Voluntary termination of a hire purchase agreement is a right under the Consumer Credit Act 1974. This option can help if you’re struggling to keep up with your car finance payments. Below is a guide on how the voluntary termination process works.
What is voluntary termination?
Voluntary termination lets you end your hire purchase agreement early, as long as you have repaid at least half of the total amount payable. This includes the amount you borrowed, interest, and any other charges. Voluntary termination is designed to protect consumers from being stuck in agreements they can no longer afford. It can help you avoid further financial stress and the risk of repossession if you’re struggling with payments. This option can be helpful if your financial situation has changed unexpectedly, like losing your job, reduced income, or higher expenses.
Eligibility for voluntary termination
To be eligible for voluntary termination, you must:
- Have paid at least 50% of the total amount owed under your hire purchase agreement.
- Make sure the vehicle is in good condition, allowing for reasonable wear and tear.
- Ensure the vehicle is roadworthy.
If you haven’t paid 50% yet, you can still choose voluntary termination, but you’ll need to pay the difference to reach the halfway point.
Steps to voluntarily terminate your hire purchase agreement
Repayments: Check your agreement to see the total amount you owe and make sure you’ve paid at least 50%. If not, you can make an additional payment to reach the halfway mark and become eligible for voluntary termination.
- Assess the vehicle's condition: Before choosing voluntary termination, make sure your vehicle is in good condition. Normal wear and tear is allowed, but any damage beyond that may lead to extra fees. Some people opt for a professional inspection to ensure the car meets the lenders standards.
- Contact the finance company: Once you’ve reviewed your payments and checked the car’s condition, let your finance company know that you want to voluntarily terminate your hire purchase agreement. This can do this by, calling their customer service team or by sending an email or letter. The finance company will explain the next steps and answer any questions you may have.
- Arrange for vehicle return: Your car finance provider will give you instructions on how to return the car. This could involve taking the car to a specified location or arranging for collected at a convenient time.
- Closure: Once the car is returned, the finance company will inspect it to ensure it’s in good condition. After the inspection, and if everything is in order, your car finance account will be officially closed. You’ll get confirmation that your agreement has been settled, giving you peace of mind.
Make sure you follow all return and include the vehicle’s documents, keys, and any other items to avoid extra charges.
Credit impact
While voluntary termination can help relieve financial pressure, it may still affect your credit score. The voluntary termination will appear on your credit report, which might make it a bit harder to get finance in the future. It’s a good idea to weigh the pros and cons, and if you’re unsure, consider speaking with a financial advisor to understand how it might impact your credit file.
Help and support
If you’re struggling financially and thinking about ending your car finance agreement, support is available. Reach out to your finance provider for help. They can discuss your options and guide you towards the best decision. Whether you’re considering voluntary termination or voluntary surrender, your finance company will explain all the exit options available to you.
For more details about voluntary surrender you can find more information on our guide Voluntary surrender of car finance or, feel free to contact our friendly Customer Support Team on the free phone number above if you have any questions.
PCP voluntary termination
With a Personal Contract Purchase (PCP) agreement, you have the right to voluntarily terminate your contract once you’ve paid at least half of the total amount o. This includes the amount borrowed, interest, fees, and the balloon payment. The balloon payment is a large lump-sum due at the end of a PCP contract if you want keep the car. Even though it’s paid later, the balloon payment is still part of the total cost when calculating voluntary termination.
If you haven’t yet paid half yet, you can still end the agreement by paying the difference to reach that amount. The car must also be in good condition with normal wear and tear, or you may have to pay extra for damages.
How long does the voluntary termination take?
The voluntary termination process usually takes a few weeks, depending on your finance company and the details of your agreement. After you inform your finance company that you want to terminate, you’ll need to return the vehicle, and they will inspect its condition. Once the inspection is done and any outstanding payments (if needed) are made, your account will be closed, and the termination will be confirmed. This entire process typically takes 1 to 3 weeks, but this may vary depending on your finance company.
If you’d like more information about voluntary termination, feel free to contact our friendly customer support team on the free phone number above with any questions.
FAQs
No, once you voluntarily terminate your car finance agreement, you must return the car to the finance company. The purpose of voluntary termination is to end the agreement early without taking ownership of the car.
Yes, you can still terminate the agreement, but if the car is not in roadworthy condition or has significant damage, you might face extra charges. It’s a good idea to repair any major issues before starting the voluntary termination process to avoid extra fees.
If you've made modifications to the car, it could make the process more complicated. The finance company usually expects the car to be returned in its original condition. Major modifications might result in extra charges or affect the car’s value, so it’s best to check with the finance company before moving forward.
Voluntary termination might be reported on your credit file. While it's less severe than a default, it could still make it harder to get approved for finance in the future. Lenders may see it as a sign that you had trouble meeting the terms of your previous agreement.