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 Masson

    Hi Chris. There is no legal definition of reasonable care; it’s simply a matter of negotiation. If you can’t resolve it between yourselves, you can always take it to court for a judge to decide.

    And yes, the finance company will almost certainly charge you for a missed service.

  2. Stuart Masson

    Hi Lewis. No, your calculations are wrong and the finance company’s are correct. You can’t deduct the balloon; it’s money that is still owed. If you were to run the contract to its natural conclusion, you would either give the car back or pay off the balloon to settle the finance.

    If the Total Amount Payable is £36,831.76, then the VT point should be £18,415.88 – which is exactly £8,630 more than you have paid so far.

  3. hi
    i have my car on pcp which is due back to citreon sept 2017. that will have been 3 years so i take it im well over the 50% mark. i was entitled to 18,000 miles for the 3 years and im on 19,500 now, so 1500 over the 18000.
    is your advice not to sign any documents and literally just send a letter to say i want to VT?
    also im thinking maybe 1 or 2 of my tyres maybe on the boarder line of legally need replacing. the last thing i want is for them to collect the car and say it needs 2 new tyres and charge ridiculous prices for a tyre. but if i dont sign any forms am i not legally obliged to pay for new tyres?

    cheers
    danny

  4. Stuart Masson

    Hi Danny. We don’t offer advice as to what you should do (and we would not be allowed to if we wanted to); all we can do is explain how the system works so you can determine the best path for yourself.

    You will need to check your finance agreement to find out whether you have reached your 50% VT point – it will depend on the car’s balloon/GMFV so you may or may not have hit that point yet.

    Your car must be legal and roadworthy, and that applies to your tyres. They don’t need to be new but they do need to be legal. If the tread is below the legal limit when you hand over the car, the finance company will almost certainly charge you for new tyres. Refusing to sign any forms will not change anything in this regard; if the tyres are illegal, they will bill you and they are entitled to do so.

    To execute a VT, you do not need to fill in their forms or ‘information packs’ or similar. You simply need to write to the finance company and advise that you are exercising your right to voluntarily terminate the agreement as set out in the contract.

  5. hi stuart I’ve just recently lost my job i have a 3 year pcp plan which I’ve being paying money for a year now can i phone mercedes to tell them to take the car back as i can’t afford the payment nomore without my name being black listed or being refused credit elsewhere or even have charges to pay

  6. thanks for the reply stuart..
    i have confimred with them today that ive paid £2000 more after the point i was entitled to a VT…
    my issue is if i dont sign the forms then will they still bother to come and collect the car? or will they wait until ive signed them and sent them back?

    another issue ive come across today is my GAP insurance. when i took out gap insurance with citreon I was told by the sales man that my gap insurance fee would be included in my monthly payments…ive phoned up today to process the VT and they have said that i need to pay £279 to repay the remaining gap insurance on the vehicle!!!!!!!! im fuming!!!

    the way they have done it is when i took out the GAP insurance back in sept 2014, citreon finance have paid Car Care Plan (the GAP insurance company) the full £499 gap insurance for the 3 years in one go and now citreon wants the remaining back that hasnt been paid as im getting rid of the car before the 3 years! i was never told that this is how they work it. i was led to believe that i pay my gap insurance every month as part of my payment and thats it!

    Any thoughts on this?
    thanks
    Danny

  7. Stuart Masson

    Hi Trevor. You can and should contact the finance company to explain your situation, but they are not obliged to alter the agreement to help you out.

    There is no provision in your agreement to cancel the agreement because of financial hardship for any reason. You may be able to voluntarily terminate the contract, depending on your position, but the finance company is not obliged (and not likely) to help you out.

  8. Hi Stuart, I am coming up to the half way period of my finance with GMAC. In the initial letter of VT do I need to notify them of the mileage the car has done? I got the below template from legalbeagles as you suggested.

    ” Dear Sir / Madam,

    TERMINATION OF AGREEMENT PURSUANT TO S.99 OF THE CONSUMER CREDIT ACT 1974

    Agreement number:
    Registration:

    I am writing to notify you that I wish to invoke my statutory right under section 99 of the Consumer Credit Act 1974 and hereby give you notice that the agreement is terminated effective immediately from the date of this letter. Please confirm by return acknowledgement of this letter and to make arrangements for collection of the vehicle. The condition of the car is noted as being in a reasonable condition for its age and photographic evidence has been taken in the event of any future dispute as to the condition of the vehicle. You will be aware that the Consumer Credit Act limits my liability to half of the total amount payable under the agreement but excludes any sum payable as a penalty, compensation or damages for a breach of the terms of the agreement. Such terms imposed are inconsistent with my rights under the Act and are therefore deemed void and unenforceable. The vehicle is now available for collection and I would be grateful if you could contact me on [NUMBER] to arrange a suitable time within the next 14 days.

