What Happens at the End of a Car Finance Agreement?

The end of a car finance agreement is something many buyers do not think about until it arrives — but knowing your options in advance means you can plan ahead and make the right decision for your circumstances.

At the end of an HP agreement, the process is straightforward. Once you make your final monthly payment, ownership of the car transfers to you automatically. There is no balloon payment, no decision to make and no mileage penalty. The car is yours outright.

At the end of a PCP agreement, you have three choices. First, you can pay the guaranteed minimum future value (GMFV) — the balloon payment — and keep the car. Second, you can hand the car back to the finance company and walk away, provided you have kept within the agreed mileage and the car is in good condition. Third, if the car is worth more than the GMFV, you can use that equity as a deposit on your next vehicle, e?ectively rolling into a new agreement.

The third option is how many PCP customers cycle through vehicles every two to three years, always driving a relatively new car for a manageable monthly payment.

It is worth being aware of excess mileage charges on PCP agreements. If you have exceeded the agreed annual mileage, you will be charged a per-mile penalty at the end of the term. Keeping track of your mileage throughout the agreement avoids any unwelcome surprises.

Whatever type of agreement you are on, it is worth reviewing your options a few months before the end date so you have time to explore what is available and make a considered decision.