So you have a car on PCP but you don’t actually want the car anymore. What can you do?
This is one of the most popular questions we get asked at Car Buying Guru.
In simple terms yes you can terminate a PCP early meaning you just hand the car back and walk away from the deal it is actually your legal right, however there are a few things you need to be aware of.
Firstly you must have paid at least 50% of your total amount you owe this includes any interest and fees
The vehicle must have been kept in good condition if you have not taken reasonable care of the goods you will not be able to return the car.
If these conditions are met, you can sign the car back over to the dealer through a voluntary termination Clause with no more payments to make.
How do you know how much you need to pay?
All agreements should show you the total amount payable and the termination figure
If you haven’t reached the figure you need to terminate you will need to pay the finance company the difference to ensure that figure is achieved.
For e.g total amount payable £20k and you’ve paid 7k you will need to pay £3k more to reach the figure to voluntary terminate.
For those legal eagles out there you can check the act that this covered under here
There are also another points to consider that are not within the law but help when doing a voluntary termination. It is important to ensure you have kept up repayments up until that point. 2 reasons for this is voluntarily termination is a way to get out of a car and still protect your credit history so don’t give any reason for a negative mark.
Also it is good to be in a position of strength to deal with the finance company when initiating a Voluntary termination. This law is to protect you in case of a change lifestyle such as loss in job, or new car requirement for family or health reasons and should really be your last resort especially as settling the finance and keeping the car to sell can sometimes work out better.
So what do I do to terminate my PCP
Well bare in mind the dealer or finance company aren’t going to be overjoyed at the fact that you want to return the car and make no more payments so they may not be enthusiastic about helping you. Contact the dealer or Finance company you should be clear on your position and ensure you know you have met the above criteria. You can then set a deadline with finance or dealer to return the car. They will try and drag it on as you will be paying for the car until its return.
Send an email or a signed for letter with your plan clearly stating that you are exercising your right to terminate your car finance agreement as set out in your contract and the Consumer Credit Act 1974. Do not fill out any of the finance or dealers forms you don’t need to and they could be slipping something in to let you lose some rights. Do not get confuse with Voluntary Surrender which is different to Voluntary termination and means the finance can still charge once you hand back the car this is not what you are doing here!!!
Make sure the car is returned in good condition remember the dealer or finance company is likely to be losing money so will be trying to claw it back somehow. What better way than to over charge you for a scratch or scuffed wheel. Its also a good idea to take a picture of the car so you have evidence of it condition. Just in case you get an unexpected charge.
Once you have handed back the car you will not be required to pay any further payments. If you do get any further charges that seem unfair then it is within your right to fight those. Some finance companies will try it.
One of the ways finance companies do try and recuperate their money is through excess mileage charges but guess what…. You don’t have to pay? There is no legal provision for excess mileage charges. However, as the cars value is linked to mileage the dealer or finance company will try their best to intimidate you into paying it especially if at the point of return your pro rata’d mileage is higher than it should be. As part of a Voluntary termination you do not have to pay any more charges as long as you have satisfied over 50% of your agreement and the car is in good condition.
A common misconception that finance companies and dealers do feed off is that if you do Voluntary terminate it will adversely affect your credit rating. This is not the case a Voluntary termination is a legal right and despite it being noted on your credit file it is seen as quite common because there are many causes for a voluntary termination. Voluntary terminations are recorded when a car has been rejected for being faulty or the dealer cancels because of an accommodation deal and may other reasons there for its not always the customer just handing the car back and the reason for Voluntary termination is not recorded. The finance company you have returned the car to may not look at you again but that is something to consider at the time.
So that’s it a quick guide to Voluntarily terminate a PCP this is also the same for a HP agreement but not for a lease which is a different type of agreement and not covered by the same rules. If you are thinking about Voluntary Termination make sure you assess your situation thoroughly, sometimes if the car has equity in it settling the finance and selling the car would be a better option. If in any doubt about the legalities of your contract please seek professional advice from a solicitor
Please do not hesitate to contact Car Buying Guru if you want to help with your car