    Yours faithfully,
    [NAME] “

  9. Stuart Masson

    Hi Anoop. No, you don’t need to notify the finance company of the mileage; they will ask for it soon enough.

    Also, please note that the VT point is half of the total amount payable, not the halfway period of your agreement. Usually you are still well below the VT threshold halfway through the agreement, but it will depend on the type of agreement and how it was configured.

  10. Hi Stuart, thank you for your reply. Luckily half of the total amount payable has come up on my halfway period as it was an interest free agreement. Please may I contact you if I need any further help? Thanks once again and have a good day.

  11. Hi Stuart, is there a private email I can email you on with some figures? I just want to remain confidential if that’s okay with the numbers. There is some confusion with the ‘half of the total amount payable’ and ‘total amount of the finance’. Hope you can help, thank you.

  12. Stuart Masson

    No, we don’t do private consultation, and would not be allowed to do so under FCA rules anyway. All finance information provided is of a general nature for anybody to read, and not specific to your case.

  13. That’s fine Stuart, I have managed to ring the finance company and sorted out the confusion. I initially phoned them to request a VT figure couple of weeks ago, they then sent me a letter saying I am in a position to VT as I have paid over the half amount. According to your advice in the article, I believe I do not have to sign any papers that they sent me (correct me if i am wrong please). What do I now tell them?

  14. HI I took a car out on pcp and am in to my last year. I can either pay the ballon payment or hand the car back. My concern is that the car has been in and out of the garage for repairs at my cost and today the car cut out and overheated. it needs s new raider costing nearly £400! Can i hand the car back or can they swap it for me as i am still making the monthly payments and have until Jan 18 before I can hand the car back?

  15. I took the car to the dealer for a service less than three weeks ago and mentioned that the over heating light came on, the suggested it was the coolant that needed changing. I had this don’t and now less than 3 weeks on the car has water all over the floor and overheats.

  16. HELLO.MY IS JAHED I AM FROM BANGLADESH. ONE YEAR AGO I BOUGHT A CAR FROM WITH HELP OF A FINANCE LTD COMPANY WITH INTEREST RATE OF 14%. BUT NOW THE INTEREST RATE IS 10%. SO HOW CAN I REDUCE MY INTEREST RATE 14%TO 10%. WHAT I SHOULD DO? PLEASE GIVE AN ADVISE.

  17. Stuart Masson

    Hi Tracey. You can’t simply swap it for another car and carry on under the same contract; you have to conclude your current finance agreement before you can start another one. If your car is not under warranty, you’ll probably have to foot the bill for any repairs.

    You can try selling or part-exchanging the car in its current condition, but there’s no guarantee you’ll be financially any better off than paying for the radiator repair and keeping the car until January.

  18. Stuart Masson

    Hi Jahed. This is a UK site, so we can’t offer suggestions as to how to address your situation in Bangladesh.

  19. Hi. I have a mercedes I bought in September on pcp. My circumstances have changed and I need to get out of the finance agreement and return the car. Its currently in negative equity. How do I do this without gaining a black mark on my credit score?

  20. Stuart Masson

    Hi Ant. Your finance agreement will not have a provision for changed circumstances and returning the car. There is no provision to “get out of the finance agreement”; it’s a 3-4 year commitment. You can contact the finance company and ask them about making alternative payment arrangements if you are struggling to make your repayments, but they are not under any obligation to help you.

  21. Thanks for the reply. I simply cannot afford the payments Stuart. And Im pretty stuck and need to do something. What would you advise ??

  22. Stuart Masson

    The first thing you should do is contact the finance company and explain your situation. Putting this off or not telling them will generally only make your life harder. There is no easy answer and you may not be able to avoid ending up with an adverse credit history if you default on the loan.

  23. Hi Stuart – my finance agreement has a table laying out the various charges – so price of the car (A), less deposit paid(B) to give the amount of credit (C, calculated as A-B). It then shows the total charge for credit, i.e. interest & fees (D) to give something described as the “Repayment Balance” (E, calculated as C+D). The next bit is how this relates to a VT payment. It has a final figure called the “Total Amount Payable” (F, calculated as A+D). It is 50% of this last figure, F, that is shown as the VT amount. Why isn’t it 50% of the repayment balance, E ? I’ve paid the deposit so surely that should be factored in and therefore the figure E used rather than F ? Confused !

  24. Hiya,

    I am voluntary terminating my agreement with PSA finance. I had mileage of 30,000 over the three years. They are claiming that, as I have used 27000 and have 4 months remaining, they can charge me pro-rata for the fact I have overused my allowance for the year. They are basically saying I should have drove my car 830ish miles a month and I have been doing approximately 875. Usually my mileage levels off in summer but I won’t have that on my side this year.

