paperwork to the last letter maybe, but I felt we had reached an agreement and was unaware. I would just like to hear your thoughts. I’m increasingly frustrated but have always felt I don’t have a leg to stand on, just wanted to hear your thoughts.

    2. With a VT on a PCP, can you do it before you pay half? Or is it pay half and then go ahead with a VT only.

    Cheers

  23. Stuart Masson

    Hi Paul. If you have not taken delivery of the car, you can simply withdraw from the agreement and go through the application process again with the correct mileage. However, the monthly payment will almost certainly increase noticeably to cover the extra depreciation of a 50% higher mileage allowance. Other than that, there’s not a huge amount you can really do as a verbal agreement or understanding is worth nothing – the salesman can swear blind that you agreed on 6,000 miles per year and that you are lying…

    You can VT the car at any time, but you still have to pay half the Total Amount Payable. So if you have not reached that point then you would have to pay the difference in order to complete the VT.

  24. Cheers Stuart.
    I thought as much, basically got screwed over there. Thanks for the swift reply. I have had the car a while, but wasn’t sure on my rights. I’m VTn as soon as I can.

  25. Good Morning

    I need some advice, I took out car finance on a vehicle which was valued at the time as £8000. the total amount payable on a 60 month term is £20000. I have paid just over £14000 and now sadly the car has broken down and the repairs are far more than I can afford. I don’t know what I can do and was hoping I could get some advice on this. Could I terminate early?

    Thank you

  26. Stuart Masson

    Hi Mark. The termination amount you have to reach will be listed in your finance contract, but it sounds like you have already passed that. The problem will be that the car requires repairs which are beyond normal wear and tear. These will have to be addressed before you can hand the car back or else the finance company will simply bill you for the repairs – and probably at a much higher cost than you getting it done yourself.

  27. Hi Stuart. I have a 4 year deal on a new BMW at £314 per month. I was looking to VT at around the 24 month point and pay any difference however I called BMW to enquire about the process and they are saying I owe 50% of the entire car price, not the agreement over 4 years. I have an optional balloon payment at the end which I was under the impression was not part of my finance deal as it is a pay it or hand the car back deal.

    I currently owe £19600 on the full amount according to them but they say I must make a minimum of 31 further payments before I can VT at 50%. Is this correct or are they just trying to fob me off?

    Thanks.

  28. Stuart Masson

    Hi Trevor. As explained in the article, the VT point is 50% of the Total Amount Payable, not halfway through the term. You have borrowed the full value of the vehicle (excluding deposit), and have to pay off that amount plus interest and fees. With a PCP, instead of paying the whole thing off in cash, you usually pay off some in cash and then give the car back at the end as the final repayment.

    So if you want to VT, the amount is effectively 24 of your 48 monthly payments plus half the GMFV, as you have borrowed that value.

    You don’t have to make 31 payments to be able to VT the car (you don’t have that many payments left, for a start). You can VT at any time, as long as you pay up to the 50% mark, so it would be whatever that value is minus what you have already paid.

    This should all be explained in your finance agreement.

  29. Ah right ok – wasn’t aware the final payment was included also. May as well keep the car for the full term then or I’m effectively paying for nothing. Thanks for the info.

  30. Hi Stuart – Just checking the VT provision has not changed as this thread is now a few years old. I’ve paid 50% of the agreement and BMW finance are telling me that I need to pay excess mileage – I expected them to do this but then a friend has suggested that the law may have recently changed (my finance was taken out in 2012).

    Thanks!

  31. Stuart Masson

    Hi Jonathan. No, the information in this article is still correct. The only thing that has changed is that BMW Finance seems to be much more aggressive these days in chasing payments for excess mileage.

  32. Hi Stuart, I have just received my VT form from Citroen finance, they are asking me to fill in the form and return it back to them. With this I will be agreeing to be paying to additional mileage and damages, is there another way I can go through with the VT without filling in this form.

