Sometimes we assume that as soon as we sign on the dotted line, our car finance contract is binding until the final payment is made.
However, from the day you sign, circumstances can change, which may affect your ability to keep paying the monthly payments.
That’s why you’ll be pleased to know that you can cancel your car finance. In the UK, a law has been passed to allow certain types of car finance agreements to be ended early.
Read on to find out how.
Under the Consumer Credit Act 1974, you have the legal right to cancel your car finance agreement early.
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 also 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 PCP finance, 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% as the amount will also include the balloon payment, as well as interest charges and fees. If the vehicle is damaged, you may be charged.
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 a terminating a PCP agreement.
Half the amount will have to have been paid, which is usually around the mid-way point of your HP contract, unless a higher initial deposit has been made and, therefore, it could be earlier.
The car will have to be in good condition too, or you may be charged for any damages.
How Bristol Street Motors Can Help
At Bristol Street Motors, our team of friendly 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 to us, we will pay the outstanding balance for you and deduct it from the price we give you for your car.
Find out more about selling your car on finance.