    Is this something which they can charge for? It seems unfair as I am still handing back the car with what I believe to be a fair amount mileage.

    I have had my termination letter sent out but am reluctant to sign it now after reading this page and will be writing my own letter.

    Any help on this matter would be greatly appreciated.

    Thanks

  25. Stuart Masson

    Hi Dan. Yes, their numbers are correct and that is how VT is calculated. This works in your favour, as your deposit is taken into consideration when calculating the VT amount.

  26. Stuart Masson

    Hi Becca. As you can read in this post above, excess mileage is a disputed area. Looking at the numbers involved, there’s no great amount to be gained by the finance company pursuing the matter, so you shouldn’t have too much resistance if you simply make it clear that you will not be paying anything for excess mileage.

  27. Hi there,

    I am voluntary terminating my agreement due to moving to London and not needing my car anymore. Due to it not being used for the last few months I have SORNED the car and it has been parked on our drive the last 4 months. On the voluntary termination agreement it stipulates that the car must be taxed and insured in order for the agency to collect the car.

    I have looked into simply insuring the car for one day (the day that will be arranged for pick up) but would this suffice or does there need to a completely new insurance policy set up?

    Thanks in advance

  28. Stuart Masson

    Your finance agreement will almost certainly have a clause in there stating that the car must be kept fully comprehensively insured at all times. You are asking for trouble in not having it insured at the moment, even if it is declared SORN.

  29. Would I be able to start a new insurance policy now then cancel once the car has been given back to finance company?

  30. Can a finance company (Advantage) charge me for picking up a motorbike that i have VTd …. i owe nothing as in an email they say have paid half but they are asking for me to pay £80 for a pick up service …..is this normal ?

  31. Stuart Masson

    Yes, that should be possible.

  32. Stuart Masson

    Hi Chris. Normally you would be expected to deliver the vehicle to their nominated destination, as long as it is within a reasonable distance. Given that you’re the one cancelling the contract, you should expect to be responsible for either returning the bike or paying for it to be collected.

  33. Hi Stuart, I bought my Vauxhall astra on finance with Close motor finance 2 years ago to be repayed over 3 years. Over the period I have had the car it has cost me an arm and a leg in repairs, over and above normal servicing and has clearly been unfit for purpose. Now the gear box oil cooler seals have blown rendering the car unusable yet again. The car is an 07 plate and has only done 54,000miles. The garage tell me that the cost of repair will be in the region of £2,500. Am I legally allowed to hand the vehicle back to the finance company as I have paid more than 50%of the payments and the vehicle is and has been unfit for purpose from approximately 3 months after purchase. It has passed it’s M.O.T.s first time every time with no advisories proving that the vehicle has been maintained correctly and the mileage is low.

  34. Hi Stuart, I am currently able to VT even though the 50% would be completely paid up in October. I am able to pay the difference so to speak in advance to terminate. My main concern however is this the milages, which is contractually 15,000 per year.

    I am currently at 45,000 which is what it should be in October! So I am in excess, if I VT now is there a chance that I could be charged the excess milage now even though I am paying up until October as per the contract or should I leave the car on the drive until October gaining no milages and be 100% of no excess miles (the impractical option)?

    Thanks
    Jo

  35. Stuart Masson

    Hi William. VT may be an option if you have repaid more than 50% of the Total Amount Payable (not necessarily the same as making 50% of the payments, depending on the type of finance), assuming you have an agreement that provides for VT. However, the car will have to be working properly at the point you hand it over or you will end up with a bill for the repairs.

  36. Stuart Masson

    Hi Jo. As the article points out, excess mileage is a disputed aspect of voluntary termination. If you stick to your guns, despite any assertions to the contrary from the finance company, you should be fine to VT the car now.

  37. Hi, seems to me in my experience that the 50% rule is not worth the paper its written on unless I still do not understand how the amount is calculated. Ever since I can remember, the guaranteed future value of every car I have bought on PCP is always seems to end up as 50% of the list price, so I will never reach 50% of what I owe until the end of the agreement and all monthly payments have been made. Have I got this wrong and I do not take into account the balloon. Just curious as the 50% rule is banded around as if its somewhat useful for consumers. Maybe I need to buy a different make of car to get the 50% safety net?

  38. Stuart Masson

    Hi Jeff. It depends on the vehicle you are choosing, the term taken and the annual mileage. Don’t forget to include your deposit, which counts towards the total amount payable. It is rare these days to have a balloon/GMFV that is more than half the total amount payable unless you have a short term (ie – less than three years) with a low annual mileage on a car with very good resale value.

