When can I end my PCP agreement through voluntary termination?
You can end your PCP through voluntary termination once you have paid 50% of the total amount payable. This does not just mean half your monthly payments – it is half of the amount payable over the entire course of the agreement, including interest, fees and the optional final-balloon-payment.
If you have paid this amount, you can walk away from the contract. Bear in mind that if you have paid over 50%, you will not be refunded by the finance company.
What are my legal rights?
Thanks to the Consumer Credit Act 1974, Section 99, all consumers have the right to end a PCP agreement through voluntary termination. This will be clearly set-out in your contract, when you sign it.
This law is in place to protect consumers who may be struggling with the monthly repayments. At the same time, the 50% minimum required offers protection to finance companies so people cannot abandon their obligation whenever they wish.
How do I voluntarily terminate my PCP contract?
To start the voluntary termination process, you should:
- Contact your finance company in writing
- Post your letter via recorded delivery and include the date
- Keep your proof of postage
- Send your termination again as a copy via email
Your finance company’s contact details should be detailed in your contract.
It is understandable why PCP companies do not like voluntary termination because they will often lose out. In most cases, the company is having to take back a car that holds less value than the remaining balance on the contract.
When it comes to telling them you wish to end the contract early, you may not receive the most enthusiastic of responses. In rare cases, the finance company may try to convince you to take another option, or generally take a little longer than expected to process your request. Remember that you are exercising your legal right to terminate the agreement.
Voluntary termination charges
On top of your VT payment, you may encounter charges after returning the car:
- Admin fees
- Excess mileage
Depending on what is outlined in your contract, you may need to pay admin fees to your finance company. Collection charges are particularly common, where you compensate the lender for picking up your vehicle. Any fees or charges will be set out in the terms and conditions of your finance agreement, so make sure to check your contract carefully.
When you first take out the contract, you will have to agree to a mileage limit. When the car is returned, the mileage on the clock will be checked against the amount stated in the agreement. If you have exceeded this figure, you could pay up to 30p per extra mile or more, depending on the make and model of your vehicle.
If you have damaged the vehicle beyond the standard expectations, you will be liable for the repair costs.
If you are unsure what normal wear and tear relates to, you can use the British Vehicle Rental and Leasing Associating (BVRLA) guide. It provides an industry standard and by adhering to these guidelines you should not experience any issues once the car has been returned.
You may not agree with the company’s assessment of the car’s condition and if you are asked to pay for repair damages you believe to be unfair, you have a right to challenge it. This will involve writing to the company and laying out in detail why you believe their assessment is incorrect.
To avoid this, ask a professional to fix any serious damage before returning the vehicle.
Will a voluntary termination show up on my credit file?
Voluntary termination will appear on your credit file, although it will not state the reason why the contract was ended early.
It also should not make much of a difference to your credit score. Therefore, it makes more sense to terminate your HP or PCP contract instead of missing payments, which will have a negative effect on your score and lead to further charges.
What to do once my PCP has ended?
As you are nearing the end of your PCP agreement, or if your PCP vehicle has been returned and any outstanding payments have been settled, you can decide what steps to take next.
If you are having money problems, it is best to wait until your finances are more stable before signing another contract.
But for most of us, driving is an essential. In that case, look around for a more affordable car that suits your finances, so instead of PCP, why not consider a lease deal?
Car leasing works on a rental basis. This means you lease the car for a fixed period of time (usually between 2-4 years) and pay the same amount of money each month. There is no interest involved and you do not make a balloon payment, as you simply return the car at the end of the contract.
If you want to know more about the difference between car leasing and PCP, we have a handy guide for you to learn more.
Or if you’re ready to get the lowest price on your next car, check out our best lease deals, where we have handpicked a wide choice of special offers on a range of makes and manufacturers, including Audi, Kia, Mercedes-Benz and lots more.