Voluntary surrender of a financed car
Handing a car back sounds simple, but how you hand it back decides what you owe afterwards. Here is what voluntary surrender involves and the questions to ask first.
Applies to: UK-wide
What to do now
- Work out what you have paid against the total amount payable before agreeing to anything.
- Ask the lender to put its offer, the sale method and the fees in writing.
- Compare it with voluntary termination and with keeping the car on a lower plan.
Surrender, termination and repossession
| Voluntary termination | Voluntary surrender | Repossession | |
|---|---|---|---|
| Basis | Legal right under section 99 | Agreement with the lender | Lender ends the agreement after a default notice |
| What you owe | Capped at half the total amount payable, plus arrears and any damage | The balance after sale, plus costs | The balance after sale, plus costs |
| Court order needed? | No | No, because you agree | Yes, once a third is paid, unless you agree at the time |
Agreeing can remove your protection
Once you have paid a third or more of the total price on hire purchase or PCP, the car is “protected goods” under section 90 of the Consumer Credit Act, and the lender needs a court order to take it back. If you agree to hand it over, no court order is needed. A court can make a time order letting you pay at a rate you can afford, so check where you stand before you consent.
How the shortfall is worked out
The lender usually sells the car at auction, where prices are often lower than a private sale. The sale price is taken off what you owe, and collection, storage and sale costs may be added. What is left is the shortfall, which becomes an unsecured debt, like a personal loan.
- Ask for the sale price, the date and the auction details.
- Ask for an itemised list of every cost added.
- Ask whether the lender will reduce or write off any shortfall, and get the answer in writing.
Other options to check first
- Voluntary termination if you are near half paid: paying up to the half-way line can cost less than a surrender shortfall.
- A lower payment arrangement or a short payment break, if you need the car.
- Selling the car yourself with the lender’s agreement. You do not own it until the finance is settled, so you need its settlement figure and permission first.
If you are left with a shortfall
It is treated like other non-priority debts. You can offer affordable payments or a full and final settlement, or include it in a formal solution such as an IVA or Debt Relief Order. A free adviser can explain which might fit.
You never have to pay for debt advice. MoneyHelper (government-backed), StepChange, National Debtline and Citizens Advice all give free, confidential advice with no obligation.
Common questions
Is voluntary surrender the same as voluntary termination?
No. Voluntary termination is a legal right that caps what you owe at half the total amount payable. Voluntary surrender is an agreement to return the car, and you can still owe the full shortfall after sale.
Will I owe money after a voluntary surrender?
Often, yes. The sale price is set against what you owe, costs may be added, and any shortfall remains your debt unless the lender agrees in writing to reduce it.
Does voluntary surrender affect my credit file?
Usually, yes. Missed payments stay on your file, and the account will normally show a balance owing or a default until the shortfall is dealt with. Ask the lender how it will be recorded.