  39. Hi Stuart i had a 3yr contract through vauxhall as i had a new car for my mother to get in n out easliy i have had it since 2015 Aug but recently had a change of circumstance now im struggling to pay my car had a slight dent to it as well dont know what to do ?

  40. Stuart Masson

    Hi Craig. If it’s a three-year PCP then you may or may not have reached your VT point by now (but it’s unlikely). Vauxhall Finance should be able to tell you if you have reached it or how far you have to go.

    If you can’t VT the car, you will need to work out whether you can manage your finances to keep paying it. If not, you can sell the car but you’ll probably not get enough to cover the finance settlement – so you’d need to find the difference from somewhere.

    Finance contracts don’t have a provision for change of circumstances. You can try speaking to the finance company to see if they can offer alternative terms that ease your cashflow (although it would probably cost more overall). They may be able to help, although they are not obliged to.

  41. I’ve just voluntary terminated my contract deal with the car finance company and I told them they need to pick it up by next week because I will be taking my insurance off it and putting it on to a new one. I have paid 50% of it off and missed no payments. I’m given it back because the car was already faulty and I was lied to about the cars failed MOTs from it’s previous owners. Fowlers finance are the moto traders and total con artists too. I have the log book and it’s registered in my name but they are the legal owners of course. They have told me I need to sign paper work first to say it’s been voluntary terminated and what do I do with the log book? What do I do if they don’t pick the car up by the date I have given them? Sown it I’m guessing.

  42. Hi Stuart
    So I have a car from new on PCP I currently owe £11,000 the car is still worth around £7000, I have done 31,000miles in 26months out of 32,000mile allowance over 4years, I have a few curb scratches on my front alloy and a scratch on the rear wheel arch when it seems someone has clipped my car, nothing T-Cut hasn’t solved. Would it be possible for me to VT and if so what costs can they put on me?
    Thanks

  43. Edit*
    I need to pay £11,480
    My remaining balance is £10,145
    Car is valued at £7,200

    So I’ve paid £1,500
    Car is worth £7,200
    Total paid back off finance would be £8,700 when I return the car?

  44. Stuart Masson

    You can’t SORN it and you can’t cancel the insurance while the car is still in your possession.

    You are not legally required to fill in any of their paperwork, and consumer legal experts legalbeagles.info recommend that you don’t fill in anything – however, you can sign the inspection report if you agree with the details of the inspection.

    You can advise the finance company that if the vehicle is not collected by a reasonable date, you will start charging for storage and insurance costs. They may ask you to deliver the car to a nominated facility, which they are allowed to do as long as the distance is considered “reasonable” (and there is no legal definition of reasonable). This is fair since you are the one cancelling the contract, however they can’t expect you drive 100 miles to return the car.

  45. Stuart Masson

    Hi Joshua. Your finance agreement should set out exactly what the VT point is. You’ll need to refer to this, as the numbers you have provided are not particularly clear. Your car’s current value is irrelevant to VT calculations; it’s simply whether you have paid back 50% of the total amount payable.
    The finance company will almost certainly try to chase you for excess mileage. As for the alloy wheel damage and scratches, that’s a matter of negotiation – there’s no legal definition of “normal wear and tear”.

  46. Hi Stuart
    I got a brand new car on finances from Ford on the 1st of May I’m paying it over 3 years, within a week of picking it up I got a new job and a company car and now I’m not driving the new car at all its just sitting on my drive and its only done 300 miles on the clock..plus I’m being tax on my company car so I’m paying for 2 cars is there anyway I can give the car back to Ford?

  47. Stuart Masson

    Hi Xenia. Nope, it’s all yours. You can sell it and settle the finance, but you will lose thousands. Alternatively, you could try to renegotiate your job package to pay cash in lieu of a company car.

  48. Hi, I purchased my car Renault Megane Gt Line under 2 years ago on PCP (3/4 year deal), within that time I have had problem after problem with the product itself. I have had 5 courtesy cars and the service has been awful. At this stage I would like to get a new car completely wither I stay with this company or not is another question. Is there any way I am able to get out of this contract?

  49. Stuart Masson

    Hi Heather. If you’ve had the car for two years then it will be difficult to reject it under the Consumer Rights Act. You can settle the finance agreement early, but this will almost certainly mean covering any negative equity you have at the moment (which could be quite a lot).

  50. Hi Stuart I have a question wondering if you could help.
    I just startes a PCP on the 31/03/17 from Infiniti and have been really happy with everything, finances have also been fine however just 2 months in and I have accepted a job overseas therefore will not be in the country. What options do I have?

  51. Hi Stuart. I’m looking in to canceling my finance contract, I’ve only had the vehicle since late November and I have been back and forth to the garage 8/9 times now. The garage I bought the car from have out right said that there’s nothing they can do and are basically refusing to do anymore. It is a Fiat 500 and the fault is that the radio keeps crackling and losing signal. Apparently this is a known fault with FIAT cars. With my car still being under warranty, am I entitled to cancel the contract?

