When you are buying a car on HP or PCP finance, you have the right to hand the car back and end the agreement.
This is known as Voluntary Termination (VT). Depending on how much you have paid, you may not need to pay any more after VTing the car.
In 2022, many people are struggling to pay their car finance, with petrol, energy bills and other costs rising so fast. See Can you afford your car finance payments? which looks at your options.
One of those options is to VT the car. If your problems are likely to last a long while or you simply don’t need the car, it is often much better to VT a car than have the lender repossess it.
The finance companies don’t like this – they would make more money if you kept paying them. They probably won’t suggest voluntary termination if you say you have money problems.
So you need to know about your right to VT the car and how to do it.
Contents
Background
The types of legal agreements this applies to
Voluntary Termination applies to the following types of car finance:
- Hire Purchase (HP);
- Personal Contract Purchase (PCP) – this is a type of HP where you have to make a large payment at the end to own the car. The same VT rules apply as for all other HP contracts.
- Conditional Sale – this is very similar to HP and the terms for VTing a car are exactly the same as for HP. Wherever you see HP in this article, the same applies to Conditional Sale contracts.
There is no right to VT your car if you are leasing it.
If you have borrowed the money from your bank, you usually have a simple loan, not linked to your car. Here you own the car already and if you can’t afford the loan repayments, the bank cannot repossess it.
Three reasons you may want to hand back your car
- You can’t afford the repayments. it’s good to get advice on your debt options before you do this. Read Can you afford your car finance? and talk to National Debtline on 0808 808 4000. They can help you look at your alternatives.
You can VT the car and also make an affordability complaint, see below. - There may be negative equity in the car. This can occur when the finance interest rate is very high. Sometimes the remaining payments you should make are more than the car is worth!
- The car may no longer be suitable so you want a different one. I’ve looked at this situation in Can I get another car after VT or is part exchange better?
Whatever your reason for wanting to hand back the car, the procedure for doing it is the same.
Your right to terminate (VT) your contract
All HP contracts, including PCP, have the same provisions letting you terminate the agreement and hand back the car. Your rights are defined in Section 99 of the Consumer Credit Act 1974.
The agreement you received when you bought the car will have the following clause:
TERMINATION: YOUR RIGHTS
You have a right to end this Agreement. To do so, you should write to the person you make your repayments to. They will then be entitled to the return of the Goods and to half the amount payable under the agreement, that is [£x – the exact figure for your contract]. If you have already paid at least this amount plus any overdue instalments and have taken reasonable care of the goods, you will not have to pay any more.
Here is an example:
“Half the total amount payable under this agreement”
This £x is an important figure – find your finance contact and look up what it is. For the rest of this article, I will call this the 50% figure.
In a traditional HP contract, you pay the same amount every month for a set number of years. Here you will have paid the 50% figure after you have made half the monthly payments.
In a PCP contract, the lump sum payable at the end is included in the total amount payable under this agreement. As a result, you won’t have paid the 50% figure until you are a lot more than halfway through the contract.
Whether you end up owing money after VTing the car depends on how much you have paid already:
- you have paid less than the 50% figure You can still VT your car! The termination clause does not say you have to have paid the £x before you terminate the agreement. When you VT the car you will owe the difference between what you have paid and the 50% figure.
- you have paid at least the 50% figure with no arrears Here you can hand back the car and you will not owe any more money at all. If you have paid more then the 50% figure, you will not get any money back.
- you have paid more than the 50% figure and you have some arrears You don’t have to pay the arrears before you terminate the agreement. When you VT the car you will still owe the arrears.
“Have taken reasonable care”
If you haven’t “taken reasonable care” you may have to pay extra to cover the cost of repairing any damage.
Lenders lose money when you VT a car so they may want to try to get as much back as possible from you by sending threatening letters and invoices alleging paintwork damage or scuffs to alloy wheels. You can reduce the problems you may have if you photograph the car before you return it.
If the lender ends your contract it usually costs you more!
The 50% figure cap on the amount you have to pay means that VTing a contract can save you a lot of money.
If your car is repossessed by the lender, you normally have to pay the whole of the total amount payable under the contract, less whatever the car is sold for. And the car may be sold at auction for less than you would hope.
National Debtline has a comparison in the Example Agreement at the bottom of its Hire purchase and conditional sale factsheet. That shows how much less debt you may end up with if you VT a contract compared to when the lender ends the contract because you have arrears.
If you aren’t convinced VTing will be cheaper for you, talk to National Debtline who can help you look at your alternatives and what they will cost.
Important – you can’t VT your contract if it has already ended
You can only terminate your contract if it is still going. So if the finance company terminates your contract because of arrears, you lose the right to VT the contract and – as explained above – this may cost you a lot more money.
If you can’t avoid arrears on your car finance, you may need to decide whether to VT your contract before the lender terminates it.
Don’t panic and rush into a decision if you just miss one payment. A lender has to follow certain procedures to terminate your contract and they have to send you a Default Notice giving you the chance to pay the arrears. The National Debtline factsheet looks at what the lender has to do.
But think about taking some debt advice as soon as you know you have a problem. You may need to act very fast if you receive a Default Notice so it’s good to have thought about your options beforehand.
How to VT your contract
Tell the finance company
You must tell the finance company in writing that you are terminating your contract. National Debtline has a simple template letter you can use here.
(If you don’t tell them in writing, this will be treated as though you have “voluntarily surrendered” your car, not terminated the agreement. Then you will not get the protection of the 50% figure being the maximum you have to pay.)
Send that letter by recorded delivery to the finance company’s address – it is set out in your credit agreement. Keep a copy of the letter and the proof of postage. You can send a copy by email, but send the letter as well.
