There are a number of reasons why you may be visiting our blog to find out about voluntary termination. We understand that life isn’t easy, and circumstances do change which can affect your current car finance agreement. However, if you are looking to voluntary terminate your car finance deal, we have a number of helpful solutions below. Find out what your voluntary termination legal rights are and how to go about cancelling your finance early. 

What is voluntary termination?

Car finance voluntary termination is when the customer cancels their car finance agreement earlier than the agreed end date. It can be applied to both hire purchase and PCP car finance and also applied to both new and used cars. Voluntary termination of car finance works by changing the minimum repayment amount to 50% of the original agreement.

taking car away

What are your voluntary termination of car finance rights?

Voluntary termination is your legal right under the Consumer Credit Act 1974. As long as certain criteria are met, you have the right to end your car finance agreement early and more information can be found in your car finance contract. This law has been put in place to protect customers who can no longer afford their monthly payments but also gives the lender more protection too.

How does it work?

Voluntary termination works differently for HP and PCP deals. In both scenarios, you can voluntarily terminate your car finance agreement as long as you repay 50% of the total amount payable (including interest and fees) and have kept the car in good condition.

Hire purchase voluntary termination is pretty straightforward as you spread the full cost of your chosen vehicle into the finance deal. This means that at the halfway point of the agreement, you will usually have paid off 50% of the total amount payable anyway. If you have not yet reached the halfway point, you will be required to pay off the remainder before you can voluntarily terminate.

For voluntary termination PCP, it can be a little more complex because 50% of the total amount payable doesn’t usually occur until near the end of the agreement. This is because of the balloon payment that PCP car finance deal have. The balloon payment tends to be quite large because you are borrowing more money than you are repaying. If you want to keep the car instead but are struggling to pay the final payment, you could also consider refinancing balloon payment. You would be advised to wait until you have met 50% of the repayments or you can obtain a settlement figure from your lender and pay off the remainder before you hand the car back.

Does voluntary termination affect your credit score?

You have a legal right to be able to voluntarily terminate your current car finance deal and doing so won’t affect your credit score. It can be recorded on your credit file and be visible to future lenders but shouldn’t have an impact on your ability to get finance in the future. As long as you have made all your repayments up to the 50% mark and paid the repayment amount, there should be no effect on your credit score at all.

credit score going up

Are there any charges to voluntarily terminate your car finance deal?

There are no additional charges associated with voluntary termination. As long as you have paid 50% of the total amount payable, you should be able to return the car without anything else to pay! You may only incur additional charges through a PCP voluntary termination if the vehicle has damages to the vehicle that does beyond wear and tear.

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