  33. Stuart Masson

    Hi Marc. When you write to the finance company to VT the car, you are providing all the required written notice required to end the contract. You do not need to fill in their forms, and they cannot reject your VT if you don’t fill them in. The only form you need to worry about is the one where you sign to agree with the assessor’s inspection of your vehicle – and then only if you agree with every single point on that form.

  34. Perfect! Thanks! If we are still a little bit away from the 50% would you advise sending a cheque, asking for a bill or not trying to Vt until we’ve paid the full 50%?

  35. Thanks that’s great, another quick question. If I’m just short of 50% should I send a cheque ask for an invoice or wait til I’ve paid the full 50 before I Vt?

  36. Stuart Masson

    I would ask the finance company how they want it paid, to minimise any grief if they refuse to take your cheque or something.

  37. Hi Stuart thanks for the reply previously. I have been contacted by the reclaims department for collection of my car, which is this Wednesday coming, from which point do I cancel any further payments? And also what’s the chances of getting a loan/finance on another car now I have VT this car? Thanks

  38. Stuart Masson

    Once you have written to the finance company to VT the vehicle, you may cancel the direct debit – since you have terminated the contract.

    The right to VT is covered by law and does not affect your credit rating. However, the same finance company may be less likely to offer you another finance contract given that you have just terminated this one.

  39. Thank you for that, you have been a great help.

  40. Hi I’ve had a Nissan Note which I’ve had on pcp for 18 month I have continually complained of issues with the car, loss of power when on the motorway a chuggering, to be told nothing is showing on the diagnostic. It has now cut out while driving on a country road and from starting it has lost power. What are my rights if I am unhappy with the car ???

  41. Stuart Masson

    Hi Therese. If the dealership is unresponsive in resolving problems with the vehicle, you can take it to another dealer or take the matter up with Nissan GB head office.

    Your rights will be largely limited to the warranty on the vehicle, if any. If you have had the car for 18 months, you are beyond any right to reject the car under the Consumer Rights Act. Without knowing what the faults causing your problems, it is impossible to say whether you would have to spend a decent amount of money to get the car fixed before you can consider selling it or returning it as a voluntary termination.

  42. Hi Stuart, I’ve filled in the forms to send back my mini. I haven’t exceeded the mileage and there’s no damage. However the M.O.T runs out in a few day (probably before they pick it up) also the insurance has expired and also I have missed last years service and also the arms that hold up the boot have gone (hydrolics) do you think they will try to bill me for anything? Thanks Lizzy

  43. Stuart Masson

    Hi Lizzy. Your car will have to have a valid MOT when it is collected, so you will need to pay for that. You will also have to have it insured until they take it off your hands, so you should renew that ASAP. You may well be charged a penalty fee for having missed the last service, as it is usually a PCP requirement that the car maintains a full manufacturer service history. Don’t know about the boot issue – they may or may not be interested in that.

  44. Hi, 5 years ago in VT my HPI in my car , phone the crédit company to come check this vehicle . But they didn’t show up on the day agreed . As I already bought a new car , I left the old one Sorn till the road tax ended , and the police took the car . Now I’ve been ask to pay more than £2200 for the rest of the HPI contract . I still got the keys from this vehicle . I’ve been told that the car doesn’t belong to you till you pay the final payment , so can you help to sort out this mess . I can’t pay and won’t !!

  45. Stuart Masson

    Hi Gilles. I’m not sure why you have let this drag on for five years simply because the collection people didn’t turn up on the agreed day. If the police have got involved and taken the car away, there is clearly more to this story than you have explained. I think you probably need to engage a solicitor to work through the issue from beginning to end and help you sort it out.