If you are asked to sign something by the lender, it is best to refuse to do this. If you talk to the lender on the phone, use the phrases “terminate my agreement” or “voluntary termination”. Do not agree if you are asked if you want to surrender the car or have it repossessed – these are not VTing your car.
Returning the car
The lender will give you details of how to return the car. You may be asked to deliver it somewhere – this should not be an unreasonable distance away – or they may pick it up from your home. You should not be asked to pay a charge for this.
Read the Legal Beagles Guide. That covers everything you need to hand over, including servicing history and keys, as well as the importance of taking photographs to show the car is in reasonable condition.
Settling money still owing
After the car has gone back, the lender will either confirm that you don’t owe any more money or tell you how much you do owe. If you don’t think their calculation is fair, you should challenge it – see below.
If it is fair, you then have a debt to settle. You can make an offer of monthly payments. National Debtline’s budget tool will suggest what you can afford. You can send a copy of the budget to the lender. The lender can take you to court for a CCJ if you do not pay what is owed, but most lenders won’t do this if you have made a reasonable offer of monthly payments.
Should you make an affordability complaint?
If the car finance was a problem from the start, with you having difficulty paying your other debts, bills and living expenses, then the finance may well have been “unaffordable”. For example if your other debts such as credit cards or overdraft were increasing while you were trying to pay for the car.
You can make an affordability complaint after you VT the car. See Refunds from large loans and car finance which has a template you can use to complain.
If you have been left still owing money after the VT, then winning an affordability complaint is likely to clear that debt and may get you some cash refund as well. You would also have your credit record cleaned of any problems with the car finance.
Problems that may occur
Many people don’t have any problems if they follow the above process to VT their car. Don’t read this section and feel that most people find this difficult – they don’t.
But here are some things that can happen.
For all of the following issues, National Debtline and the Legal Beagles Vehicle Finance forum are great resources to explain what is happening, your rights, generally support you and suggest what you can do.
“Lender says I can’t terminate the contract”
The lender may say you can’t VT it because you haven’t paid 50% yet or because you have arrears. This isn’t correct. You have a statutory right to do this, your finance company can’t have more restrictive rules.
Go back to the lender and say that you are terminating your contract under Section 99 of the Consumer Credit Act (1974) and that section 99 and section 100 of the Act do not say that termination is conditional on your having paid half the total contract amount or on not having arrears.
The lender may immediately agree that you can VT the car – they were just trying it on in the hope that you would be put off.
If the lender still refuses, put in a formal written complaint to the lender. At the end of the complaint say that you will be taking the complaint to the Financial Ombudsman if it is not resolved. If you are unsure about what to write, talk to National Debtline
You can take your complaint to the Financial Ombudsman as soon it is rejected by the lender in writing or after 8 weeks if you have not had a response by then.
Making it difficult to return the car
Lenders may make it harder or more expensive for you to hand back the car eg by:
- adding charges;
- insisting you complete their documentation; or
- saying you have to deliver the car to somewhere that is not close
If this happens, take some advice on how to tackle this. You may find some of the Legal Beagles template letters useful.
Unreasonable charges for damage to the car
If you think the amount you are being asked to pay to repair damage is unreasonable, you should challenge it. You are should write to the lender, arguing in detail about your car and what “fair wear and tear” is. Read the Legal Beagles guide and post on the Legal Beagles forum for help.
You can also take these complaints to the Financial Ombudsman. The Times reported one example:
One driver who was charged £945 for wear and tear when he handed back the keys to a second-hand car in July 2019 had the fee reduced to £159.97 after the FOS intervened in January.
Excess mileage charges
PCP contracts contain a mileage clause, where you will have agreed to pay so much per mile over the annual mileage agreed. When you VT the car, the finance company usually says that you should pay the excess mileage charge for the time you have had the car.
This is a grey area. Excess mileage charges aren’t included in the 50% figure in your contract, so some legal experts don’t think you have to pay them if you terminate your car finance. But I have seen Financial Ombudsman decisions on excess mileage complaints where the Ombudsman said it is fair that excess mileage charges should be paid when you VT.
It’s up to you if you want to challenge an excess mileage charge. You will need to be determined. You may spend a long while exchanging letters with the car finance company and its solicitors. And you may need to be prepared to go to court. You can get help on the Legal Beagles forum if you do want to challenge this.
But I want to keep my car!
In this case you don’t want to hand it back unless you have no other possible alternatives.
Read Were you sold a car on unaffordable finance? which looks at some of your other alternatives and take some debt advice.
If you have temporary problems because of Coronavirus, you can get 6 months of car finance deferrals and at the end of that you can ask your lender for other help, see Can you afford your car finance if your payment breaks have ended?
Worried you can’t pay the car finance?
What is a car finance affordability complaint
Car finance – the problems in an IVA
Jasmin Kay says
I have just spoken to Blackhorse about my vehicle which I financed from them feb 2020, they said as I have not paid 50% of the loan, I would have to pay a liability fee.. I am unsure what this is and how it would work… They said they can give my car to BCA and then there will be a default on my name if I don’t pay the remainder liability… can you please explain?
Sara (Debt Camel) says
I assume this is HP or PCP, not leasing.
I don’t know what a liability fee is – you need to ask them.
What is BCA?
If you haven’t paid 50%, then you will still owe that much. eg say you have paid £1000 and the 50% amount is £4,300. then you would still owe £3300 after handing back the car.
That is probably better than having the car repossessed and sold at auction – talk to national Debtline if you are unsure and want to talk through the details of your case.
If you do owe a balance, you will get a default if you can’t pay it.
But if you can’t pay the car finance, then nothing is going to protect your credit score.
SG says
Hi
What impact does a VT have on my credit score
Sara (Debt Camel) says
will you still owe money after the VT? Or have you paid over half?
