Options for Ending a PCP Early
There are two ways to end your PCP car finance agreement early, depending on how much you’ve paid – through either voluntary termination or early settlement.
If you’ve paid 50% or more of the total amount, you can choose voluntary termination. If not, you can settle early and keep the car.
Read our helpful guide below for more information on how to get out of a PCP agreement.
Anyone can terminate their PCP contract after 50% of the total amount payable has been paid. This is referred to as voluntary termination, which is a legal right covered under Section 99 of the Consumer Credit Act 1974.
The important things to know about voluntary termination are:
- If you are struggling to keep up the monthly repayments, voluntary termination may be a good option.
- You must have paid 50% or more of your full contract (the Total Amount Payable), including any interest and fees before you can terminate.
- If you have paid more than 50% and voluntarily terminate, you will not receive any refund.
- Finance companies normally need notice of your voluntary termination in writing.
- You will need to return the car, or pay to have it collected.
- If you have damaged the car beyond the Fair Wear and Tear guidelines, you will need to pay for repairs.
- If you have exceeded your mileage agreement, you will need to pay an excess-mileage charge.
How much does voluntary termination cost?
You can arrange voluntary termination once you have paid at least 50% of the total amount payable under the contract. This amount will be clearly stated within your agreement. It includes interest and any admin fees charged by the finance company. You are also liable for any damage or mileage fees incurred.
If you have not reached the 50% point, you will need to pay up until you reach this figure. Or you can go for option two, early settlement, if you want to end your PCP early.
If you have not paid 50% of the contract, you can still get out of your car finance through early settlement.
- Early settlement is best if you can afford to pay off the full remaining balance, or if the trade-in value of the vehicle is greater than the settlement figure.
- It can happen at any time during your agreement.
- You will pay the outstanding balance, any admin fees and the final balloon payment agreed at the beginning of your contract.
- However, you will not need to pay any future interest.
- You will own the car once you have paid the settlement figure
How much will I have to repay?
Your finance company will calculate the settlement figure in accordance with the “Actuarial Method” set out in the Consumer Credit Act 1974. Each payment that you make under the agreement is made up of both capital and interest amounts. Your finance company will calculate your settlement figure by taking the outstanding capital-balance and adding the interest due up to the settlement date, plus one month’s additional interest. You will receive a copy of the settlement figure in writing: this will show a clear breakdown of the amount required.
Why would I need to end my PCP early?
Circumstances change, and if you are having issues with your income or employment, your PCP agreement may no longer be affordable. It is much better to try and renegotiate your contract instead of getting into debt.
It might just be that having a car is no longer necessary for your lifestyle, for example if you are moving away. Or you might need a different type of car if you have a growing family.
Whatever the reason, you should contact the finance company as soon as possible to discuss your options. If voluntary termination or early settlement are not practical, you might be able to lengthen your contract to reduce the monthly payments or agree to a payment plan with the finance company.
What happens if I’ve been in an accident?
If the car is written off or stolen, you must settle the agreement.
It may be recommended to take out Guaranteed Asset Protection (GAP) insurance. This provides cover if a car is written off or stolen and never recovered. Depending on the type of GAP insurance that was taken out, it should cover the full amount of outstanding payments that were left on the contract.
When it comes to bumps and scratches beyond normal wear and tear, you will have to pay for any repairs, if you intend to return the vehicle to the finance company at the end of your agreement.
I’m canceling my PCP but still need a car
If you do want to get out of your PCP finance agreement but still need a car, consider leasing – it’s one of the most popular ways to drive a brand-new vehicle.
Leasing is similar to renting, so you don’t need to pay any interest like with PCP. Learn more about the differences between leasing and PCP, or if you’re ready to start a new deal, see our special offers and find a great price on your next car.