  46. Hi Stuart
    You may already have answered a similar query apology if you have, there have been a lot of comments submitted here, too many to sift through for a response.
    I am about to hand back my vehicle based on the VT and pay just over 1000pounds to make up the shortfall, I have a new vehicle waiting to be picked up but the new dealership has put terms on the new finance agreement. The terms are that the current finance company have to supply a letter stating that they have ‘no further interest’ in my current vehicle before I can collect the new vehicle.
    My current finance company want to collect, and inspect the vehicle first, determine if it is in good condition, put it up for sale at auction and once sold will supply the letter of no interest, in the meantime I will be without a vehicle. Is this normal?
    Surely if I terminate the agreement under the VT terms which in the agreement only state that if I wish to do so I only need to pay at least half of the finance, that should be the end of it. Why are the current finance company now adding additional terms to the agreement?
    I am self-employed a rely on my vehicle for work. Once the car is collected on Wednesday I will be unable to travel for work, so I need the letter of no interest as soon as the car is collected because as far as I am concerned that is where the agreement ends.
    Thanks in Advance

  47. Stuart Masson

    Hi Carmen. It is unusual for a finance company to insist on getting this confirmation that your previous agreement has been concluded. Your credit rating (Experian, Equifax, etc.) will show that you currently have a finance agreement in place which you are paying off, and this is an area of concern for them.

    it is not unusual for your current finance company to not be able to supply the letter required until the vehicle is sold at auction. The car belongs to them and not you, so they will retain a financial interest in the vehicle until they sell it. Once you terminate the agreement, there is nothing else you should need to pay unless there is damage over and above normal wear and tear.

    The new finance company may well be concerned that either you are overstretching your finances and are not prepared to finance you until you confirm that your current agreement is concluded, or that you are actually trying to arrange an Accommodation Deal, and that the new vehicle will be for someone other than you. Finance companies are always suspicious of anyone having two finance agreements in the same person’s name at the same time.

  48. Hi, we have a 2016 Kia Sportage on a regulated PCH contract.

    The front doors have suffered a major failure – essentially splitting in two. Despite whatever repairs are offered by KIA under Warrantee – we have no confidence in the vehicle.

    CCA legislation must be of help here, I.e the item not being of satisfactory quality?

    KIA will want to fix…we want out. Any comment pls?

  49. Stuart Masson

    Hi James. if you are on a PCH agreement, you will need to argue the matter with the finance company, as you are basically renting their car. If you feel the vehicle is unsafe or not fit for sale, it will be up to the finance company to replace or repair it. As you don’t own the car, you can’t reject it or control how the matter is handled.

  50. Hi Stuart, when the car is collected and inspected, am I required to sign anything at that point ?

  51. Stuart Masson

    Hi Simon. Officially, there is nothing that you need to sign.

    The agent collecting the vehicle will create a condition report, noting any damage or scratches on the vehicle. You should sign this only if you agree with everything on it. If you disagree with anything, you are entitled to add your own comments or alterations before signing. Signing your agreement with the report, including your own comments, means that you have written agreement of the vehicle condition when it was collected by the finance company. So if they come back to you with charges for damage, you can refer to the condition report if you plan to contest the charges.

    Other than that, there is nothing that you should need to sign. There may be forms that the finance company wants you to sign, but you don’t need to and they are often written in a way which signs away your legal rights.

  52. Hello I recently just got a car on finance 3 days ago and I don’t feel at all happy with the car it’s smaller than I thought and I feel for the price I’m paying I could of got a much better deal elsewhere, my monthly payments are 268 a month is there no way out of it now?

  53. Stuart Masson

    Hi Faye. No, you don’t have any particular legal right to get out of it now. You can cancel the finance agreement, but that just means you will have to pay cash for the car instead. For more information, have a read of our article about buying a car and then changing your mind.

    The issues that you have raised are ones that you should have looked into before signing the order form. It’s too late to change your mind now (well you could, but it would probably be very expensive).

  54. I realise that. I am now kicking myself for rushing in to signing the forms! Thanks for your advice!

  55. I thought it would be useful to provide an update with my case. I arranged for the car to be returned and it was meticulously inspected by both the inspector and collector, they couldn’t find anything wrong with it other than claiming one of the tyres was slightly worn.