  52. Stuart Masson

    Hi Asif. You can settle the PCP early and sell the car, but you will lose thousands of pounds.

  53. Stuart Masson

    Hi Grace. I don’t think you’ll have much chance of rejecting the car and cancelling your finance contract because of poor radio reception. The car itself is not faulty, and the radio is not going to be considered essential to the vehicle’s operation.

  54. Good afternoon Stuart having taken out a Mercedes PCP 6 months ago the service is now due however they are saying it’s going to be around £700 this time then £200 for the next one the first service seems rather steep to me and they won’t explain why they just say its a major service that’s why it’s more. We weren’t told about this price when taking out the lease and nowhere in the paperwork does it state three times the price for a major service. They are also telling us if we even go to another garage to get a quotation the warranty will be void will this void the warranty how does warranty even effect us if its a PCP any advise would be grateful.

    Regards

  55. Stuart Masson

    Hi Nathan. Your PCP requirements are different from your warranty requirements. However, it is absolutely false to suggest that your warranty would be void if you have a quotation elsewhere! If it’s still under new car warranty, they can’t force you to have the car serviced by a Mercedes-Benz dealer. If it’s a used car, it will depend on your warranty cover.

    When it comes to your PCP terms and conditions, the finance company may insist that you have the car serviced by an approved dealer if you want to give the car back and claim the GFV at the end of the agreement.

  56. Hi, if I do a VT, in my contract it says after paying 50% I can VT at any time with no extra cost. Will I need to pay the 2 weeks of the month I have had it?

  57. Stuart Masson

    Hi Kayleigh. You have to be up to date with your payments, so in theory you should be able to VT any time before your next payment is due (as long as the finance company has received your VT notice before your next payment is due). I certainly haven’t heard of a finance company trying to bill a customer for a pro-rata monthly payment on a VT.

  58. Hi Stuart – I have just been on the phone to my finance company who I am terminating with early – by only 2 months tho – and they have asked me to send a letter which I have done via email there, they said that I might have to take the car to the auction place which is in Lanarkshire, Scotland. I stay in Perthshire which is a good 2 hour drive away from Lanarkshire. Is this something that I should have to do? I don’t think it’s correct really and it’s just been said to make me change my mind. They also said that I would have a pack sent out to me which I would have to sign but reading up on these comments its clear that I shouldn’t have to sign them, but what happens if you refuse to sign them? can they hold up the process? I want to have this done and dusted before my next payment at the end of this month. is there anything that I can send them to prove my rights

  59. Stuart Masson

    Hi Laura. Collection/return is a grey area, so you can argue it with the finance company or just accept their location. You don’t have to sign any of their forms; once you formally voluntarily terminate the agreement, you have ended the contract and are not liable for any further monthly payments. You can and should sign the vehicle inspection report if you agree with it, and make any amendments if you disagree with it – then sign it.
    The finance company can either make life easy or difficult, and there’s not much you can do about that.

  60. Hi Stuart,

    I took a 4 year PCP out with Mercedes 2 years gone in May. I am under the milage quoted and was wondering if I hand the car back, can I walk away?

  61. Stuart Masson

    Hi Matthew. The VT point is 50% of the total amount payable, not 50% of the term. Typically on a four-year PCP, this doesn’t happen until after about three years.

  62. So, has anyone took on the excess mileage charges and won as interested to hear from you.

  63. This article is brilliant – I’ve heard so many myths and theories on VT, great to get a firm standpoint on it. I’m currently looking to sell a car which is still under PCP (change in circumstances means we needed two cars, and existing car wasn’t suitable), which I haven’t had a lot of interest for, despite “””pricing to sell”””.

    It’s very helpful to know this is available as a fall-back option if the car doesn’t sell. Interesting to read your closing my comments – my father has just financed a new car and was instructed by the dealer to deliberately under-disclose the mileage and then do a VT at the end of the agreement..!!

  64. Hi – do we have the same rights if the agreement is in the name of a Limited Company?
    we want to voluntary terminate Hp agreement on a car – the car is not a company car but the agreement is in the company name and payments go through as a director loan.

  65. Stuart Masson

    Hi Jayne. The Consumer Credit Act (which provides for VTs and other rights) is specifically aimed at private buyers. If you are a business purchaser, you don’t have the same rights.

    You will need to look at your finance agreement to see what it spells out – if you have VT rights, they should be specifically listed in the contract.