Gareth says
I’ve just handed my car back to motonovo and they sent someone out to collect it.i have paid 29 out of 60 payments with a final payment of 400 so on my eyes I owe one more payment plus a percentage of the 400 final payment.because I took a 3 month holiday due the covid which I basically just added onto the end of my agreement.they are trying to say that’s arrears and I owe those 3 months as well as the 180 they added on for collecting the vehicle.i didn’t miss one payment it’s not arrears in my eyes it was all arranged.were do I stand on this I don’t want it affecting my credit score if I don’t pay it.i know I’m suppose to pay arrears but it’s not like I defaulted.
Sara (Debt Camel) says
I’ll have a think about this.
Gerard says
I have just done a Voluntary Termination of my vehicle with Motonovo finance and a company called Crystal Collections and theyve said my car has a few scratchs over the car but the biggest fee they have given me was for servicing as only had a partial service history and want £300 for this the whole bill is £591 which includes scratches over different panels and bumpers and a scrape to an alloy wheel. The car was registered in march 2013 so just under 8 years old what are my options?
Sara (Debt Camel) says
Read the Legal Beagles guide and post on the Legal Beagles forum https://legalbeagles.info/forums/forum/legal-forums/motoring-parking/vehicle-finance-and-issues for help.
Valentin Miscu says
Hello.
I am current VT my car with VauxhallFinance and at the moment I am paying 444.33£ per month and my contract is for 60 months. I have already paid 28 months and willing to pay the rest if 888.66£ to reach 50% of the agreement.
Vauxall wants to charge me 1207.03£ and I don’t lnoe for what. I do understand that for collecting my car they charge 100£ but what is the reason for the 239£?
They said is something related to tax rebate and excess of mileage.
The car is a vauxhall insignia 2017. When bought, the car already had 23.000 miles and at the moment it has 83.000 miles. That means that I have done 80 miles a day during the contract, which is my route to work and back.
Please help.
Sara (Debt Camel) says
Excess mileage is if you have been doing more miles than was in your contract. See Excess mileage charges in the article above as these can be challenged.
Tax rebate – not heard of that one.
You can ask National Debtline on 0808 808 4000 or ask on the Legal Beagles forum: https://legalbeagles.info/forums/forum/legal-forums/motoring-parking/vehicle-finance-and-issues
Lisa says
“you have paid less than the 50% figure You can still VT your car. The termination clause does not say you have to have paid the £x before you terminate the agreement. When you VT the car you will owe the difference between what you have paid and the 50% figure.”
In this scenario, if I also had arrears, would I also need to pay those on top of the amount to bring it up to the 50% figure..?
Sara (Debt Camel) says
I think you need a debt adviser to help you look at your specific situation – call National Debtline on 0808 808 4000 about this.
steve says
hello .I am 35 months into a 48 month pcp .according to my credit agreement its states I need to have paid 8k to he able to terminate my agreement. I have paid slightly over this and am under on the mileage, and also the car is in fantastic condition. so is it is simple as that ? im worried there is more to it than what I understand and will be hit with additional fees .am I being over cautious?
Sara (Debt Camel) says
It should be as simple as that if you have paid more than the amount in your credit agreement.
But I understand your caution. Can I suggest you talk to National Debtline on 0808 808 4000 about this tomorrow? This is something you want to get right.
Barry says
Is there a time period from when the car is collected to getting an invoice/confirmation of the vehicle being returned?
British Car Auctions (BCA) collected my car on the 8th January after I VT’d on a HP with BMW. I had nothing outstanding to pay and when the person collected he did not inspect the car and I didn’t sign anything. I have lots of photos of the cars condition and it had a full service history so I’m not expecting a charge.
That said I want to know the matter is closed and they’re not going to try and charge me unreasonable wear and tear costs. So any suggestions on how long I should wait before considering it closed?
Sara (Debt Camel) says
I am not aware that there is a set period. And a lot of things take longer with the country in lockdown.
Simon says
I am hoping to VT my car (PCP) as I’m struggling with the repayments.
Does the 50% figure take into account the deposit.
My total agreement was for £16,000 and my 50% figure is £8000. I put a £3000 deposit down (called “advance rental” on the paperwork), so am I right in thinking i can return the car once I’ve made £5000 worth of payments?
Weatherman says
Hi Simon
Yep, the deposit should go toward the 50%. It’s part of the total amount you’re due to pay under the contract.
Sara (Debt Camel) says
The National Debtline fact sheet https://www.nationaldebtline.org/fact-sheet-library/hire-purchase-debt-ew/ says:
“If you decide to terminate your agreement voluntarily and hand back the goods to the creditor, you should only have to pay up to half of the total amount payable under the agreement, minus sums that you have paid and sums that are due. Sums that you have paid include any deposit plus the instalments that you have paid. Sums due are any arrears or missed payments due at the time of termination.”
Diane says
Hi, my son lost his job due to corona in November, missed 2 payments from his car finance, they towed the car away. Next day we contacted finance place and paid the full cost of his loan £6.200.we havnt heard where the car is now, just a phone number to ring but noone there. What shall we do? Its so stressful
Sara (Debt Camel) says
Why didn’t he ask for a payment break?
He needs to talk to National Debtline urgently – 0808 808 4000.
Diane says
They said he couldn’t after 2 missed payments. He was only out of work 8 weeks, lost his job, fiance and managed to keep hold of his house, no electric etc. But now, he’s a carer, looking forward – I’m just concerned why noone has emailed to say where car is!? It’s lockdown, is that essential work even?
Sara (Debt Camel) says
I think that is unreasonable and he may have a good reason to complain and ask for compensation.
He needs to talk to National Debtline on Monday about what is happening at the moment and he should also ask them about whether the lender treated him fairly by repossessing the car so fast when he had asked for a payment break. They are open from 9am – 8pm.