    Some time passes and I receive a letter requesting payment for the excess mileage (not for any other costs of damage). I write back using the template letter and I receive a response that they are investigating my complaint. I never actually referred to it as a complaint or asked for it to be investigated. I simply said they were wrong and I wasn’t paying.

    The outcome of the investigation is as expected, they claim they are in the right to levy the charge and that they see excess mileage as putting the vehicle out of good condition and therefore not in good condition.

    I am writing back to repeat that if they want the money they will need to issue a court order. I am also contemplating whether to also write to the financial ombudsmen – any thoughts?

    I’ll let everyone know how it concludes as I know it can be a bit daunting when you get to this stage!

  56. Hi Stuart, i have 16mos left from a 5 year finance and i am planning to return the car for circumstantial reason.
    the problem im having is that i failed the service agreement. i missed the 3rd annual service and lost the vauxhall lifetime warranty, Do you think i will be charge?

    thanks

  57. Quick update and question; they have sent a letter, clearly sent before they received my last letter, stating that if I don’t pay within 28 days it may be reported to the credit reference agency and affect my credit rating. I take it this is nonsense?

  58. Stuart Masson

    Hi Melvin. It will be a grey area, much like excess mileage. You might get a helpful answer from legalbeagles.info, which is a free consumer legal advice website.

  59. Stuart Masson

    They can certainly try, but it is more likely that they are trying to scare you into paying up. It is probably an automatically-generated letter.

  60. Hi,

    i am am thinking of selling my car which I am almost two years into a hire purchase agreement. I fished out the details last night and have noticed that the car registration number is wrong. I am paying for a car registered to someone else that is 4 years newer than mine. Also the proposal number is different from the proposal number of the document I signed.

    I have not yet contacted the finance company as I would like to know where I stand.

    As as I want to sell the car. I am hoping this might just save me the bother of paying off the HP and then selling the car and they may just take the car back?

  61. Stuart Masson

    Hi Jillie. I answered your original enquiry here: http://www.thecarexpert.co.uk/car-finance-what-you-should-know/#comment-26405

    If you are considering trying to declare the contract void and walk away from it, you will need to seek legal advice and assistance.

  62. Hi Stuart,

    I wonder if you could clear up a grey area that I’m in need of clarification with. I bought a car on a PCP 36mth deal with a £6k deposit, however the car has gone over the agreed mileage two years in. So now with just under 10 months left, what is the best way to figure out if I’ll see any of that deposit or was that indeed part of the depreciation value over time. Can i expect to realise any of my deposit at the end of term? I intend on buying from the same dealer but at a loss when trying to get a clear answer with regards to my position? Any help would be most welcome.

  63. Stuart Masson

    Hi Cee. You are not going to see any of your deposit again; it is a downpayment on the car and is not returned at the end.

    If your car is worth more than the GMFV at the end of the agreement, you can use that difference, called equity, as a deposit towards your next car. If you plan to give the car back to the finance company at the end, they will charge you for excess mileage over and above that agreed in the contract.

    For more information, have a read of our article about how PCP car finance works.

  64. Hi there. My girlfriend Bought a car without a very high 18% apr from santander a few years back. She was not aware it was a personal loan (as they stated on the phone) as in all documentation she has it clearly states that the finance agreement is for (goods) volvo c30 etc etc etc. Now when she asked to hand it back she was met with the news it was a personal loan and she cannot do that.

    She and i both believe she was mis sold this as a personal loan. Nothing in the documentation describes it as a personal loan as i stated. It even states (goods. Volvo c30) so for them to say they have no interest in car seems a bit far fetched and underhanded if it quite clearly states the car on the finance agreement. What are the options here? She already contacted the financial ombudsman and they quickly discovered together that this is a common practice that some companies use to remove some of these rights consumers enjoy.

    Also there’s a mistake on the contract as it were. They have written and signed for some date in 2012 when the agreement was made in 2013. This alone they reckon should be enough to get out of the agreement. What are your thought’s?

