Many people assume that as soon as they take out a car finance contract, it’s binding until the final payment is made.
However, circumstances can change and this could affect your ability to keep up with the monthly payments.
In the UK, a law has been passed to allow certain types of car finance agreements to be ended early, which is useful for individuals who wish to get out of a contract.
Read on to find out how.
You have the legal right to cancel your car finance agreement early, Under the Consumer Credit Act 1974.
In Section 99 of the Act, both you and the finance company are protected if you can no longer afford your monthly payments. The Voluntary Termination law covers both new and used cars, with the amount payable dependent on the type of finance you have taken out.
Cancelling Your PCP Agreement
With a PCP contract, you can end the agreement as long as 50% of the total amount payable to the finance company has been paid. If you haven’t paid over half, you can still end your agreement early but you will have to pay the difference.
It may not be half way through your agreement that you have paid 50% of the total, as the amount will also include the balloon payment, interest charges and fees. Plus, if the vehicle is damaged, you may be charged extra for this.
If you have paid more than 50% at the time you want to end your agreement, you won’t be entitled to a refund.
Cancelling Your HP Agreement
Terminating a HP agreement is similar to terminating a PCP agreement.
Half the amount will have to have been paid, which is usually around the mid-way point of the contract, unless a higher initial deposit has been made, in which case it could be earlier.
The car will have to be in good condition too, or you may be charged for damages.
How Macklin Motors Can Help
At Macklin Motors, our team of experts will always be on hand if you need any advice on car finance. You can either give us call, read our Finance Explained guide or pop down to your local dealership for more information.
Furthermore, if your car has outstanding finance to pay but you are wanting to sell it, we will pay the outstanding balance, and deduct it from the price we give you for your car.