  66. Its ok saying its wrong to take advantage but when the way a PCP works is not explained correctly and is , in effect, miss sold then the finance companies only have themselves to blame. I was told by skoda that at some point there would be equity in my car and I could swap cars early and use the balance on my current vehicle as a deposit. This is crap and simply a lie. If you are paying depreciation the vehicle will always be in negative equity, even when the GMFV is due. I have calculated that, at current usage, I shall have to pay £1750 in excess mileage by the end of my agreement. I have no issues with terminating early as, if they had been honest, I would not have financed this way

  67. Hi Stuart,
    I used the VT to hand back my Mercedes early to Mercedes Benz finance. Didn’t have to pay a thing as I had paid over 50%.
    The car was in good condition also.
    I was down for doing 10,000 miles a year.
    I received a letter today saying I’m being charged for excess mileage.
    Went over my amount by 5808 miles. Is this something they would likely “aggressively ” try get back? Or should I just not contact them and ignore it? They said I need to pay £627 within the next 30 days.

    Many thanks

    Danny

  68. Hi Stuart
    Hi took a car in finance pcp in January 2017 the seller never told me about the conditions. And when I asked him if I could give the car back in case I lost the job he said was fine. Now I lost my job and I told them u need to give the car back the told me I need to contact the finance company black horse. I did and they told me u need to pay the liability which is a lot of money. I feel like I been ripped off they never told me this. I do t know what to do now. Thanks

  69. Hi Stuart, I can see you have been swamped with questions so will keep it brief, past the 50% stage (22 months out of 36 month contract) with Citroen, car inside is immaculate and outside there are scuffs to the front wheel’s alloys and I have done 19k miles and the allowance over 3 years was 21k.

    slightly off topic is the fact that I have already been at war with Citroen and won after 9 months when the clutch and flywheel went I was quoted £2.5k by local Citroen dealer, 3 months fighting they gave in, but I know they hate me, do you think this will impact the looking for evidence that the car isn’t in ‘reasonable condition’.

    has there been any instances of similar situations and ideas of how much it will cost and after I initiate VT is there no going back as in I hand it to local dealer can they say right you owe us £5k and then the fight ensues from there or am I able to say okay ill pay the final year??

    I bought the car from a different dealership as they offered a better price just FYI.

    Thanks in advance

    Josh

  70. Stuart Masson

    Hi Danny. As you will have read above, it’s a grey area. Ignoring the finance company is probably not the best bet, as they will automatically move to engage a collections agent if you don’t respond.

    Your best bet is to contact them and make it clear that you know your rights and that they can’t enforce any excess mileage charges. After that, it’s a question of who backs down first.

  71. Stuart Masson

    Hi Graciela. Sounds like a combination of poor dealer selling practices, and you not reading your contract before signing it. If you want to settle the finance now and sell the car, you will have a considerable amount of negative equity so it will be an expensive process.

  72. Stuart Masson

    Hi Joshua. The 50% point for voluntary termination isn’t based on time; it’s based on Total Amount Payable and includes the final balloon. So it’s likely that you haven’t reached this point after 22 months of a 36-month PCP.

    If you do initiate a VT, then it is generally irreversible. Once you notify the finance company in writing that you are VTing the car, you have ended your contract.

    The finance company and the dealership are completely separate entities, so there’s no reason for any warranty issues to prejudice the vehicle inspection when you VT the car.

  73. Hi Stuart

    This is a hard one for me, I have made 36 payments out of 48 on an MB. I want to VT because I now have a serious illness that affects mobility, basically I can’t use the car and need a car that is suitable. Is it possible to VT?

  74. Stuart Masson

    Hi Chris. You will need to check with the finance company how much you have paid off. After three years of a four-year PCP, you are probably close to the 50% mark. If you have an HP, you have probably already passed the 50% mark.

    If you haven’t paid off 50%, you can still VT the car but you will need to pay the difference to get you to the VT point. Depending on how much that amount is, it may still be worthwhile to do so if you are not able to use the car anyway.

  75. fantastic article. i have a Renault Clio on PCP which ends in October after 4 years. We are thinking of VT soon. We have a paint transfer from another car hitting us on the back of the car, say around an inch wide. would this affect anything? no damage, just paint. also 5k miles over. from what i have read, this isn’t as bad as many others on the forum. also, just to clarify, do we send them the letter of intent, or can any of this be done over the phone?

  76. Stuart Masson

    Hi Liam. You need to formally terminate the agreement with the finance company in writing (email is fine).

    In terms of damage to the vehicle, the finance company will almost certainly charge you for paintwork repair. You can have this repaired yourself before VTing the car, which will probably be cheaper.

    In terms of the excess mileage, they will probably try and charge you since it will presumably be in the region of £500 according to your agreement.

