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 2024, many people are struggling to pay their car finance, with mortgage/rent, childcare and car insurance 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. Or if the expected second-hand value of the car has fallen more than expected. 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.
Other ways of ending the contract often cost 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 you just hand back the car and do not VT it, or if it 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.
A few years ago it was almost always worth VTing the car. But as second-hand car prices have increased this is not always the case.
What about selling the car?
You don’t own the car, so you can’t legally sell it.
But you can arrange to settle the car finance early through a sale. To do this, you’ll need to contact your finance company and ask them for a settlement figure. There are firms that specialise in buying cars in this situation and they can explain to you how this will work.
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.
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
A car finance commission refund?
Suzanna Walker says
This is a quite dangerous action to take because the car will be in a worse condition than when you bought it purely through wear and tear. The car will have to have a full service history to show that you have maibtained it. If it hasnt then an insorction could show that monor defects are apparent. Every stone chip, small dent , chipped windscreen, faulty lights, worn brake pads etc will impact on its condition. In PCP’s you may be restricted to average mileage., the Ombudsman thinks it is fair to be charged for excessive mileage so its not so cut and dried.
I would definately contact a specialist first, have the car cleaned and serviced and carefully photograph evry area of the car in daylight, including sills, bumpers, and tge interior, before you take any action on exercising your rights under Section 99.
Cathy says
Hi
Can i please ask a question about VT. If the monthly payment for the car is made up of a finance company payment and a personal loan (due to the negative equity from the previous part exchange car) What would happen to the personal loan payment if I opted to VT the car?
Sara (Debt Camel) says
Is the personal loan mentioned in the Finance agreement? Specifically does it form part of the Total Amount Payable?
Cathy says
Hi Sara
Yes one payment is deducted monthly. The annual statement has just arrived and the loan is split into 2 elements. A Hire Purchase agreement and a Personal Loan agreement. They both have the same agreement number.
Sara (Debt Camel) says
Sorry you need to go back to the actual legal agreement and see if the negative equity is included in the “Total Amount Payable” in which case it will also form part of the 50% figure given under Your Termination Rights
Andy says
Hi,
Does this by any chance also relate to logbook loans also?
The reason I ask is, I had a logbook loan a number of years ago, where I borrowed in the region of £6k, against my car. Only to pay back in the region of £18k / £12k interest.
I am going to go to FOS, if I do not receive a response in 8 weeks, but I did notice the small print in the contract, mentioning terminating the contract, if I paid in the region of £9k.
As it stands, I have paid the entire £18k in full, and received by logbook back, so thankfully now no ties. Now just disappointed in myself!
Sara (Debt Camel) says
Normally logbook loans are not structured legally as HP agreements. But if yours is (check the legal agreement) then it will include a TERMINATION: YOUR RIGHTS clause.
Chris says
Re Suzanna Walker’s statement, when a finance company agree a VT, they generally send out a driver to collect the car who will take the car to an agreed auction. The driver will look around the car, making notes on condition that both parties sign for. The car doesn’t have to be like new but does need to be in good condition. The customer also pays for the collection from the house/garage to the auction.
A decent car dealership will have a smart repair service to provide a cheaper way to get the car up to a decent condition. They don’t usually check the mechanical side of things other than to make sure things work, but any car owner should have maintained their own car for their own peace of mind. The level of brake wear won’t be a factor.
My advice, having worked in the car industry for 20 years, is to try and part exchange if you can, even if you break even. The dealership will normally try and get a car in px rather than allow it to go off to an auction, especially if it’s the same brand.
Although the majority of finance cases have the VT option it really should be used as a last resort, rather than the first option.
Sara (Debt Camel) says
“The customer also pays for the collection from the house/garage to the auction.” any charge there can be challenged. Of course if it’s low and the finance company isn’t trying add on an unreasonable amount for repairs then often someone doesn’t mind.