  65. Stuart Masson

    Hi Ian. In terms of how you argue your case, you will need to get legal assistance. The finance agreement should state clearly what type of finance it is. Even if the purpose of the loan is to purchase a vehicle, that doesn’t mean that the finance is secured against the vehicle. I have no thoughts on the date error; you will need to get a lawyer to make your case on that.

    If you run an HPI check on the car, it will show whether the finance company has any interest in the vehicle. If it is a personal loan, they will not have any interest; if the finance is secured against the vehicle, it should show up.

    It is true that some finance companies are moving away from secured finance (like PCP and HP agreements) in favour of unsecured finance (leasing or personal loans) because they do not have voluntary termination rights, but that is not surprising given the number of people who are using voluntary termination clauses to walk away from their financial obligations.

  66. hi, can you advice us please. we purchased a car in march on hire purchase agreement. the car went wrong after about a month.the garage that sold it to us has agreed to pay for the repairs but its now august and we still have no car to use and are making payments to the car finance company even though we don’t have the car to use.many thanks

  67. Hi

    I purchased a vehicle from Evans halshaw back in June on PCP on a 48 month agreement paying £142 monthly. Unfortunately within the last few weeks I have now been made redundant and can no longer afford the repayments. As it stands I am now outside of the cooling off period so cannot just return the car. How, and what should I do?

    Thanks

  68. Stuart Masson

    Hi Michelle. You are still within the first six months of ownership, so if the dealer has not been able to fix the vehicle then you have the right to reject the car. For more information, have a read of our article about the Consumer Rights Act.

  69. Stuart Masson

    There is generally no cooling-off period for buying a car. If you can’t afford the payments, you will need to sell the car and pay the settlement to the finance company.

    Unfortunately, if you have only had the car for a couple of months, the settlement figure will probably be much higher than the car’s value and so you will have to pay off the difference, which could be thousands of pounds. For more information, have a read of our article about settling your PCP early.

  70. Hi Stuart,

    I’ve got a HP contract with Mini. I want to exercise my right to terminate. After my next instalment on 1 September 2016 I will be £86.82 short of the 50% paid off. But I want to get rid before October as that is when the first MOT is due. My questions are:

    1) can I pay this additional amount now to bring it up to 50% repaid and then send a letter to terminate on 2 September?

    2) the car has been fully serviced by a Skoda garage who have used non-genuine mini parts (brake pads, discs, tyres) but like for like in terms of quality, size and speed for tyres etc. Mini say I will be charged for any non genuine parts – the charges will be for the parts and labour. Is this correct under VT?

    3) I’ve been told by Mini anything that is classed as “Amber” in terms of servicing must be completed before returning. Is this correct? Anything that has been red I have had serviced.

    Appreciate any advice.

  71. Hi there,

    I have sent my VT letter to the finance conpany for my car, stating I would terminate the agreement within the next 14 days. I am 1/2 way through my payment and recieved my VT pack from the finance company, that I requested from them. It came with forms to sign but I didn’t sign them, i put my request in a letter. It has now been 7 days since I sent the letter, and I haven’t even heard from the finance company that they have received my letter, let alone make arrangements for the car to be assessed and collected. What would you advise I do? I don’t want to cancel my bank DD until I have confirmation that the VT is happening, then I don’t want to pay another month when I don’t have to either.

    thanks, Mhairi.

  72. Hi Stuart,

    I took out a car on a HCP for 42 months. This was £189.38 per month. With a final payment of £3,227.50 if i want to keep the car.

    I’d like to give back the car after 12 months. I would’ve paid £2,272.56 off. I’m not sure if that includes interest.
    The car was worth £9,295 when i took out the finance.

    Is it possible to hand the car back at that point? (30 months left.)

    Any advice would be much appreciated.