  77. Hi Stuart,

    I’m looking to VT my car shortly as I will have paid 50% by late August. The settlement figure is about £3k but the trade in value is £800. There are 2 issues I am considering;

    1) Could I include in my VT notification letter something along the line of “I believe you will not be able to achieve much more than £1000.00 when you dispose of the vehicle. I would be happy to purchase the vehicle from you for no more than £1300.”

    2) Looking over the loan agreement, I see that the car dealer lied on the credit proposal, they stated that the price paid for the car was £5000 with no deposit, whereas it was worth less, I’d put down over £1000 including the PX, but I was also paying for a comprehensive warranty and servicing deal. Should I bring this to the finance companies attention. I believe I was shafted by the dealer, so would like to drop them in it, if that is risk free to me.

    Thanks in advance

  78. Stuart Masson

    Hi Ewan. You can include a paragraph along those lines if you like, but it is unlikely that the finance company will respond. It will need to be in no way linked to your termination of the contract, and a separate offer.

    I assume that the cost of the warranty and servicing deal you paid for was equal to the deposit you put in. In that case, the paperwork will be correct. You can’t include warranties and insurance plans on your finance deal, so the numbers on the finance contract won’t necessarily line up neatly against the sales contract. Even if the numbers don’t add up, it’s probably a bit late to bring it to their attention now.

  79. Hi – can you VT a car if it has missed the first years service?? I missed the first year on my fiat and am looking to VT. Have had a major service for the second one but didn’t know if they could refuse VA or charge me for voiding the warranty??

  80. Hi Stuart,

    I am getting a new car in September, so I am looking to VT my car and have paid over 50%. BMW has said it will take approximately 3 weeks to collect the car. I don’t want to pay the 1 Sept payment so intend to serve notice of VT before then. BMW intends to email me a letter before I serve notice. It said said that it wants the log book sent with the notice by recorded delivery.

    Your advice above suggests the log book will be collected with the car. Given BMW want this at notice time, am I still able to drive the car after I serve notice and before BMW pick it up, even if I have sent it the log book?

  81. Hi.

    I have sent in a termination letter from a template I found on legalbeagle stating they have 14 days to arrange pick up. What happens if they don’t contact me within the 14 days?

  82. Stuart Masson

    Hi Lynn. You can still VT the car, but the finance company will want to charge you a fair chunk of money as a penalty for missing the service.

  83. Stuart Masson

    Hi Les. Once you terminate the contract, all rights and obligations of the contract become void. Therefore you should not be driving the vehicle at all (although you should keep it insured until it is collected). You don’t need to fill in any of their forms to enact a VT, and you don’t need to wait for their letter. Personally I wouldn’t send the logbook in while I still have the car either.

  84. Stuart Masson

    Hi David. You can start charging them storage, as long as you notify them that you will be doing so if they don’t collect the car by a certain date. I’ve not heard of this actually working, mind you…

  85. Hi Stuart. I’m about to do a vt very soon and am under my scheduled mileage. Once I send the letter off how soon should I cancel my payments through the bank? Also my car has been serviced but by a mechanic who’s a friend, will I get charged for that? Thanks Ricky

  86. Stuart Masson

    Hi Ricky. Once you formally inform the finance company that you are claiming your right to VT, you are terminating the contract with immediate effect. Therefore, you are within your rights to switch off your direct debit. However, I’d suggest making sure that you’re up to date on all payments before you do.

    The finance company will almost certainly try to charge you for failing to have the car properly serviced by an authorised dealership, so you’ll have to argue that one out with them (like excess mileage, it’s a very grey area as to whether they can enforce this on a VT).

  87. Very interesting article, and can I thank you, Stuart, for clearly taking so much effort to answer everyone so concisely, truly commendable!
    I’m currently considering a VT on my Mercedes C250, 3 yrs into a 4yr PCP. I was hoping to simply include it in a new PCP arrangement perhaps, but as I’m being told its circa £1500/2000 in Neg Eq, it wouldn’t make sense to include that amount in the new payments, pushing up the cost further. I’m aggrieved that MB has got its sums so wrong, hence why I’m considering the VT and then starting afresh.
    What I hadn’t realised was that Excess Mileage Charges can’t be enforced, that’s very interesting. I’d been assuming that I’d be responsible for the £7/800 of costs in that respect, but maybe as so many have found, they’ll try and charge me……
    I do have some reservations about VT’ing, and the effect it ‘may’ have going forward in getting future Car Finance tho, – do you hear of many that have been adversely affected in any way as a result?

    I’m about 8000miles over my 10k/yr PCP agreement, mainly as a result of the MB Dealer being less than ‘up front’ with what he had worked out the deal on, as I thought it was the usual 13k/yr I had been on before, – he clearly used the lower miles to get the figures down to tempt me, and was something I didnt realise until quite some trime after when I had to refer to my Agreement for something. Its clearly well hidden, as I have the agreement in hand at thos minute and still cant see the mileage figure easily…..but I doubt I’ll have any recourse now. ?