Part exchange can work, but anyone with negative equity may be better off VTing and getting a new contract, see https://debtcamel.co.uk/vt-car-part-exhange/.
Chris says
I’m not trying to argue your points, just pointing out real world dealings. Regarding the collection charge, I missed out that you have the option to take the car to the designated auction if you wish or are able but in the agreement letter that the finance company send agreeing to the VT it gives you the choice.
The same with the amount for repairs, hence I mentioned the garage might have a smart repair tradesman who can do such repairs cheaper than the finance company might charge you. Obviously there has to be some responsibility on behalf of the customer otherwise everyone could hand cars back without any care taken at all.
In your link you also mention that the VT goes onto the finance company record but you’ve not seen evidence of this affecting someone’s next agreement. I’m just giving your readers a real world heads up that it can affect your next agreement, the finance company do not have to accept any agreement, or they can put some restrictions in place because of the risk of VTing again, like a bigger deposit or restricted terms. If you are close to part exchanging it is better to do that, however you can, with some deposit to clear the negative equity or with a dealer contribution. Depending on the car most dealers would rather take a car in part exchange rather than wait for a car and agreement to be VT’d as that can also take time.
Sarah says
I have a query. I PCP a car from Mercedes, I have had it for a year now, my monthly payments are 262.52 a month, its only been a year and I have paid 3105 so far. I am having financial difficulties at the moment and I have this car for 48 months however for me to be able to VT I have to of paid at least 10k in total which at that amount leads me in to my 40th month. Is there anyway round Voluntary Terminating or Surrendering my contract earlier at this point?
Sara (Debt Camel) says
As the article above says, you can VT the car now and only owe the remainder of the 10k (or whatever the half way amount is in your documentation).
If you can’t afford the repayments this may be a better option for you than having the car repossessed and sold at auction as it you MAY owe less if you VT. Talk to National debtline on 0808 808 4000 about your options.
Christine says
I would like some advice for my son. My son (unwisely) took a car finance out from a sub prime car finance company. The payments were made regularly for 16 months then he had a problem and missed a payment.
The car has been immobilised. My son rang and explained the situation and said that he would pay the £160 the following week only to be told he would need to pay over £400 due to their charges-which seem extortionate.
Can he challenge the charges? Ideally he would have liked to keep the car but the purchase price was in excess of the value.
If he terminated the finance could he come to an arrangement to pay the arrears off at an affordable amount.?
He needs the car for work, I have suggested that he gets a cheap runabout and returns the car but the company have told him that he will have to have missed 3 payments before they will collect it. I suppose that means 3 more sets of charges too?
Sara (Debt Camel) says
“My son rang and explained the situation and said that he would pay the £160 the following week only to be told he would need to pay over £400 due to their charges-which seem extortionate.” that sounds unfair – are these charges set out in the terms & conditions?
“but the company have told him that he will have to have missed 3 payments before they will collect it” he has the right to VT the car as the article above explains. He will only have to repay the rest of the 50% amount that is set out in his finance agreement – has he looked and seen how much that is? the finance company cannot refuse to collect the car or charge for collecting it.
If he can’t repay the amount owing and needs a payment arrangement, that will affect his credit record. But if the current loan is unaffordable, there are no options that will not harm his credit record. I suggest he should talk to national Debtline about VTing the car and if he has any other options.
Hannah says
Hi, our car has developed a mechanical fault with the oil pressure. The repairs are going to end up meaning we’ve spent more on the car this year than it’s worth but it’s in negative equity. If we are to look into VT how would I approach the subject of the fault with the finance company? As this option is likely to be a lot less than my settlement figure.
Sophie says
I have recently VT my car with Kia / Santander I have paid the equivalent of half the amount as on pcp which is all they said I owed. They’ve cancelled my direct debit. Now have sent me a letter saying I need to pay a cancellation fee is this a thing??? Why didn’t they mention it when I paid the rest off ?