  73. Hi stuart wonder could you help us out. We took out a hp last october on a vaux insigna. Since then we have discovered the wife is pregnant with twins…mad! Anyway having already 2 kids we obvisouly need a bigger car. 7seats. Now since we will in necitve equity with the insignia we are finding it really hard to get fiance for the bigger car.when i say that what i mean is figures that we can afford every month. Could we vt the insigna but still get finance for another car??.
    Yours
    David

  74. Stuart Masson

    Hi Selina. You can terminate at any time, as long as you pay the balance to bring you to the 50% point. Once you terminate the agreement, the finance company will invoice you for any shortfall from the 50% point, along with any other charges.

    With regards to servicing, you are in a bit of a grey area. In the same way that the finance company will certainly try to hit you for any excess mileage, they will do the same for service issues. I would suggest visiting legalbeagles.info for more information, as they are a consumer legal advice website who can advise you better on legalities. You may be billed for not having the car fully serviced by a MINI dealer, with genuine MINI parts, on time every time.

  75. Thank you for the advice Stuart – I’ll check out LegalBeagels.

    Do you know where I would stand on point 3 regarding issues which are Amber on the car but not yet showing on the dashboard requiring servicing? Do I have to bring them up to Green? As Amber means they are still legal and fine but get ready to service.

  76. Stuart Masson

    Hi Mhairi. Once you send the letter informing the finance company that you are terminating the agreement, it is terminated. In your case, you specified a date within 14 days, so the agreement terminated on whatever date that was. Everything that happens afterwards is after the agreement has been terminated. You can and should cancel your direct debit so that the finance company can’t take any further money – if there is any shortfall, they will invoice you.

    While the car is in your possession, you will need to keep it taxed and insured. The finance company should eventually respond to tell you where to return the car, or that they are coming to collect the car. If they do not contact you, you can contact them to advise that you will charge them storage at a rate of £X/day if they don’t collect it.

  77. Stuart Masson

    Hi James. You can return the car after 12 months, but you will need to pay up to the 50% of the Total Amount Payable, which will be thousands of pounds.

    Your other options is to sell the car and settle the outstanding finance, using the money you get from selling the car plus any extra (which will again be thousands). For more information, have a read of our article on settling a PCP early.

    Basically, there is no way to give the car back that won’t cost you a load of money.

  78. Stuart Masson

    Hi David. You have to pay 50% of the Total Amount Payable to VT your current car. If your finance agreement started less than a year ago, you will be a long way short of this amount.

    If you do VT a car, it should not affect your credit rating with other finance companies in any way as it is your legal right to do so. The only catch is that the same finance company may decline another finance application from you.

  79. Thanks very much – i appreciate the response. Today, they have actually contacted me saying i have to fill in the paperwork in the VT form they sent; however i have responded saying that i have informed them of my decision, and there is no need by law to sign any of their forms (which is the same advice you have given others on this page) – was i correct to do this?

    If i stated that i would terminate the contract 14 days from the date on the letter (which is up on Thursday next week), do i only have to keep the car insured until Thursday? Because i then won’t be insured on the car after Thursday, am i within my rights to get them to come to wherever my car sits as of Thursday (i.e. a garage or my home address) and they have to come and collect it from there? Or should i put it to a secure paid storage lot and they can collect it from there. I’m assuming there will still need to be an inspection of the vehicle before collection, even if it’s outwith the 14 days that i would terminate my agreement in?

    Thanks again.

  80. Stuart Masson

    I don’t think they can enforce that, but it may depend on what your contract states. LegalBeagles will probably be able to advise on this as well.

  81. Stuart Masson

    You should still keep the car insured while it’s in your possession. Not worth the hassle if anything goes wrong before it is collected by the finance company.

  82. Hi Stuart,

    Thanks for the advice so far. I’m hoping you can advise me. I have a Corsa which is due an MOT but needs repairs for almost the same value of the car itself. I’m looking at a VT but I don’t know if the vehicle needs to be taxed and MOT’d before I can VT. Can you please advise?

