How to Get out of Car Finance – Step by Step Guide
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
When it comes to car finance, it can feel like a maze. If you’re asking “what happens if I cancel my car finance within 14 days”, you’re in the right place. Each month, over 170,000 people visit our website seeking advice on financial matters.
In this guide, we’ll explain:
- What car finance is
- Your rights and choices in your car finance deal
- How to end your car finance deal in a good way
- The impacts of ending your car finance early
- Steps to take if you’re having trouble with your car finance payments
StepChange stress the need for professional debt advice, noting that 60% of adults in financial trouble hesitate to seek help.1 We know that making car finance payments can feel heavy -you might worry about your car being taken away or find car finance contracts hard to understand.
But you’re not alone! We’re here to help you make sense of it all and find the best way forward.
Can I get out of a car finance agreement I just signed?
Cancellation rights for car finance UK stipulate that all car finance agreements come with a 14-day cooling-off period.
It allows you to change your mind and end the agreement.
Can I cancel my car finance with more than half of the balance outstanding?
Can I end a car finance agreement early?
Yes, there are two ways to end a car finance agreement early depending on your situation.
If you have Black Horse Finance, I’ve written a detailed guide of your specific options already. Find this information by reading our Get Out of Black Horse Finance article.
Can I change my car finance company?
Switching car finance providers depends on the car finance company and your personal circumstances.
» TAKE ACTION NOW: Fill out the short debt form
Common reasons for cancelling a car finance agreement
The most common reason for cancelling a car finance agreement early is because the borrower’s finances have changed and they’re struggling to keep up repayments.
By exiting the agreement early, you might lose the opportunity to purchase the vehicle, but you can avoid getting into car arrears and much bigger debts.
In a nutshell, it helps cut losses and avoid serious action taken against you.
On the other hand, some people use voluntary termination because they realise they can get a better deal elsewhere.
What happens if I voluntarily terminate my vehicle?
It’s your legal right to cancel a car finance agreement early. However, you must meet specific criteria.
You must return the vehicle. Plus, you would be liable for half the amount payable plus any arrears and charges, should they be applicable.
How a debt solution could help
Some debt solutions can:
- Stop nasty calls from creditors
- Freeze interest and charges
- Reduce your monthly payments
A few debt solutions can even result in writing off some of your debt.
Here’s an example:
Situation
| Monthly income | £2,504 |
| Monthly expenses | £2,345 |
| Total debt | £32,049 |
Monthly debt repayments
| Before | £587 |
| After | £158 |
£429 reduction in monthly payments
If you want to learn what debt solutions are available to you, click the button below to get started.
How can I request a voluntary termination?
To request a voluntary termination from your finance company, it’s best to put it in writing.
We have created a free letter template to make this request to car finance companies.
Download our terminate car finance template letter for free, add your details and send it off.
This can save you time and worry when informing your lender that you wish to terminate.
Can I settle my car finance agreement?
An alternative option is to ask the lender for a settlement figure to purchase the car outright earlier than planned.
You may want to do this if your finances have improved or you’ve received a windfall.
The settlement figure will be an amount of money to pay off the agreement early and become the instant owner of the car.
The total amount of the settlement figure should be slightly lower than the remaining finance balance. But you may have to pay early settlement fees.
Plus, it could have an effect on your credit file.
Don’t forget that you may have agreed on a final balloon payment at the end of the contract. You would still need to pay this if you have a PCP agreement.
Paying to settle with the lender can be beneficial if you can afford to do so. You will immediately own the car and could then sell it to recover some or all of the money if desired. Proper budgeting can go a long way in making car payments easier, so if you want some useful tips, please take a look at the table below.
| Budgeting Advice | How You Can Lower Your Expenses |
|---|---|
| Arrange a Debt Repayment Plan | To negotiate, contact your creditors via phone, email, or letter to explain your financial situation, and offer to pay an amount you can afford. |
| Save on Utility Bills | Compare energy providers to find a cheaper deal. Use energy-efficient appliances. Reduce water usage with low-flow fixtures. |
| Save on Groceries | Shop with a list to avoid impulse buys. Buy store brands instead of name brands. Look for sales and use coupons. |
| Cut Back on Non-Essentials | This includes dining out, entertainment, subscriptions, and luxury items. Look for free or low-cost entertainment options and cook meals at home. |
| Transportation Costs | If possible, use public transportation, carpool, or consider biking to work. If you own a car, maintain it regularly to avoid costly repairs. |
| Negotiate Bills | Contact service providers (like phone, internet, and cable) to negotiate a lower rate or switch to a cheaper plan. |
| Consolidate Debts | If you have multiple debts, consider a debt consolidation loan or a balance transfer credit card (with caution) to lower interest rates. |
| Sell a Financed Car | When you sell a financed vehicle, the proceeds can be used to pay off the remaining loan balance. |
| Use Cash Instead of Credit | To avoid accumulating more debt, use cash or a debit card for your purchases. |
| Seek Professional Advice | If you’re struggling, consider contacting a debt advice service like StepChange or National Debtline. They offer free, confidential advice. |
Will a car dealer settle my finance?
Some car dealerships offer to help you settle your existing agreement if you wish to use the vehicle to help buy one of their own vehicles.
Not all dealerships offer this option.
What to watch out for when ending PCP or HP early
There are two things to be aware of when wishing to give back the car early and end a PCP or HP financing deal.
These are:
- You’ll need to have paid 50% of the value of the agreement already or be willing to pay up to the 50% mark.
- You could be hit with early repayment charges
An early repayment charge is usually applied when a car financing deal has ended prematurely.
These fees can vary in cost but they’re not exactly cheap. Check the early repayment fees you’ll be subject to within your credit agreement. Or ask the lender directly.
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Is it worth ending your car finance agreement early?
Depending on your situation, it could be worth ending your car finance agreement early.
When should I end my finance deal early?
It’s most beneficial to end your car finance early if you know doing so will prevent arrears.
Although you’ll lose what you put into the agreement already – or at least 50% – it’s better to miss out on this than create debts which can be subject to interest and chased in court.
What can happen if you don’t pay car finance?
The consequences of defaulting on car finance payments can be far-reaching.
If you don’t pay your car finance, the lender is likely to make contact and ask you to catch up on the missed payments.
They can also add late fees and charges to your arrears.
Plus, all missed payments can be reported to credit reference agencies, which lowers your credit score.
If you don’t catch up with payments, the lender can repossess the vehicle without a court order if you’ve paid less than one-third of the total car finance agreement.
Otherwise, the lender may need a court order to repossess the vehicle.
The remaining arrears can still be chased by the company, and they may decide to take you to court to recover the money owed.
Can my car be repossessed if I have paid more than half?
Your PCP or HP vehicle can still be repossessed if you’ve paid more than one-third of the total agreement (including interest).
The rules around repossession of financed cars in the UK are quite clear. In short, to do this the car finance provider must get a court order first.
The company must follow a proper and strict process of acquiring the court order before it can take the vehicle away.
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