Thanks
Sophie
Sara (Debt Camel) says
I think you should reply that you have paid half of the total contract value as set out in your contract and they are not allowed to charge you an additional fee.
Adele says
I have contacted my finance company to voluntary terminate. I havemt signed anything, can I change my mind and not go through with it?
Sara (Debt Camel) says
I suggest you phone them up and ask. They may well be happy for you to withdraw from this and carry on paying them.
Sianyyyyy says
Hi Sara,
I am hoping you can advise. I have had my affordability complaint with MotoNovo finance upheld. They agreed that due to income and outgoings etc they should not of lent me £5,000 towards my car. They have agreed that once i arrange to return the vehicle they will unwind all the payments made plus statutory interest. The car is an 09 plate with a few dents etc and i have only 10 months remaining on the current contract. What i want to know is would Motonovo agree for me to keep the car as the value would of depreciated significantly and agree to refund interest or payments etc. I’m worried that upon me handing the car back they may make deductions due to dents etc from use of the car? Would i be better handing it back or trying to keep it to avoid having to try and fund a new car and not get back all the payments? Or do i send to FOS to see what they think.
Thanks
Sian
Sara (Debt Camel) says
So they are offering to refund the interest you have paid plus 8% and write off the balance owed? How much have you paid to Motonovo so far, ignore whether they have called this interest or principal, just how much have you paid them?
Also is your car finance HP or PCP – was there a “balloon” payment to be made at the end?
Sianyyyyy says
Hi Sara,
There words are “in light of the issue you experienced, we will unwind the agreement once we have been allowed to collect the vehicle. Once we have collected the vehicle, you will receive back all of the payments you made towards the finance plus statutory interest, and i will remove the finance from your credit profile completely”.
There is a small balance due at the end of £303.63 and it is HP. I have paid £5,040.83 there is a balance of £1,911.41 remaining.
Thanks
Sara (Debt Camel) says
So you have already repaid more than you borrowed.
Did you pay a deposit?
How much do you think your car is worth now, if you tried to sell it?
would you be happy to keep the car or would you prefer to get more money – obviously this depends on how much more money, but in general do you like the car or are you keen to get a different one for about the same value?
Sianyyyyy says
I did not pay a deposit.
Looking on we buy any car the car is only worth around £2,000 or less around £1,800, giving it back would put me at a disadvantage until i could get another vehicle.
I would be happy to keep the car.
Sianyyyyy says
Ideally if they are proposing to return all payments to me upon forfeiture of the car I would rather keep the car and have returned the difference between what i paid for the vehicle and what the car is worth now. So as I have paid £5,040 and the car is worth £2,000 i would rather the difference returned and the remainder written off and removed from my file. I don’t know whether this would be a good option?
Sara (Debt Camel) says
OK, so as you haven’t paid a deposit, i think you can reply to Motonovo that as the loan is unaffordable, they should remove the interest from the contract and you should just repay what you borrowed. You have already paid £5,040 and you only borrowed £5000. So you have already completed paying back the loan without the interest. So a fair settlement is that the contract should be ended and you should keep the car – as that is what should happen on the completion of the HP agreement.
I don;t think they are going to give you back the drop in value of the car – when you buy a car you accept that its going to drop in value over the years and that is what has happened.
Leisha Owen says
I recently got a used car on conditional sale, however, due to unforeseen circumstances, I no longer need the car. Is it possible to VT now and keep paying the monthly instalments until half of the amount owed is paid? Or will I have to pay the full amount?
Sara (Debt Camel) says
You will owe the full amount if you VT, but can make an arrangement to pay monthly.
Lauren says
Does VT effect my credit rating?
Sara (Debt Camel) says
No, see https://debtcamel.co.uk/vt-car-part-exhange/ for details.
Tom says
Hi. I have a PCP agreement through Santander Consumer Finance. I have not had the vehicle long (about 6 months), but my personal circumstances have changed and I won’t be able to continue with the repayments. I understand I can VT the car, however I will not be able to afford the monies outstanding with regards to the 50%. What will happen?