    Thanks,
    Fin

  83. Stuart Masson

    Hi Fin. Yes, the car needs to be taxed and have a valid MOT certificate when you VT it.

  84. Thanks. As of the date of the termination – Thursday this week – should i then have my car in a secure storage facility to ensure that no damage happens to it after my agreement has been officially terminated? Also, if this is the case, i won’t have a car to drive, but still need a car to use for getting to and from work etc.

    So what do you do if they haven’t come to collect the car before the agreement is terminated? Do i have to hire a car to use until they come and collect my VT car (which will possibly be in a secure storage unit as of Thursday if that’s what i have to do)? And charge them for the hire of a car on top of the storage of my current car until they come and collect my current car i am VTing? Do i just offset the amount of money they are due me with the amount of money i am due them, and pay the outstanding amount?

    Thanks. This is all so confusing but i really appreciate the help and advice. Mhairi

  85. Stuart Masson

    You’re getting ahead of yourself a bit. You have terminated the agreement and they have to inform you where to return the car or when they will collect it from you. Until then, you keep it exactly as you have done up until now.

    It is unlikely the collection or return will be completed by Thursday this week, so you will need to make other arrangements – that’s not the finance company’s problem. There is no requirement for them to have taken the car back by Thursday and you can’t charge them for hiring another car until this one is gone. What you do to replace this vehicle is your problem, not theirs. You are terminating the contract on this vehicle, and they are not under a deadline to put everything in order. They will want to sort it quickly anyway, since they have an asset worth thousands of pounds that they are no longer getting money for and is still in your possession, so they will want to get it to auction and sold as soon as possible.

  86. Hi Stuart
    My lad is in the armed services and wants to hand back his BMW after about 10 months into a low deposit 3 or 4 year PCP deal. The problem is lack of funds at his disposal and feet dragging on the part of BMW – Any advice on his rights or best action plan?

  87. Stuart Masson

    Hi Pete, Your son has no particular rights, so there’s no point complaining that BMW are dragging their feet.

    He can either settle the finance, which will mean settle a large negative equity, or terminate the contract and pay whatever is needed to reach 50% of the total amount payable, which will probably be even more.

  88. Hi Stuart, I wondered if you would be able to help. My father took out a PCP with Mercedes finance in October 2013 this was for 4 years. He unfortunately passed away august 2015, since then I have been fighting with Mercedes to take the car back, I have continued to make the monthly payment, but they are asking for £5500 to send the car back, can they do this?

  89. Stuart Masson

    Hi Gemma. With any PCP finance agreement, the person taking out the loan has borrowed many thousands of pounds from the finance company and that has to be settled one way or another. When your father passed away, the finance company became a creditor of his estate as it is still owed whatever money remains outstanding.

    The £5,500 amount they are asking for is likely to be the amount required to repay 50% of the Total Amount Payable, which would allow the executor of the estate to voluntarily terminate the agreement and give the car back.

  90. Hi Stuart.

    I have a 49 month pcp with Barclays. On the agreement he total amount payable is £14643 yet the termination figure is £11160 which is clearly more than 50%. I’m just trying to understand how they have calculated that ? As part of the deal I traded in my car for £7000 and used this to clear the outstanding finance unless they have added this amount also.

  91. Stuart Masson

    Hi John. The Total Amount Payable (TAP) includes your deposit, the amount borrowed (including the GMFV/balloon amount) plus any interest and fees. The VT amount is 50% of this total.

    Your numbers do not seem correct unless there is an error in the paperwork or you are reading the TAP incorrectly. If the VT amount is £11,160, then the TAP should be £22,320.

    If your part-exchange was valued at £7,000 but there was still finance owing on it, then net value of your car was whatever was left after the finance was paid off. If your finance settlement was more than £7,000 then the additional amount (negative equity) may have been added onto your new finance agreement.

