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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. This 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 the total amount you owe, this includes any interest and fees. The vehicle must be kept in good condition. If you have not taken 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 this option no more payments are required to be made. 

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 reach the figure you need to terminate, you will need to pay the finance company the difference. For example, the total amount payable is £20k and you’ve only pay £7k, you will need to pay the difference. The £3k remaining will need to be paid to voluntarily terminate. For those legal eagles out there you can check the activities that this covered here.

There are also other points to consider that are not within the law but help when going through with a voluntary termination. It is important to ensure you have kept repayments up until that point. The voluntary termination cancels the agreement and still protects your credit history. So it is important not to give any reason for a negative mark.

It is a good idea to be in a position of strength when dealing with the finance company initiating a Voluntary Termination. This law is to protect you in case of a charged lifestyle such as loss in a job, or new car requirement for family or health reasons. This should be your last resort because settling finance and keeping the car to sell can sometimes work out better. 

So What Do I Do To Terminate My PCP

Bear in mind the finance company isn’t going to be overjoyed at the fact that you want to return the car. They will now receive no more payments so they may not be enthusiastic about helping you. When you contact the finance company you should be clear on your position and ensure you have met the above criteria. You can then set a deadline with the finance company to return the car. They will try and drag it on as you will be paying for the car until its return. 

Send a Letter or Email

Send an email or a signed letter with your plan clearly stating that you are exercising you right to terminate. You will be terminating your car finance agreement as set out in your contract and the Consumer Credit Act 1974. Do not fill out any forms from the finance company as you don’t need to. Finance companies could be adding new clauses and could be removing some of your rights. Do no get confused with Voluntary Surrender which is different from Voluntary Termination. The main difference is that the finance company can still charge you after you hand back the car. 

Keep Your Vehicle in Good Condition

It is so important that the car is returned in good condition. Remember the finance company is likely to be losing money so will be trying to claw it back somehow. The easiest way is to overcharge you for a scratch or a scuffed wheel. It is also a good idea to take a picture of the car so you have evidence of its condition. Just in case you get an unexpected charge.

Once you have handed back the car, you will not be required to pay any future payments. If you do get any further chargers that seem unfair then, it is within your right to fight those. Some finance companies will try it. 

Excess Mileage

One of the ways finance companies try and recuperate their money is through excess mileage charges. But you DO NOT have to pay! There is no legal provision for excess mileage charges. However, the value of the car is linked to mileage, the finance company will try their best to intimidate you. This is especially true if at return your pro-rated mileage is higher than it should be. As part of a voluntary termination, you do not have to pay any more charge if: you have satisfied over 50% of your agreement and the car is in good condition.

Credit Record

A common misconception is that finance companies tell you that a Voluntary Termination will adversely affect your credit rating. This is not the case, a Voluntary Termination is your legal right. Despite it being noted on your credit file, it is seen as common because there are many causes for Voluntary Termination.

Voluntary terminations are recorded when a car has been rejected for being faulty or the dealer cancels because of an accommodation deal. There are many other reasons, it is not always the customer handing the car back. The reason for Voluntary Termination is no 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. You should not be affected when going for any other financial product such as a mortgage or loan. Learn more about the affects here.

Wrapping Things Up

So, that’s a quick guide to voluntarily terminating a PCP, this is also the same for a HP agreement. These rules do not apply for a leased vehicle which is a different type of agreement. 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 need any assistance!

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