Sara (Debt Camel) says
You will have an unsecured debt that needs to be repaid and a default on your credit record if you can’t repay it.
Tom says
What if I set up a reasonable payment plan with the creditor?
Jack Stone says
Hi there
I called my finance company today and was told if I wanted to voluntary terminate I would need to pay £375, valid until end of April. My monthly direct debit is 390 and is due to come out on 1 may.
Does anyone know if we pay a month in advance or if we pay a month after use?
So if I pay the direct debit of 390 on 1 may could I essentially have the car up until 31 May without being charged anymore? Or would I be charged for useage between 1 may – 31 May?
I am asking because I have gone over my mileage and given the small price differences above I’d rather keep the car for longer so I have an extra months worth of mileage if it won’t cost more? Especially as it’s sat on my drive not being used?
Thanks
Sara (Debt Camel) says
I could guess but there is no point, you need an exact answer. Go back and ask your finance company if you make this payment before the end of April, should you cancel the May 1 DD and when will the car be repossessed?
Nan says
Hi I have a car on a Time Order through the courts and there have been a few missed payments can I go back to court to have it varied or can I VT ifI have paid half? Or does a Time Order mean the original condtional sale now terminated?
Sara (Debt Camel) says
Was there a solicitor or a debt adviser that helped you get the Time Order?
suze says
Hi I have a car personal lease hire for 4 years I have 11 months left. Paid 3 months upfront but I want to give car back can I do this with no charges under VT.
thanks
Sara (Debt Camel) says
If this is a lease contract, not a hire purchase or a PCP contract, it probably does not contain a VT clause. The article above shows what a VT clause looks like, check your paperwork and see if it is there.
Leslie J Bayliss says
Hello I have a car on HP how ever I have only paid four payments and now not working I own 18.500 on the car trade the car is worth 13000 if I give my car back would I only need to pay them back the difference between trade and what I own as my finance company want the car plus 13000 is the right or wrong can I defend if the car has a few issues which I would have looked at in my next MOT .
Sara (Debt Camel) says
When you took the credit, what was the total cost for credit listed on the paperwork? How much have you paid so far?
How realistic is the 13k valuation if the car has problems? The car finance co would sell it at auction and could get significantly less than you think.
What are the rest of your finances like, do you have other problem debts as well?
P Raimi says
Hello,
I recently sent a VT email and letter to my finance company saying I am voluntary terminating with immediate effect. The reasons I did this is because my circumstances changed and some health problems has caused me to leave my job. I am around 7 months off 50% mark in the agreement and the company have been good enough to say they will work out a payment plan with me to pay off the difference, which is no problem, I understand my obligations to that, but my question is do I still make the monthly payment due on January 3rd 2020? I am hoping the collections company get the car before then, because I will have a hard time making that payment.
Thank you in advance.
Sara (Debt Camel) says
You have told them in writing so your contract is already terminated, it isnt still going until they pick the car up.
But I suggest being proactive and proposing a monthly payment, saying you would like to be able to make an agreed payment on Jan 3.
Dan McRorie says
Hi folks,
I am unable to access the Legal Beagles Guide that you recommend. It does not appear to be loading. Do you have any other way to access this or have anything similar?
Thanks,
Dan
Sara (Debt Camel) says
There may be some problem with their site. I suggest trying again in a day or two.
Lauren R says
I was sold a PCP and tried to VT the car as I cannot afford the payments anymore. I was told by FCA Automotive that I don’t have a PCP finance but it is a MotorLoan Balloon.. Any ideas on what I can do? I’ve had the car for three years and only just been made aware of this.
Sara (Debt Camel) says
do you have your car finance agreement?
LouBee says
Hi , First time poster .
