It is not an ideal scenario to imagine, but it is one that is worth bearing in mind: what if you are well into a car finance agreement, only for your circumstances to change to such an extent that you need to start considering how you can get out of it? There can be a lot of worry and confusion as to what the rights of a driver are in the event of a car finance plan cancellation, but that is what this article will be discussing today.
A voluntary termination clause exists as part of a car finance agreement for both PCP (Personal Contract Hire) and HP (Hire Purchase) plans, in the event that your finances reach the point where you are no longer able to keep up payments on a long-term basis. It is a clause that should only be activated when you have considered and rejected all other options, meaning that it is not a decision to be taken lightly. However, it is a decision that can be made by the driver, should your circumstances deem it necessary.
Although you can activate the voluntary termination, there can be different steps for you to take as a result; it isn’t just a case of escaping the agreement and moving on. If you are in the midst of a Personal Contract Hire finance plan, then you will have to pay 50% of the complete cost back to the relevant finance company in order to leave the agreement early, along with any interest and additional fees. Bear in mind that because of the balloon payment that is required as part of the PCP plan in the first place, it could mean that you have to pay a large amount in order to leave, but you can do so nevertheless.
As far as a Hire Purchase is concerned, then the same largely applies in that you would have to pay 50% of the total amount to the finance company in order to leave. The difference here is that there is no balloon payment involved – there is a 10% deposit prior to the agreement beginning, but not a large-scale balloon payment – meaning that you will have already paid a significant amount to the finance company already. Ergo, leaving via a voluntary termination should be easier. It’s worth remembering that you will have already considered which finance plan was best for you without ever considering the possibility of a voluntary termination, so picking a plan based on how to potentially leave it if necessary is definitely not recommended.
But as you can see, the driver does have the right to cancel an agreement by following the steps above to instigate a voluntary termination. Find out more about this by visiting our news journal here.