Voluntary surrender of car finance

If you have taken out car finance, but can’t keep up with your payments, or are struggling with your finances and looking at ways to reduce your bills, voluntary surrender could be an option for you.

This means returning the car to the finance company. Unlike voluntary termination, a different option open to you, you don’t need to have repaid at least half of the total amount owed. However, with voluntary surrender, you might still need to pay the remaining balance, if the car is sold for less than what you owe.

What is a voluntary surrender?

Voluntary surrender lets you return your car to the finance company if you can’t keep up with payments on your hire purchase or PCP agreement.

After the car is returned, it will be sold, and the money from the sale will go towards paying off what you owe.

If the sale doesn’t cover the full amount of your debt, you will still need to pay the remaining balance. This usually means setting up a payment plan for what’s left. The condition of the car and how much it sells for will decide if you need to make more payments after the surrender.

Eligibility for voluntary surrender

You can choose voluntary surrender if:

• You can no longer make the monthly payments on your car finance agreement.
• You are ready to return the car to the finance company in its current condition.
• You understand that you may still owe money if the sale of the car doesn’t cover the full amount of the outstanding finance.

Steps to voluntarily surrender your vehicle

1. Review your car finance agreement: Start by looking over your finance agreement to understand how much you still owe and the terms of the voluntary surrender. Remember, if the car sells for less than what you owe, you will need to pay the difference.
2. Check the car’s condition: Make sure the car is in good condition before giving it back. The finance company will inspect it, and any damage beyond normal wear and tear could lower the resale value, leaving you with a higher balance to pay.
3. Contact your finance company: Let your finance company know you want to voluntarily surrender the vehicle. You can do this by, calling their customer service team or by sending an email or letter.The finance company will guide you on the next steps and how to return the car.
4. Return the car: The finance company will tell you how to return the car. This could mean dropping it off at a specified location, or having it collected. Check if collection costs extra.
5. Sale and settlement: After you return the car, the finance company will sell it, usually through an auction or a dealer. If the sale doesn’t cover what you owe, you will need to pay the difference. If it does cover the amount, your account will be settled.

Credit impact

Voluntary surrender can impact your credit score because it will show up on your credit file. Lenders may see this as a sign that you couldn’t keep up with your payments, which could make it harder to get finance in the future.

However, it’s usually considered less harmful than a default, as you chose to return the car, rather than having the finance company repossess it.

How long does the voluntary surrender process take?

The voluntary surrender process usually takes a few weeks to complete, depending on the finance company and their procedures.

After you tell the finance company that you want to surrender the car, you’ll need to return it to them. They will then sell the car. Once it’s sold, the finance company will calculate any remaining balance and let you know what you still owe.

This process typically takes 2 to 4 weeks, but it can vary depending on how quickly the car is inspected, valued, and sold.

What happens after voluntary surrender?

Once the car is sold, if the sale price is less than what you still owe on your finance agreement, you will be responsible for paying the difference. The finance company will let you know how much you owe and give you instructions on how to settle it.

If you're worried about how voluntary surrender might affect your credit score or the remaining balance, it’s a good idea to speak with a financial advisor or contact your finance company for more information before making a decision.

Is voluntary surrender a good option?

Here’s a summary of the pros and cons of choosing voluntary surrender:

Pros

• Stop missed payments: Voluntarily surrendering your car helps you avoid falling behind on payments and facing extra late fees.
• Take control: It allows you to manage the situation before the finance company repossesses the car, which could hurt your credit score more.
• Avoid legal action: By returning the car voluntarily, you reduce the risk of the finance company taking legal steps to recover the debt, which could lead to extra costs.
• No repossession fees: Since you’re returning the car on your own, you won’t have to pay any extra fees that might be charged if the finance company had to repossess the vehicle.

Cons

You may still owe money: If the car is sold for less than you owe, including any balloon payment on a PCP, you will need to pay the difference.

• Credit score impact: Voluntary surrender will show up on your credit file and could lower your credit score.
• Possible extra charges: If the car has damage or more wear and tear than expected, the finance company may charge you for repairs, increasing what you owe after the sale.
• Long-term financial burden: While voluntary surrender may give you short-term relief, you could still face a long-term repayment plan if there’s a large gap between the sale price and what you owe.
• No longer own the car: Surrendering the car means giving up ownership, which could leave you without a car and needing to find a new way to travel.

Help and support

If you're having trouble keeping up with your car finance payments and are thinking about voluntary surrender, it's important to talk to your car finance provider for advice. They can explain your options, including voluntary termination or other alternatives.

Reaching out early could help you find solutions like a payment break or refinancing options, allowing you to keep the car while managing your payment.

If you are a customer of AutoMoney Motor Finance (check your car finance paperwork) you can contact our friendly Customer Support Team on the free phone number listed above for more information about voluntary surrender, or if you have any questions about your car finance options.

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