I have a car on PCP, My ballon payment is due on 1/4/20 and is £9270,
I have been to a few dealers and book price on my car is £7400(Negative Equity)
My monthly cost is £190
My agreed mileage was 6000 per year, at a total of 18,000… I am currently sitting at 31,000.
My finance paper work says 6p per mile unless over 30% in which case it doubles to 12p.
I could possibly afford the 6p but i for sure can’t pay the 12p
What can i do ?
Thanks for any advice
Sara (Debt Camel) says
I suggest you ask on Legal Beagles about the mileage issue. Some posters there are experts on this: https://legalbeagles.info/forums/forum/legal-forums/motoring-parking/vehicle-finance-and-issues
Cathy says
Hi Sara
My son needs to VT his car.
He is 3 years into a 5 year deal which is made up of a hire purchase and an additional personal loan (due to negative equity from his previous car). I have looked at the credit agreement and it does look like the only element included in the 50% VT figure is the hire purchase. Sara does the 50% figure include all the interest that has been loaded onto the agreement?
Assuming the personal loan is not included in the VT figure what happens to that element after VT?
Thank you for your fantastic site and I appreciate any advice you can provide.
Kind Regards
Debi v says
Should I get another car on HP before I voluntarily terminate my HP agreement on this one. I have paid 3 years 3 months of a 5 year HP contact and not missed a payment. I cannot afford to be without a car for even 1 day due to work commitments.
Sara (Debt Camel) says
I don’t know – is your credit good enough to get a second HP contract at an OK price? What is wrong with your current car?
Martin says
I did exactly this after Motonovo refused my current PCP car to be part-ex against a newer one. The plan was to stick with Motonovo as the rates were brilliant in comparison to the market.
They declined my application , one that I’ve never been late paying and I’ve never not paid a bill on time. I’m in a better financial position too from the original PCP application 3 years ago.
I went with Santander who accepted me for immediate credit then I VT my Motonovo agreement the next day, which was a better deal for me as there was negative equity in the car if I was to part-ex. (the difference was going to be passed on to the new finance) The negative equity was 40% more than the VT option, so I was better off.
Lauren says
Hi Guys,
Need some advise – I got a car june 2019 on HP (Part ex old.car) Taken some negative equity of £1,080 making new payments £285 Which now for an old 2014 plate is ridiculous and high road tax plus the car dealership is dodgey and greedy,
However my vehicles worth around £7,500 – £8,500 as my settlement is still £11,000 from.july 2019 i dont know how!?
Anyways im trying to get rid of the vehicle but I did not SIGN any paperwork what so ever the two times i went to this dealership -I have two family witness’s PLUS the sheet the dealership signed and i have not, I asked was there a ything to sign he said no also no m.o.t sheets or service etc…. Where do I stand in signing no paperwork?
Thank You!
Sara (Debt Camel) says
Do you have the finance agreement?
Lauren says
The car dealership did this online but i did not sign any paperwork. Ive no finance agreements in paperwork etc just online but ive not signed anything myself.
Sara (Debt Camel) says
It is possible to sign an agreement digitally, doesn’t have to be done with pen and ink.
Lauren says
Ive not did this online either – This is my point i did not sign anywhere.
Sara (Debt Camel) says
Oh! In that case I suggest you phone National Debtline on 0808 808 4000 and ask for their advice.
Cathy says
Hi Sarah
Sorry to bother you but we are at the point of VT ing my sons car and urgently need your professional advice before making the call to MotoNova.
He is 3 years into a 5 year deal which is made up of a hire purchase and an additional personal loan (due to negative equity from his previous car). I have looked at the credit agreement and it does look like the only element included in the 50% VT figure is the hire purchase. Sara does the 50% figure include all the interest that has been loaded onto the agreement?
Assuming the personal loan is not included in the VT figure what happens to that element after VT?
Thank you for your fantastic site and I appreciate any advice you can provide.
Kind Regards
Sara (Debt Camel) says
I don’t know and don’t want to guess. It should all be set out in the credit agreement but I suggest you talk through all the details on the phone with National Debtline on 0808 808 4000.
