Under UK law, you have the right to terminate certain types of car financing agreements prematurely. As with other types of credit, when entering into an HP agreement, your financial company sends details of the repayments you make to a credit information bureau. Learn more about the information displayed in your credit history. For example, if you had a three-year lease that pays £200 a month and wanted to terminate the contract after two years, it would cost you £1200 (50% of the remaining 12 months). If you have repaid 50% or more of the total amount of funding to the financial company, you can use the voluntary termination clause to terminate your agreement on the PCP. Their right to early termination of a lease (HP) or personal contract (PCP) is set out in section 99 of the Consumer Credit Act 1974. This law aims to protect you if you find a financing contract that you later deem unaffordable. During the agreement, you can use the car, but the financial company actually owns it. You are the owner, and you are the tenant. The financial company may be able to take back (withdraw) the car if you are late in your payments.
At the end of the agreement, the financial company gives you ownership of the car, provided that you have made all the refunds. Here`s a summary of what else you need to know if you have car financing at an early stage. The PCP deal is one of the most popular types of auto financing. For this type of financing, you need to make a first deposit, followed by a series of monthly payments. At the end of these monthly payments, you have two main options. If you terminate your contract prematurely, it will be displayed on your credit report. They are not recorded on the reasons for the termination of the agreement. It will make little or no difference to your credit score, so it`s a much better way than no payment, which could have a big impact on your credit file, making it difficult to borrow money in the future. If you do not wish to keep the vehicle, you can return the car.
Many people then choose to launch another agreement on the PCP. A voluntary termination is a better option if the value of the car is much more amortized than you had anticipated at the beginning of the contract. This is because if you pay the car loan instead, you are the direct owner of the vehicle which, in the end, is worth less than what you just paid for it. Since companies lose money if you terminate early deals, this means that they are often not very favorable if you want a voluntary dismissal. They might want the process to take as long as possible. Whatever your reason for leaving your self-financing contract, as you actually do, it depends on the type of plan you have integrated. Different rules apply to personal purchases of contracts and rental purchases. Here too, as with the PCP agreements, if you have not repaid 50% of the total amount of funding, you can get the difference, so you can cancel. The same rule that the car is in good condition also applies to HP agreements. If you have not reimbursed 50% of the total amount of the financing, you can nevertheless terminate the agreement in advance by paying the difference. If you have a lump sum to invest, you can pay your HP and become the owner of the car.
Your balance is the outstanding loan plus a tax that cannot be collected if you only repay £8,000 or less. If you repay more, the fee is limited to the lower in between: if you have the funds available, prepaying a PCP is definitely an option. To find out what the amount of this amount would be, you need to contact the financial company and they will be able to give you a billing amount that would end your contract.