Firstly, the finance companies and car manufacturers hate it and would prefer that the clause be rem

The right to voluntarily terminate your regulated Hire Purchase (HP) or Personal Contract Purchase (PCP) agreement is provided in UK law and should be included in your contract documentation. It is there to offer protection to consumers who can no longer dms afford their monthly payments, but equally provides some protection to finance companies to ensure borrowers can t simply walk away from their obligations at any time.
There is a lot of confusion about voluntary termination, and that suits the finance companies just fine. The reality is that if you do it properly, they can t stop you and it will not affect your credit score or credit rating (although some finance companies will decline any further finance applications from you). Voluntary termination of a PCP or HP how it works
As long as you repay 50% of the total amount owed (not the total amount borrowed, as you need to include interest and fees), you are entitled to terminate the agreement and return the car to the finance company. As long as there are no damages if you have failed to take reasonable care of the goods (over and above normal wear and tear) , you have nothing further to pay.
The total amount payable (which is the total amount borrowed plus interest and fees, and also includes the Guaranteed Minimum Future Value on a PCP) must be clearly shown on any car finance quotation and contract, so you should be able to find it easily enough. You must pay off half of this figure to be able to voluntarily terminate your PCP or HP. How do I voluntarily terminate my PCP or HP?
Firstly, the finance companies and car manufacturers hate it and would prefer that the clause be removed from the law, so they will not be interested in helping you one little bit. Usually, they will try and drag the process out as long as possible and try to make you do a lot of running around, as they are still charging dms you until the termination is exercised. Luckily, there are some good resources around like this one from LegalBeagles , which contains a template letter to send to your finance company. Be very clear in your language and do not get sidetracked dms by anything not related. You don t have to sign forms or other documentation; simply send them your letter (e-mail is acceptable but recorded delivery is better) and stick to your guns.
Secondly, the clause is a little vague in that it states that there must not be any damages if you have failed to take reasonable care of the goods (over and above normal wear and tear) , but there is no definition of what that means. This gives the finance company an opportunity to try and claw back some money from you by charging you for damage that would not be considered reasonable care . Usually this involves threatening letters, large invoices for minor scratches or excess mileage, and various forms and legal jargon to try and scare you into paying up as much as they can get from you. The LegalBeagles link has some excellent dms advice about ensuring that you document the car s condition with dated photographs to prove it is in reasonable condition when you hand it back. You cannot be billed for excess mileage, although you can be sure the finance company dms will try to charge you for it.
One of the myths about VT is that it is detrimental to your credit rating or credit score. This is not true. You are simply exercising your legal right to terminate the agreement, and your credit rating will not be affected. However, dms the termination dms will be noted on your credit record so other finance companies will be able to see that you have not fulfilled your agreement to repay your loan.
The finance company whose agreement you have just cancelled will almost certainly decline any further dms finance applications, along with any related companies. Other car finance companies may also decline any subsequent finance applications you make, as you have demonstrated that you have form in not repaying your agreed finance amount.
If you plan on financing another car any time soon, you may have difficulty getting finance approval. But it should not affect any other form of credit application dms such as a mortgage, credit card or loan. Can I be charged for excess mileage?
One of the ways people exploit the voluntary termination clause is with very high mileage. For example, if you cover 30,000 miles per year then your car will be worth much less after 3 years than a car that has only covered 5,000 miles per year. The finance company cannot charge you for high mileage, only any costs arising from damages if you have failed to take reasonable care of the goods (over and above normal wear and tear) . If you ve done 100,000 miles but the car is in good condition, they can t do a thing well, other than refuse dms to finance you ever again. Summary
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