Robert says
Hi, I have a HP agreement with Advantage Finance. The agreement is at a very high interest rate and the purchase price of the car was £7900. The total amount payable under the agreement is £14,000 with all the interest.
I have paid £3000 so far and I want to VT as I no longer need the car. They are telling me that if I was to VT, I would hand the car back and my “total liability would be £4000”. Does this mean I would need to pay £4000 on top of giving them the car? If that is the case then I would have paid in total £7000 for a £7,900 car that I would have only used for 1 year. This doesn’t seem right to me.
Thanks
Sara (Debt Camel) says
Does this mean I would need to pay £4000 on top of giving them the car?
That sounds right unless you paid a deposit? If you aren’t sure about the numbers, phone National Debtline on 0808 808 4000 and talk them through.
It may not seem a bargain but your alternative is to pay 11,000 over the next few years for a car you don’t need which will be worth depressingly little at the end of the agreement. So VTing may be your best option.
Cathy says
Hi Robert
Apologies in advance because i don’t know about your personal financial circumstances, but have you considered keeping the car until you pass the £7000 threshold. The benefits to this course of action is that you don’t have to find £4000 immediately and you get the use of the car until you VT it.
Just something to consider.
Kind Regards
Cathy
Sara (Debt Camel) says
That’s correct – but if he can’t afford the monthly repayments then it isn’t an option. VTing now will let the remaining money be repaid at a lower rate (though that will harm your credit record.)
Robert Dixon says
Thanks Sara and Cathy,
I have to come to terms with the fact that I signed up to a terrible deal in terms of the interest rate.
I have been looking at refinancing the car and managed to find a better deal that means I can shorten the remaining term from 4 years to 3 years, saving me over £3k in interest over the term and only increases my monthly payments by £10pm.
I just wish I had shopped around at the time!
Thanks
AGiles says
My son contacted KIA to advise he wanted to VT and return the vehicle and asked where he should deliver the car to. Despite numerous attempts to speak to them they continued to send him letters regarding non payment and now have served notice of court proceedings to recover the car and all outstanding amounts on the car. He had already paid 50% of the amount payable.
Sara (Debt Camel) says
Did he tell them in writing he wanted to VT it?
I suggest he talks urgently to National Debtline on 0808 808 4000 about his options.
Gabriele says
Hi, does the VT effect on my credit score? Can I return the car to dealer ,if I’ve paid 50% of the finance or pay the balance to reach the 50%, just because I don’t want anymore? Can they refuse to get the car ?
Do I have problems to get finance or loan on the future if I do the VT?
Thanks
Sara (Debt Camel) says
Can I return the car to dealer ,if I’ve paid 50% of the finance or pay the balance to reach the 50%, just because I don’t want anymore?
Yes if you inform them in writing you are VTing the car – read the article above in detail.
Can they refuse to get the car ?
No
Do I have problems to get finance or loan on the future if I do the VT?
And
does the VT effect on my credit score?
See https://debtcamel.co.uk/vt-car-part-exhange/
Amy says
Hi we are looking at VT for our car, am I right in thinking that we have to give the car back AND pay 50% of the total amount owed? They don’t sell the car and the money they get go towards the 50% payment?
Sara (Debt Camel) says
You have to pay 50% of the total amount of the credit at the start of the contract. So If the total amount payable under the contract was 16k half that is 8k. This number will be clearly stated in your finance agreement.
It sounds as though you think the car company is doing well if you VT a car? That isn’t the case!
Car depreciation is largest in the first couple of years of a contract. So the car finance companies normally lose money when you VT a car.
If you aren’t sure VTing your car is your best option, I suggest you talk to National Debtline on 0808 808 4000.
Lee says
I have a CCA HP agreement which will allow me to VT the agreement/car. However I still need to pay £6235 to be at the half paid amount. Will the finance company lodge this amount as a default at Equufax until I have paid this amount back? Do they have this right?
Sara (Debt Camel) says
How many months into the agreement are you? What are the monthly payments?
Are these too high for you to manage or is there some other reason you want to and the car back?
What are the rest of your finances like at the moment?
Lee says
I was looking at reducing the household bills and going to one car which will help greatly The payments are just about £390. It’s just my credit file that’s my main concern for remortgaging in a year time when it’s time to re-negotiate
Sara (Debt Camel) says
ok, then I think if you carry on paying the £390 until the balance is gone (16 monthly payments?) then they can’t default you.
Of course you may decide that in that case you may as well keep the car for the next 16 months and then VT it… On the other hand by getting rid of the car you gain on all the extra costs – car tax, insurance, petrol, servicing, parking etc.
Can I suggest you talk to National Debtline on 0808 808 4000 about the default issue?
Gabriele says
Hi, if I want do VT I own to the finance company 1,600£ to reach the 50% of the finance..
My car has a few scratches which definitely they will look on it and they will ask more money to fixing..
If they do that can I refuse to continue the process of the VT or once the process begin I can’t change mind…
My friend says that after the process start and they will collect the car , I will not see the car anymore and I have wait a big bill after they check the car .
Thanks
Sara (Debt Camel) says
why do you want to VT the car – can you afford the repayments? do you just want to save the money?
Gabriele says
I can afford the payment but I changed job and I prefer sell the car to save money but I still don’t know if is better the VT or sell the car privately which is very hard with the finance still on ..
Sara (Debt Camel) says
it’s illegal to sell the car privately – you don’t own it.
Your options are to carry on paying for the car and keep it, or VT it, they will take the car and you pay the rest of the half plus the amount to get the scratches fixed.
The length of time it takes to get this sorted isn’t really relevant is it?
Gabriele says
They will let me know how much have to pay for the scratches before or after I ll give the car back? Can I stop the process for VT if I m unhappy with the money they ask for the scratches ( and keep the car as usual)?