Joseph Wilson says
Hi there, I recently took out a HP finance agreement, six months ago for 5 years. My situation has changed and I’m wanting to VT the agreement, I’ve got a little savings in my bank however can I write to the finance company exercising my right to VT the finance? Any help would be hugely appreciated! Many thanks.
Sara (Debt Camel) says
Yes you can VT your car. As the article above says, if you have paid less than the 50% figure: “When you VT the car you will owe the difference between what you have paid (deposit and monthly instalments) and the 50% figure.”
If you aren’t sure if this is the right thing for you to do in your current situation, I suggest you talk to National Debtline on 0808 808 4000.
Joseph Wilson says
Many thanks for your help and support. I will ring national debt line and seek some professional help from them. Again many thanks for your time.
Lauren says
Hi.
What exactly is the amount when they say ‘Paid 50%’ ?
Thanks!
Sara (Debt Camel) says
See the “Half the total amount payable under this agreement” section in the article above. This should be clearly stated in your loan documentation.
Victoria says
My daughter fell into financial difficulties whilst she was pregnant last year. Due to a difficult pregnancy she was unable to work. We attended a court hearing on 20/11/2019 where my daughter surrendered the car. The car requires a new engine and is currently SORN has been since October last year. The court ruled that the car would be collected and sold at auction. After sale my daughter would make arrangements to pay any difference. The car finance loan was with Barclays. In January we contacted the relavent party as the car still had not been collected. We had at this point had to put the car on an accessible car park around the corner from our home as it was SORN. We informed the company immediately that the car of where the car was also explaining the car park is my mothers designated space at her sheltered housing. The company took all details and said the car would be collected within a week or two. The car is still sitting in the car park all these months later! Do the company have any reasonable amount of time limit to have collected the car? I am concerned that we have had to contact them despite the court saying the car is to be collected and sold at auction yet nearly 5 months later the car is still sitting there.
Sara (Debt Camel) says
Does your mother have urgent need of that parking space?
Victoria says
Fortunately no. Residents in her building have began asking and making comment however as we where lead to believe the car would be collected within a week or two as stated to us via telephone.
However the company advised my daughter that she should also continue to pay an insurance on the car until it has been collected as any damage etc would be her responsibility. Due to the time passed my daughter is now in receipt of benefits as her only income with an eight week old baby she is unable to afford to continue insurance payments.
Sara (Debt Camel) says
do you think the car has any value? (NB I am not suggesting you simply sell it!)
Victoria says
It does have some value, unlikely to the amount still owed as it requires some work on the engine.
We are concerned about the length of time the car has been sat idle.
Sara (Debt Camel) says
You would normally have a duty to look after th car until it is collected. But to me 4 months seems too long. One option would be to tell them you are stopping the insurance on the car – if they want it insured, they should collect it or insure it your self or give you the money to insure it. But I think you should talk to National Debtline next week on 0808 808 4000 and ask them if they think 4 months is unreasonable – they may well have come across a case like this before and I haven’t.
Conor says
Hi there I am hoping to volentry terminate my car I have to pay 500 pounds to make up the half amount payable but told me they wouldn’t not be able to pick up the car due to the circumstances will I still be charged my monthly payments while waiting on the car being collected.
Sara (Debt Camel) says
No you shouldn’t be. Ask them to confirm that you won’t be and contact national Debtline on 0808 808 4000 if they say they will continue to charge you until they pick it up.
paul bradshaw says
Hi
I am exercising my right to VT my contract on HP agreement with finance company as with new job entitled to company vehicle , I have notified them via email and spoke twice on the phone . I have around £1500 left to pay to get to 50% mark which I am happy to pay in one go. After reading all the information above , Am I correct in thinking that once I have paid them over your phone the
£1500 , I can send car to auction site , I DO NOT have to sign the termination pack they have sent to me ( Section A asking for signature ) , I have to notify them in writing the auction site it has gone to on there behalf ?. Also once returned and paid , if auction site sells car for less than remainder owned on vehicle,can they chase me for the difference ?. The car is in very good condition ( tiny scratch’s here and there) but otherwise, full service history , well maintained .