  88. Actually, my MB Agreement staes in the very small print,
    12.1 “If the vehicle is returned to us (whether at the end of the period of hire or an earlier termination) we will calculate the Total Mileage travelled” etc…
    12.2 “You will pay us a charge at the rate stated in this agreement if and to the the extent that the Total Miles exceeds the allowed distance etc etc”

    – seems they are trying to indicate that they would still pursue an extra mileage cost, but if the Law says they can’t, should I ignore !?
    Thx

  89. Update: Having registered on LegalBeagles and taken a look through some of the posts on there,
    particularly in relation to Mercedes Finance, it seem sthey have a pretty hard standpoint on Exc Mileage, and whether its payable or not, and seems I’ll be in for a fight if I expect to avoid it.
    To be honest, I’d assumed it would be payable on VT, until I found this, but it seems that the matter isnt as clear as the rules may indicate…….

  90. Stuart Masson

    Hi Chris. It’s not unusual for you to be in negative equity before the end of the agreement – in theory, if the finance company has got its numbers exactly right then it should be in negative equity right up until the day the agreement ends. For more information, have a read of our article about settling a PCP early.

    Excess mileage is a hotly-disputed topic. If you are prepared to play hardball and stand your ground (politely, of course), then you will probably get your way. But it’s worth about £800 to the finance company, so they are unlikely to let it slide easily.

  91. Stuart Masson

    Realistically, it should be enforceable. But the law doesn’t say that, partly because the law was written well before PCPs were anywhere near as popular as they are today.

  92. Hi Stuart,

    Have been looking online for some clarification regarding the excess mileage conditions and came across this article, which is one of the most helpful I’ve seen, so thank you!

    I have just put in a VT for my SEAT (my contract actually ends in October so I’m only ending it 1 month early).
    My contract states a total of 35,000 miles and by the time they collect it, I will have done approx 42,000 miles, and have said I will be charged at 7.2p per mile over, as per the contract.

    I know you’ve been asked this a million times but IS this enforceable?

    The SEAT salesman who advised me to do a VT rather than trade it in (so I can get another car on PCP as my current car is in negative equity) has said the car is in great condition, and shouldn’t have any issues as far as that’s concerned.

    Your advice is greatly appreciated.

  93. Stuart Masson

    If you’ve seen the previous million times this question has been asked, why do you think the answer is going to be any different this time? Nothing has changed.

  94. Hi Stuart – I took out a PCP agreement when I purchased a new Skoda at the end of March this year. I have developed a back problem that means I am unable to drive a manual car. I am within the 1000 miles per month (12,000 pa) mileage and the car is in showroom condition still. I don’t know where to start with getting out of the payment plan. I paid a £6,500 deposit for the car which, with all the extras was worth about £28,000. I’d really appreciate your advice.

  95. HI sort of understand your answer but would the deposit be included in the payments to reach 50%.
    example, £10,000 car £1,000 deposit paid.

    lets just say £15,000 is the total amount payable, to reach 50% consumer has to pay £7,500.

    he has made monthly payments equal to £6,500 would the deposit of £1,000 be included to reach the magical £7,500.

  96. Stuart Masson

    Hi Jay. Yes, your deposit counts towards your Total Amount Payable.

  97. Stuart Masson

    Hi Adaliza. There is no provision to end the agreement on medical grounds because the car no longer fits your needs, or because your needs have changed. Unfortunately, getting out of your agreement is going to be expensive.

    You can settle the agreement with the finance company and part-exchange the vehicle on a more suitable one, but you will almost certainly have some negative equity to deal with – even though you put in a significant amount up front.

  98. My circumstances have changed since renewing my contract with BMW I had a new car 3months ago. Is there any way I can hand the car back with it being so new?
    Ive had BMW’s from new for last six years so this apply to anything

    Thanks leah

  99. I am in need of some serious help, I have a car on finance that i have only had since March, I’m no where near the 50% mark but need to trade in the car ASAP as i am already 5300 miles over the 8000 mark limit PA, The salesman told me this after he put my contract through but didn’t listen when i told him my mileage is extremely high. So now im paying for a car that at any point could put me in debt, i cannot trade in as no garage will give me enough to cover the current finance cost as they are charging me almost double what the cars worth, i’m at a loss and do not know what to do, please help.

    Thanks Hannah

  100. Stuart Masson

    Hi Leah. Not normally – assuming that you have a PCP, you borrowed the money and now almost certainly have a car that’s worth considerably less than what you borrowed. If you have a lease (contract hire), then you have an agreement to rent the vehicle for three or four years.

    In either case, there’s no cheap way out three months into a new finance agreement.

What are your thoughts? Let us know below.

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