Sara (Debt Camel) says
You can take photos of the scratches so they can’t add on an unreasonable amount. But keeping paying for a car you don’t want for years because of the cost of a few scratches does make sense.
I suggest you talk to National Debtline on 0808 808 4000 about your options.
Gabriele says
Ok , thanks for all your replies and the hard work you do.
I ll thinking about and I will decide for what to do.
Thanks
K says
Hi Sara,
Great article once again!
I am looking at a VT. I’ll keep this simple and not go into too much detail. I have been quoted £780 remaining to pay if I VT my car. The finance company have been very helpful and have given reasonable terms to collect the car.
May question is around the remaining amount. They have said they will contact me to set up an agreement to pay the remaining amount. Are they likely to log this against my credit profile. I will be paying it back over three payments. I’m worried to hurt my profile if I don’t pay the balance in one go (which I can’t do).
Any thoughts?
Sara (Debt Camel) says
What were your monthly payments before the VT?
K says
Hi,
They were 200. I may be able to offer that, would that help?
Kelly says
Hi my partner voluntarily terminated his finance as he had paid half of the payments on the loan agreement. This was done in August. He has looked at his credit file today and the finance is still showing on his credit score and they have put a default payment for March. Between September and February there was nothing showing on the payment record. Could this be a mistake by his fiance company.
Sara (Debt Camel) says
Was this normal HP?
Or a PCP contact with a large payment at the end?
Kelly says
Hi it was normal HP I think
Sara (Debt Camel) says
Then this could be a simple mistake. he needs to talk to the finance company and ask them to correct this immediately.
If they say it isn’t wrong and that he has defaulted, he should ask why he hasn’t been informed of the money that is still owed and ask for an explanation of how this has been calculated. Then he can talk to National Debtline on 0808 808 4000 about the problem.
But fingers crossed this turns out to be an error!
Kelly says
Thank you for your help, hope its just an error on their part!
Darren says
Hi!
I tried to VT in November following a 3 month payment holiday (at this point I was 3 payments short of 50% and they said they couldn’t until I had paid 50%)
Based on the above (false?) information I paid the next 3 and wrote my VT letter in March, they have inspected and collected the car, nothing was mentioned at the time but now they are saying I need to pay the 3 months payment holiday (3x£303 but somehow they have it added to £1286), £400 for a missing stamp as the car was serviced at a friends garage rather than Renault, £600 for a paintwork repair that was done before I got the car and £85 to valet (it went back fully valeted)
Where do I stand with this? The charges in total add up to more than what I would have had to pay if I had sold the car to webuyanycar (I would have had a £1090 deficit)
Sara (Debt Camel) says
Yes it was wrong that they wouldn’t let you VT until you had paid half.
The 3 months payment holiday – the FCA who regulates the market seems to think it is fair they can charge for this. But their arithmetic sounds wrong as you say!
I suggest you post on this other forum https://legalbeagles.info/forums/forum/legal-forums/motoring-parking/vehicle-finance-and-issues where there are a lot more comments about VTing – the regulars there can be very helpful on whether to challenge something and what to say.
Rachel says
Hi
My brother VT on a car agreement and the finance company have since sold the car at auction for more than what the finance was on it. I believe he didn’t meet the 50% so I am aware he would have that to pay back. My brother has a debt plan and the car finance company rejected his payment and have been chasing him for money threatening to take him to court. Can they do this despite already getting their money back from the cost of the sale?
Sara (Debt Camel) says
It is sometimes more expensive to VT a car than have it repossessed but it is unusual, see If the lender ends your contract it usually costs you more! in the article above.
But you can’t change your mind about the decision. You can’t have the car repossessed and then say you would have preferred to VT it. And you can’t VT it and then say you would have preferred to have it repossessed.
Once your brother has VTd the car, the calculations applied will be those for the VT. I am suprised he even knows what the car was sold for.
Yes the lender can take him to court for the rest of the 50% amount. If he is making repayments through a debt management firm it would be unusual, but it is possible. who is his DMP firm? I suggest he talks to them about this and his options.
KEVIN says
If a car has been handed back, sold for less than the full amount due on the contract, & borrower chased for the balance when the loan was eligible for VT, would the finance company not be bound by its regulator – under, say treating customers fairly (TCF) – to have initially informed said borrower of his options peculiar to his circumstances under the agreement at that time? If duty bound, and the finance company failed in its duty, would that not constitute grounds for formal complaint to the FCA/Financial Ombudsman Service and demand for suitable financial redress?
Surely, any attempt by the finance company to lie directly to the customer – as in some of the earlier comments on this page where customers been told VT not available when it is – or deliberately withold details of customer legislative rights to the customer disadvantage, then creates a platform for complaint either legally (CCA 1974) and/or failure to TCF? Any thoughts?
Also, what is the position if it is later discovered the dealership inflated the purchase price of the vehicle at the point of sale and would this potentially adversely affect the maths in regard to VT?
Sara (Debt Camel) says
Rather than talk about a theoretical case, can you say what actually happened to you?
kevin says
I just did ….. that was it! Reasonable questions based on the information previously read on your site and applied to my circumstances. No disrespect intended but can you answer the questions or not? Are the questions not valid to the subject matter and/or have I perhaps misunderstood the application of VT?
Sara (Debt Camel) says
So you handed have handed back a car? or had it repossessed? But you didn’t VT it?
You weren’t told VT was not possible because you didn’t ask about it?
Kevin says
Vehicle was handed back with the payments approx 6 months in arrears. No mention of VT – either at the point of initial sale or on the repossesion, so no inclin VT was ever a thing. Car sold at auction, amount deducted from the initial inflated purchase price plus arrears (plus interest to end of agreement term?) and the balance chased from me.
