Voluntary termination of car finance
Voluntary termination is a legal right to hand back a car on hire purchase or PCP and cap what you owe. Here is how to work out where you stand and how to use it.
Applies to: UK-wide
What to do now
- Find the “total amount payable” in your agreement, or ask for a copy with the CCA request letter.
- Ask the lender for a statement of everything you have paid so far.
- Photograph the car inside and out before it is collected.
Who can use it
It applies to regulated hire purchase and conditional sale agreements, which include most PCP deals. It does not apply to personal contract hire (leasing) or to a personal loan used to buy the car. You can use it at any time before the final payment falls due, by telling the lender in writing.
Working out the half-way point
The figure that matters is the total amount payable: the deposit, all monthly payments, interest, fees and, on a PCP, the optional final (balloon) payment. Because the balloon counts, the half-way point on a PCP often comes later than people expect.
| Example only | Amount |
|---|---|
| Total amount payable in the agreement | £20,000 |
| Half of that | £10,000 |
| Paid so far, including the deposit | £8,200 |
| Left to pay to reach half | £1,800 |
Any arrears count towards the half, but you still have to pay them, because ending the agreement does not cancel amounts that were already due.
Condition and mileage
If you have not taken reasonable care of the car, the lender can add the cost of putting that right. Normal wear and tear for the car’s age and mileage should not count.Be there when the car is inspected, keep your photos and service records, and ask for an itemised list of any charges.
How to do it
- Check you have a hire purchase or PCP agreement, not a lease.
- Work out the total amount payable, what you have paid and any arrears.
- Write to the lender saying you are ending the agreement under section 99 of the Consumer Credit Act, and ask it to arrange collection.
- Keep proof of sending and a copy of the letter.
- Check the final statement and query anything you do not recognise.
If the lender pushes back
It is a legal right, so the lender cannot refuse it. Be careful if you are offered a “voluntary surrender” instead — it is different and can leave you owing more. See voluntary surrender. If you are unhappy with how the lender deals with it, complain to it, then to the Financial Ombudsman.
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
Does voluntary termination affect my credit score?
Ending an agreement this way is a legal right, but lenders report it in different ways and any missed payments before it will still show. Ask the lender how it will be recorded.
Can I voluntarily terminate a PCP?
Yes, most PCP agreements are hire purchase agreements regulated by the Consumer Credit Act, so the right applies. Remember that the balloon payment counts towards the total amount payable.
Can I use voluntary termination if I am in arrears?
Yes. The arrears count towards the half-way point, but you still owe them after the agreement ends.