Thanks
Sara (Debt Camel) says
Has the finance company said to take the car to the auction site? Do check the site is open at the moment in lockdown.
I don’t know what you are being asked to sign, if you are unsure, talk to National Debtline on 0808 808 4000.
if auction site sells car for less than remainder owned on vehicle, can they chase me for the difference ?
Not just because it sold for less.
They would have to say the car was not in reasonable condition for its age. Make sure you clean the car before returning it and take LOTS of photographs, not just of any tiny tiny scratches but also the areas where there are no problems.
Paul bradshaw says
Hi
Thanks for that . Yes , I have to take to BCA auction site or they will pick up for a fee . I have had confirmation that neither are an option at the moment due to lockdown . I am being asked to sign a form to say I am terminating contract and taking car to auction site as per there request after final payment , it has various questions like mileage, tax expiry date , MOT expiry date and such. The car is in very good condition and only a month ago had brand new brake pads and discs fitted plus new tyre at rear . I am comfortable making final payment and returning the vehicle in condition it is in but wording in signature letter saying ” I also understand that I may have an additional liability if I have not taken reasonable care of the goods and the resale price is adversely affected” makes be dubious to the fact they may say we couldnt sell it in current market at value due to a small scratch etc?. There definition of reasonable care might be different to mine , I am sure it will be!
Sara (Debt Camel) says
That’s why you need lots of photos.
If you aren’t sure about signing, talk to National Debtline – they are very good,
Cathy says
Hi Paul
Not sure if this will help or not, but willing to share our recent experience . My son VTd his van in January 2020. The van was collected and appraised. He received a bill of £1200.00 for ‘wear and tear’ It was in good working order with a current MOT and service history (invoice from the garage). He was billed for items he had not received at the point of sale ie service history book, vehicle manual etc, he had some damage including minor scrapes, but nothing unreasonable for a 5 year old working van.
He raised a complaint about the charges and got nowhere. When he pursued the complaint it was sent to their customer resolution team who completed a thorough investigation. Their findings included the fact the van had been valued at £3900 by their internal valuers and sold at auction for £3500 (clearly the ‘wear and tear’ damage was not as signification as they insisted).
The investigating officer apologised for the fact our liability had been reviewed by several member of staff and none of them had reduced it to their actual loss with was the difference between £3900 and what the van sold for £3500. He also awarded £50 compensation for the inconvenience. His liability was reduced to £400.
He has accepted their finding and is in the process for paying the outstanding balance. He just wanted and end to it.
Sara does their calculation for the liability sound right?
Sara (Debt Camel) says
I’m sorry I have no idea if £400 is a reasonable estimate – “some damage including minor scrapes” could mean almost anything!
Cathy says
Hi Sara
It is not the actual figure that i would like advice on, it is the method they have used to calculate it. Reading through the investigators conclusion, the liability appears to have been decided on the selling price at auction and not their assessment of the ‘wear and tear’ .
Kind Regards
Sara (Debt Camel) says
I think it is an odd calculation. But from a practical point of view not worth challenging unless you think it should have been less.
Paul says
Hi Cathy
Thanks for that insight , to be honest I’m thinking of going down a different route now and paying the settlement fee , selling my misses car and giving her my car as I have really looked after it and know she would benefit more driving it than me getting rid to a finance company to pass onto auction site . I appreciate all advice given. Thank you .
Sara (Debt Camel) says
good to look at all your options! If you know a car has been trouble free, it is worth more to you because of that.
Ryan says
Hi there, I’m about to VT my HP Vehicle, I have paid over 50% of what I borrowed, when they receive and acknowledge my VT am I able to cancel any direct debits coming out of my account?