Sara (Debt Camel) says
how long ago was the car handed back?
Kevin says
7/11/16, sold at auction January 2017
Sara (Debt Camel) says
OK, there were some special provisions last year because of of Covid-19 but they aren’t relevant.
The right to VT the car would have been set out in your finance paperwork. I don’t think the finance company was obliged to inform of this when you handed back the car. It is a shame you did not take debt advice at the time.
Kevin says
Agreed. Thanks for the input
Chloe says
Hi, my boyfriend wants to VT his car, it’s on a high interest finance. It’s on HP and he has paid over 50% of it, the car is worth around 3k but he owes around 6k on it. If he VTs the car will he not owe anymore? Will it impact his credit score?
Sara (Debt Camel) says
I assume from what you have said that he has checked his contract and he has paid more than the “Half the total amount payable under this agreement” which is in the paperwork. If he hasn’t done this, he needs to do it now, not just assume this is ok.
If he VTs the car, he may still owe some money if he “hasn’t taken reasonable care” and for excess mileage. Some of these can be challenged, see the Legal Beagles guide in the article above.
VTing the car will not impact his credit score unless he can’t pay any charges.
I suggest he talks to National Debtline about his situation so that he is more comfortable he knows what his options are.
Rachael says
Hi, I am wanting to VT my car, I have paid 50%. I understand from a slight dint/scratch i will have charges to pay.
Would the finance company need this amount paying immediately or would I have the option to pay in instalments?
Will I need to pay for them to collect the car or can I take it to prevent extra charges?
Kind regards
Rachael
Sara (Debt Camel) says
If you can’t pay it all at once then you should be able to pay in instalments. See “Settling money still owed” in the article above.
You should be able to deliver the car but see what they say and if there is an unreasonable charge to pick it up.
Dave says
Hi i cant afford my car payments only made 5 payments, had 4 months break or so now but moving forward i cant afford the payments. If i surrender my vehicle what happens will i be chased for the 50% and how will it be recorded on my credit file
Cheers
Sara (Debt Camel) says
Do you think the repayments were always unaffordable and that the car finance lender should have realised that if they had looked properly at your credit record and bank statements before they gave you the credit?
How will you manage without the car? (I am not saying you shouldn’t VT it – if there is no way you can afford it it is often better than the alternative of not paying and having it repossessed. I am just asking about the practicality.)
What is the rest of your financial situation like – do you have other problem debts> Are you behind with bills?
Dave M says
Thank you for your quick response.
I have 4 creditors totalling 33k being on £1 payments for the last 18months.
Also have my car on top payments are quite high 350 and basically i was in a bad place and we was desperate so a did lie on the application, they didn’t check nothing, but at the time i had great credit history, that was just over a year ago now.
Being on reduced payments for 4months or so now but basically they told me i have couple more months of this then they will have to take the car. The problem i got is a need car as my son as autism.
Sara (Debt Camel) says
I am not sure how your credit history can have been good with such large debts and being on token payments? What is the interest rate on the car finance?
Do you expect your financial situation to improve much in the next year or so?
Dave M says
I was shocked to get it at the time. I think it was round 8%. No not really i dont mind paying the £1 token payments its not been to much bother so far. I have learned to live without credit.
Just this car issue As a need a reliable car.
Sara (Debt Camel) says
how large are the reduced payments?
Dave M says
I have been paying £20 pm but basically i have to go back to the contractual payments or give up the car
Sara (Debt Camel) says
ok so to answer your questions and then to look at your options…
First I am assuming that the finance company has not already terminated your contract. If it has, you no longer have the right to do this. If you are unsure about this you MUST get advice on this asap, talk to National Debtline on 0808 808 4000.
I prefer the term “voluntarily terminate” a contact to “surrendering” your car. It is more clear what is happening. IF you stop paying and the finace company repossesses your car that is NOT a VT.
If you VT the car, then you will still owe the difference between the 50% figure and the amount that you have paid, it sounds as though that will be a lot of money. They will want you to repay that and it will be show as a debt on your credit record – if you could carry on paying at the contractual rate you could argue this should not be defaulted, but in practice that is quite impossible for you. So this will harm your credit record, but your credi record must already be very poor so does this really make a difference?
If you cannot make significant repayments, then it isn’t clear there is any possible option that will let you keep the car. That’s why I asked how much you were paying – if you could have managed £250 or £300 a month then it might have been worth trying to persuade them to accept that and lengthen the term of the finance – I’m not saying that would be easy mind – but that sounds impossible for you.
So the car has to go.
You could make an affordability complaint saying you should never have been given this credit. It is made harder if you lied on the application but the lender should still have made checks. The problem here is that if you VT the car it is likely you would not get the remaining debt reduced much if at all. An affordability complaint only removes the interest from a debt, you are still expected to repay the rest. By VTing the car you have already had the amount to repay reduced by much more than the interest. It isn’t clear to me that this is worth pursuing – if the interest had been at 30% and you had not lied on the application that would be different.
I think you need to look at your debt options. You have a mountain of debt and token payments just kicks the can down the road. I suggest you talk to National Debtline about your options for the car and for all of your debts.
Dave M says
Hi thanks sara for that info. I have spoke to step change recently
Basically bankruptcy would be the best option
But we are likely to move in the next few years and with no guarantor would be pretty much impossible.
Sara (Debt Camel) says
ok, so you know where you stand… the problem is that it only takes one of your creditors to go for a CCJ in 5 years time and you are screwed for another 6 years after that and another one may try in 8 years which means another 6 years… it may still be sensible to take the pain now as fast as possible and get it over with.
Dave M says
How likely is it they would go for a ccj I dont own anything and have low income. I have been fully honest to the creditors If i could afford more i would pay them more. Its a mess !!
