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Returning a car on finance

24 April 2023
This is the article for you if you’ve been wondering what happens if I want to end my car finance early. We’re family-run car specialists and are here to answer all your questions about returning a car on finance. So, let's take a look at how you go about returning a car on finance.
We’ll cover everything from voluntary termination to settlement figures.

Can you cancel a car finance agreement? 

When you take out car finance, you enter a credit agreement, however, it is possible to get out of a car finance agreement early. A change in personal circumstances can lead to the need to cancel a car finance agreement early, this goes for personal contract purchase PCP and hire purchase agreements. They are, however slightly different in how they work.

Time to investigate:


Personal contract purchase PCP

A change in financial circumstances can often mean you need to leave your PCP agreement early. If you have paid at least half of the outstanding debt to the finance company, the agreement can be terminated voluntarily. The total finance amount will include any interest rates and additional fees too. If you haven’t paid half the final amount at the time of giving the car back, you will have to pay the balloon payment too.


Hire purchase hp

As with a PCP deal, you must have repaid half the total amount on the finance plan to return a car with a hp agreement. With a hp deal, there is no balloon payment included in the finance deal. As with a PCP agreement, if you have negative equity in the car (you haven’t paid back more than half), you can make up the difference which then lets you cancel the finance agreement.

What is Positive equity?

This is when a car is worth more than the amount you owe on it.

In a hp agreement and PCP deal, the vehicle’s condition when you hand the car back is important. Other than general wear and tear, there should be no damage, and the car's appearance must not have changed.

Top Tip: 

When you have a car finance deal, you are not the legal owner of the vehicle. Read our guide to selling a car on finance to find out what you can and can’t do! 

Can I cancel car finance before I get the car?

Under UK law, the car finance agreement will have a 14-day cooling-off period. If the 14-day cooling-off period has passed, it’s unlikely you’ll be able to cancel. If you have paid a deposit for the new car and cancel within 14 days, you should get all your money back.

Cancelling a hire purchase agreement works a little differently. With a hire purchase, if you want to cancel the agreement, the finance company must be paid the money owed for the car within 30 days.


Can you give a car back during finance?

The answer is yes you can give your car back, but there are a few things to be aware of.

  1. You’ll likely be charged an early hand back fee. Check your contract for more information on what you’ll have to pay when you hand the car back
  2. When you agree to the monthly payments, you’ll also have pro-rata mileage limits. Should you exceed this limit, when you’re giving the car back, you will be expected to pay an extra charge for every mile travelled. The charge will be outlined in your personal contract hire plan
  3. If your financial circumstances mean you need to leave the deal early, you might have to borrow money via personal loans to pay the remaining balance to bring you up to 50% of the finance deal. It’s worth figuring out when applying for a personal loan whether it will end up costing you more in the long run compared to trying to reach the halfway point in your monthly repayments.


Can I give my car back on finance if I can't afford it?

You can voluntarily terminate your car finance agreement if you cannot afford the monthly repayments. Under the Consumer Credit Act, you can terminate your agreement provided you have paid at least half the cost of the finance agreement.

Another option is to sell your car to IsYourCarAvailable. We can buy your car outright and settle any outstanding finance. All you need to do is contact your finance provider and get an up-to-date settlement figure to find out how much it is to end the agreement early and send the car back.

Get an online valuation in under two minutes


Does voluntary termination of car finance affect credit rating? 

Voluntary termination does not affect your credit rating as you are exercising a legal right to end your agreement early.


How long does a voluntary termination stay on your credit report?

From the date you ended the finance agreement, your credit file will show the voluntary termination for seven years. Unlike a voluntary surrender, voluntary termination is unlikely to harm your ability to apply for credit in the future.

Voluntary surrender is when you contact the lender to let them know that you can no longer afford all the monthly payments.

When contacting your finance provider to communicate your wish to terminate or surrender the agreement, be clear with the route you’d like to take to avoid any confusion. In the event of voluntary surrender, you’ll be expected to hand the car back and pay any outstanding payments.

Returning a car on finance - FAQs:


Is it worth paying off hire purchase early?

This depends on your circumstances. With a hire purchase and personal contract purchase, you can pay off your car early. Ending the deal early will mean you no longer have to pay the monthly repayments and you will own the car outright. If the settlement figure is lower than the total finance due it is worth paying off early. In the long run, early repayment could save you money on interest. Before you commit to a final payment, speak to the finance company directly and find out if paying off the hire purchase early will mean you have extra fees to cover.


What happens if you pay car finance off early?

If you’re able to pay off your car finance early and stop the monthly repayments – hooray! Be mindful that you’ll likely have a repayment fee (often referred to as a resettlement fee). Once you have paid the total finance amount, you will own the car outright and can do what you want with the vehicle. 

Looking to sell your car? At IsYourCarAvailable we guarantee you the best price possible for your car.

Can you pay lump sums off hire purchase?

You can pay off your car loan faster and reduce the number of monthly repayments on your hire purchase (hp) by paying lump sums back to the finance company. This means the length of your finance deal will be shorter and you’ll end the deal early. 


Is it better to pay off a car loan early or on time?

There are several reasons why you might want to look at making an early repayment to settle the outstanding balance on your car finance deal. If you’re thinking of paying off a car loan early, here are some things to consider:

- The cost. You’ll likely need a chunk of money to make the final payment – consider if you can afford to pay it off in one go

- The long-term saving. This depends on the interest rate available when you paid the initial deposit for the car

- The why. Do you want to change car and outright ownership would help you sell it? Establish your reason for wanting to change and figure out how you’ll come out financially

- The car’s value. Will paying off your loan early mean you’ll pay more or less than it costs?

If you’re looking at returning a car on finance, we hope this guide has helped you decide on the best route forward. Remember to communicate your intentions with the finance company and ask for clarification on the terms of your agreement so you don’t end up paying any hidden fees.

At IsYourCarAvailable we can settle any outstanding finance on the car you would like to sell. Contact our vehicle appraisal team for more information - 0800 093 4240.


You might also like: Want to part-exchange your car? Check out our handy guide