Voluntary Termination on Car Finance: Your Rights Explained

Life does not always go to plan, and circumstances can change significantly during the course of a car finance agreement. If you find yourself unable to keep up with payments or simply need to exit your agreement early, voluntary termination is a legal right that many finance customers are unaware of.

Under Section 99 of the Consumer Credit Act 1974, if you have a regulated HP or PCP agreement, you have the right to voluntarily terminate the agreement once you have paid at least 50 per cent of the total amount payable. This includes all payments made, any deposit and the balloon payment on a PCP deal.

Once you have reached the 50 per cent threshold, you can hand the car back to the finance company and walk away from the agreement with no further payments due — provided the car is in reasonable condition with no excess mileage on a PCP deal.

If you have not yet reached the 50 per cent threshold, you can still terminate early, but you will need to make up the di?erence to reach that figure before the car can be returned.

It is important to note that voluntary termination is not the same as defaulting on an agreement. Used correctly, it should not negatively a?ect your credit file, though some lenders may note it on your record.

Before exercising this right, always notify the finance company in writing and keep a record of all correspondence. Return the vehicle through an agreed process and document its condition thoroughly to protect yourself against any subsequent damage claims.

Knowing this right exists gives you an important safety net when taking out a finance agreement.