Sara (Debt Camel) says
Yes it’s a mess and there aren’t any neat answers. With 5 creditors all owed large amou I can’t guess what the chance is of this happening to you.
Mike says
Hi Sara,
I voluntary terminated an agreement with Moneybarn but there was over £7K balance left to pay after the VT went through. This was in January 2020 and I had already missed two payments with them. They have not defaulted the agreement and are now chasing through Moorcroft. I want to come to an arrangement to pay them but am concerned that this will drag on for longer than 6 years on my credit file if I enter into an arrangement.
What are the rules when it comes to reporting to the credit agencies for this leftover balance after a VT. Moneybarn have just reported U/No Payment Due since the VT went through. Is it possible that I could negotiate an arrangement to pay as showing my account in good standing until the balance is paid off? Alternatively if I am in an arrangement to pay and it is less than 6 years, will this be better for my credit file than a default registered in June 2020?
Sara (Debt Camel) says
have you been making payments to this?
what state is the rest of your credit record in? do you have other problem debts?
Mike says
Hi,
No I have not made any payment since the VT went through in march 2020.
I do have other problem debts including a £4k from lendable that defaulted around the same time and has been sold to intrum and another £2k with myjar that again, I have not paid since Jan 2020 but they have not defaulted. I’m trying to come to an arrangement to ask for a full and final settlement with MyJar. I will probably need to enter a repayment arrangement with intrum for the lendable loan
Sara (Debt Camel) says
“What are the rules when it comes to reporting to the credit agencies for this leftover balance after a VT”
there are no VT-specific rules that I am aware of. My assumption is that if you carried on with the normal monthly repayments they could not default you.
But as you have paid nothing, getting a default added as early as possible is probably your best option. if it takes you 4 years to pay off the balance, then an arrangement to pay will be harming your credit record for 10 years.
I think you should talk to a debt adviser about how much you should be offering to each of your debt – that is the first step. Phone National Debtline on 0808 808 4000.
Jade says
Hi I have paid over half on my finance and the engine on the car is tapping I can’t afford to get this fixed can I use vt thank you
Sara (Debt Camel) says
Yes if you have HP or PCP. Not if you are leasing the car. And not if you. Got a normal unsecured loan to buy the car.
If you are unsure, talk to National Debtline on 0808 808 4000 about your options.
Do you need a car?
Also have the repayments been too high for you? You can make an affordability complaint after you VT a car. Or before… I am just saying you don’t have to decide between VT or an affordability complaint, you can Do both.
Robert says
Can I VT a car that’s not running? I’m only 1 year into a 5 year deal and owe £16000. The cost of replacing the engine is around £7200. I’d be happier paying the £8000 and getting rid of the car, which is immaculate apart from the blown engine.
Sara (Debt Camel) says
You can VT any car on HP at any point. But the question is, would you be charged for the repair to the car if you VT it?
You have to have taken reasonable care of the car.
Does the garage say this is just a random event, or that it there was something wrong with the car when you bought it? Have there been any other mechanical problems with the car?
How much did the car cost at the start? Are the repayments affordable for you? Finance is only affordable if at the time it was given, it was likely you could repay it and still be able to repay your other debts, bills and everyday living expenses.
Robert says
The car had a similar fault on another cylinder 7 months ago and they repaired half the engine but not all of it, even though they led me to believe that the had done it all. They fixed half a v8 engine knowing that a valve spring had gone on no 3 cylinder the previous time. This time the valve spring broke on no 7 cylinder. They only fixed 1 – 4 cylinders the first time even though they confirmed they would be replacing all the springs.
Sara (Debt Camel) says
So I am unclear if you think the garage was at fault or you think you were sold a car on finance which was not of adequate quality. This may make quite a lot of difference to your options.
I don’t know if you can VT a car with a major mechanical problem. It may well be that the car has to be driveable. You should not be charged more unless you have failed to take care of the car, above reasonable wear and tear. I suggest you talk to National Debtline on 0808 808 4000 about this.
Robert says
I believe that I was sold a car on finance that was not of adequate quality hence why it broke down in the first 6 weeks of ownership. I trusted the garage to carry out a full repair, which they claimed to have done but didn’t (I believe they have a right to repair). So I essentially want to reject the vehicle. The finance company are looking into it but I am not expecting them to side with me as it is likely to cost them money and effort! The dealer believes he carried out a thorough repair but only replaced half of the valves when the first valve broke, which I believe is negligent and misleading.
Sara (Debt Camel) says
OK so you have a consumer issue about whether the you were sold was of suitable quality and whether it was repaired properly. You can take complaints about these to the Financial Ombudsman.
As i said, Talk to National Debtline about VTing a car that isn’t driveable.
Mikey says
Hi I have 7 payments left on my hp agreement and want to vting the car, before I contact them in writing and give 30 days notice, the car itself has major problems with it, clutch gone etc, will this affect vting? Also I’m £250 in arrears? Will these 2 issues affect vting the car? Mikey
Sara (Debt Camel) says
It’s unusual to VT a contract so near the end. Are the payments unaffordable? Or would it cost more to repair than the car is worth? or is it a PCP contract with a balloon payment at the end?
PC says
Hi
I had a PCP deal with BMW finance some years ago, which sadly coincided with a catastrophic loss of income. I went to BMW and explained the situation, and I was advised by the salesman to VT the car, as I was only 3-4 months off the end of the agreement anyway. I negotiated a return of the car and a new cheaper car, paid £1000 deposit, but this unfortunately didn’t work out, and I was told the manager would be “too annoyed at me to return the deposit”.