  92. Hi Stuart – I’m reading your article with interest, however it doesn’t agree with my recent experience and I thought you would like to hear it. I recently changed vehicles and obtained a new car on a personal lease with a delivery date of March 1st. At that point I had approximately 3 monthly payments left on the PCP agreement on my then current vehicle (something around £500). I rang VAG Finance happily armed with a debit card to pay off the remaining amount and square off the finance so the car could be returned. However, the VAG Finance advisor thought this was a very silly thing to do and advised me to perform a VT instead and save my money. Somewhat amazed I did query this, but they said they suggest it all the time. Basically, rather than trying to avoid and obfuscate a VT being actioned, VAG went out of their way to offer and suggest I do a VT to clear my obligation as pain-free as possible. I received a booklet in the post outlining the expectations which were entirely reasonable (usual wear and tear dings/scratches etc completely OK) The vehicle was collected by a third party auction trader who made his checks against the same booklet and drove off. Utterly straightforward no-nonsense experience from start to finish. Also worth mentioning that as far as VAG Finance were concerned, my payments stopped from the point of my initial phone call to them requesting the VT. One of my payments was still pending, and that payment was indeed returned to me. Amazing huh?

  93. Stuart Masson

    Hi Charlie. Your experience is exactly how it should go, but sadly it doesn’t work out that way for many people. Mind you, if your car was clean and straight, fully serviced and within the agreed mileage, it should be pretty straightforward.

    Also, given that you only had three months left on your PCP and have basically paid off all the interest anyway, it was probably quicker and easier, with no financial loss, for the finance company to process a VT than any other settlement – especially if you are sticking with them for your next finance agreement.

    Glad it worked out well for you.

  94. Hi Stuart

    Thank you for your reply. Can I forward the credit agreement to you for advice.

  95. Stuart Masson

    We can’t provide specific advice on a particular finance agreement to an individual, as there are strict FCA rules about provision of advice. We can only provide general advice on how such agreements work to help you understand your position.

    You will need to speak to your finance company for additional explanation, or speak to an accountant who can discuss your agreement and situation in detail.

  96. Stuart, I am currently dealing with ALD. I have asked that they take back my Volvo on VT. Initially insisting I wait for a letter to sign from them they backed down and said I would need to call back for the settlement figure. They also stated that I must either drive the car to Bristol (250 miles from my home) or pay £125 for colletion from a garage of my choice!? They also said that they would not collect the car until collection payment was made by debit/ credit card… Is this correct and if not where could I throw some legislation at them!

  97. Stuart Masson

    Hi Scott. It’s a grey area and you will need to check your contract to see if there are any conditions. I would suggest visiting the forum at legalbeagles.info, as I think they have discussed this at some point.

    In essence, if you are terminating the contract, they are under no obligation to assist you. I don’t think there is any kind of legislation to cover the collection of the vehicle, so it is likely to be a case of whatever you can negotiate.

  98. Hi Stuart.I have received a letter back from the finance company after doing a vt on my 07 plate Ford Focus, it says I have nothing to pay to date other than any costs following inspection by independent assessors which I have yet to book also any missing items. What worries me is there two very small dents on one of the back passenger doors and a few scuff marks on one side of the front bumper if they are seen as damages and not wear and tear how much they will charge me to repair them,also of the missing items I have no service history book when I bought the car the dealers said the previous owner had lost it and I haven’t had the car serviced so have no proof of service which it says they will charge £300 for. I don’t want to end up paying out £300 plus a load of money for damages any advice would be greatly appreciated.

  99. Stuart Masson

    Hi Ken. If you have receipts and service reports for the servicing you have had done while you have had the car, that should count as ‘proof of service’. That and the damage is likely to be a matter of negotiation between you and the finance company, as the legislation does not provide guidance as to what constitutes damage beyond normal wear and tear.

  100. Hi,

    I have recently purchased a car on finance and have only paid two months worth of payments. Circumstances have changed and I need to terminate the car finance agreement and hand the car back.

    Is this possible?

    Thanks,
    Jamie.

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