I VT’d the car, it was seen, assessed, and deemed to have been well looked after with no money owing. VT done and dusted, I thought. Shortly after this, they came after me for some excess mileage-the amount is inconsequential, but suffice to say, they started reporting “missed payments” to the credit agencies, even though the account is “settled and closed”. 72 missed payments have been recorded in succession, but surely they should have defaulted the alleged account? For info, I haven’t acknowledged the debt or made any arrangement to pay, so I can’t understand under what arrangement they think I’m obliged to pay, when I have no current contract with them (the VT was confirmed before request for excess mileage).
Sara (Debt Camel) says
did you agree that the excess mileage was correct?
PC says
Hi Sara, no, in fact, I didn’t speak to BMW at all. I only spoke to a solicitor, who the debt had been passed on to. All I said to them was that as far as I was concerned, the assessor deemed the car well looked after on return, and gave me a piece of paper saying there were no extra charges. The assessor also checked the mileage during the inspection.
Hope this helps, and apologies for the long OP.
Sara (Debt Camel) says
Then I suggest you send them a formal complaint saying you do not agree you owe them any charges at al and you have just found out they have been reporting these on your credit record for 6 years, which is wrong because
A) you do not owe this money and
B) if you did owe the kone6 it should have been marked as a default after 6 months.
Emily says
Hi,
I’m looking for some advice. I put in an affordability complaint against Moneybarn for an agreement I had from April 2019. They have got back to me today and not upheld the complaint. Is it worth taking to the FOS? I was in a DMP five months prior to taking out the agreement which show on my bank statskenrts as well as a lot of gambling and transferring into another account of mine for that reason at that time. Although I managed to pay the monthly payment for a year, I was in difficulty. During covid, I then had a 3 month payment holiday due to my mental health and other circumstances. In 2021 I voluntarily terminated the agreement and handed the car back. I was only able to do this by paying the 3 month payment holiday arrears on my account through family. It then left me nothing to pay. Moneybarn are saying I should have notified them of the DMP and that I kept up to the payments other than the payment holiday. Thank you
Sara (Debt Camel) says
That is definitely worth taking to the Ombudsman. Send copies of your bank statements for 3 months before and 3 months after the finance started. And a copy of your credit report.
This article has a short section on how to send complaints to the Ombudsman: https://debtcamel.co.uk/refunds-large-high-cost-loans/. It’s pretty easy but its best to use the FOS online form not send an email.
Emily says
Thank you, I don’t know if it’s worth mentioning but I also have ASD, which was undiagnosed at the time of taking the agreement out.
Sara (Debt Camel) says
probably not. You didn’t know so how could MB have guessed?
Emily says
True thank you. In terms of sending my TransUnion credit report, is there an option to be able to download it? And I’ve got the bank statements physically so should I just take photos and convert into a PDF document?
Thank you again
Sara (Debt Camel) says
I think you can download a copy of the Transunion Statutory Credit report.
it would be simpler if you could download those bank statements, but if you can’t then send FOS the pictures.
Emily says
Thank you. Can I fill this in now? Or do I need to wait til I’ve received the refund or end of the tax year?
And would I fill it in under UK interest & dividends?
So:
Net interest £461.96
Tax taken off £115.49
Gross amount £577.45
Is that right? Then the £2997.09 refund is separate from this?
Sorry for all the questions, just want to get it right.
Sara (Debt Camel) says
Yes that looks right. You can fioe it now when you get the refund if you can estimate your income and tax paid for the 23/24 tax year, but it may be simpler to wait until the end of the tax year.
Those amounts sound right.
Rose says
We have just completed a PCP early termination agreement on our car. We paid the liability and the car was inspected and driven to an auction house to be sold. The Finance company have confirmed that there is nothing more to pay, but will not issue the VT nil liability document until the car is sold.
As a result we cannot enter into a new PCP agreement for a new until we have this document.
Is this fair and legal? The car now belongs to the finance company and we have paid all money due as soon as it was requested.
Sara (Debt Camel) says
To double check what is happening, be clear you VTd the car so your total liability was limited to half the total amount payable under the agree,ent? And you have paid this amount?
Rose says
Yes. We have paid all due money. The only trouble is the delay that, although we have an email stating that there is no financial liability, it will not issue the official VT nil liability document until the car is sold at auction. This is delaying our new PCP agreement, with another financial company, to enable us to buy the new car.
Sara (Debt Camel) says
This is unreasonable and in breach of the new Consumer Duty. Would you like help with wording for a complaint? Who is the finance company?
Rose says
Yes please. The Finance Company is Jaguar Financial Company. They have sent me a letter saying that they think they have solved my complaint by sending me an email saying the car is at the auction house. It the new PCP people want the official VT document.
Sara (Debt Camel) says
Jaguar – so this is Black Horse Limited? Do you have an email address for them for a complaint?
Rose says
Yes the small print at the bottom of the letter I received today says Black Horse Limited. There is a postal address but no email.
Sara (Debt Camel) says
OK well it is up to you if you want to reply by letter or email them.
The email address is a very general one onlinecomplaints@lloydsbank.co.uk so use a clear title eg “Complaint about Jaguar Finance/Black Horse Limited voluntary termination”
Give sufficient details so they can identify you account – name, address, date of birth, customer number. Give any reference number that was on that letter.
Explain that you have VTd the car and paid the remaining liability and that Jaguar Finance have confirmed that you do not owe any more. But you are being asked for a VT nil liability document by your next finance company and Jaguar are refusing to provide this to you until the car is sold at auction, even though they have agreed that the amount car is sold for is not relevant and that you have no further liability [adjust that so it is exactly what Jaguar said].
Say this delay is pointless and it is not treating you fairly. Jaguar Finance are failing to act to “deliver good outcomes for retail customers” as the new Consumer Duty says they must. Say that if this complaint has to go to the Financial Ombudsman you will be asking for compensation for any costs you incur as you are currently unable to take out a new finance contract.
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let me know what happens!