And also, do I have to wait for the company to sell the vehicle at auction for the VT to be final or not?
Thank you.
Sara (Debt Camel) says
When you have notified them of the VT it is final. It is sensible to wait for an acknowledgement before cancelling a direct debit rather than end up arguing about it, but it is not your problem how long they take to sell it.
Ryan says
Okay this is exactly what I was looking for thank you!! So as soon as they acknowledge I will cancel the direct debit.
Shaun says
Hi I wonder if you can help u have a Car finance and was looking to VT but I have 2 months arears and have had a default notice from the finance company stating I will not be able to do VT unless I pay £2500 by the 23rd of the month ( this includes £600 which is my arrears , which equals 2 months)
I cannot pay this so I am forced to carry on struggling with monthly payments or end up owing more if they terminate the contract.
Should they be letting me VT and then just give me an outstanding balance to pay or am I just stuck now ?
Sara (Debt Camel) says
You need to talk to National Debtline on 0808 808 4000 urgently about your options.
It sounds as though you have been struggling for a while, so the arrears weren’t caused by Coronavirus?
Another possibility is making an affordability complaint. But right now you need to rule in or out VTing the car immediately. You need advice on this.
Rio Ralph says
I think cheap hpi finance check of a car at the beginning of the purchasing will be a good step to tackle certain finance issues of a used car.
Sara (Debt Camel) says
A HPI check can find problems with the car. But it doesn’t help people being sold finance which is unaffordable.
Laura says
I took out pcp on a brand new Peugeot one week prior to lockdown for my driving school. Since lockdown the car has been on the drive having done less than 200 miles. My situation has now changed and I’m having to leave my industry to take employment elsewhere therefore not needing or being able to afford the car. I have made one payment since having the car as I received no contract info via email and no agreement number which would allow me to contact someone earlier. I eventually decided my direct debit as a way to get them to send me something with my agreement number on it which is when I contacted Peugeot initially. They have sent me paperwork regarding a VT but they want me to pay £5400 equating fo the 50%. As the car is still brand new, I was told they may buy it back at £7-8000 but I owe £10k. Can I still VT or is a surrender a better idea?
Sara (Debt Camel) says
You have the right to VT if your contract has not been terminated. Can I suggest you talk to NationalDebtline on 0808 808 4000 about what your options are and what they may cost?
Neil says
Hi. I have a PCP agreement with Santander. I’m trying to find out where I stand with VT but there is nothing in the paperwork showing the 50% figure or any information about it. Should this be in all agreements? The paperwork I have is very limited. It has no account details on it, and nothing which even remotely resembles an agreement (names of parties nor anything).
Sara (Debt Camel) says
It sounds as though you do not have a copy of the finance agreement. Ask Santander to send you a copy.
Mb018538 says
I had a VT question please if anyone can help?
My wife is approaching the 50% mark when the car can be handed back.
BMW have said we need to sign a form, then someone will come a collect the car. It will be inspected, and we will be invoiced for any damages.
This fills me with dread. Sounds like we get no input into this, nor any chance to argue anything. The car will be inspected without us seeing. What constitutes fair wear and tear? I just get a feeling they will send us a bill for a load of non-existent or over stated damage. The car is 6 years old and has a few alloy scuffs as you’d expect for a 6 year old car, but the bodywork and interior is faultless.
Can you challenge their findings? Or is the bill final and needs to be paid? It’s a shame as it’s putting us off doing it. Obviously that is there intention to make them more money, but we were hoping it’d be easy.
Sara (Debt Camel) says
Get it cleaned properly inside and out, make sure the service record is there and photograph the whole car inside and out in detail.
Wesley Dean says
Less than 6-months remaining of my Agreement and I need to get a smaller car and my Dealership advised me to VT and once down, I can then come back and start finance on a smaller car, maybe with the same Finance Company. I have Contacted the Finance Company who were very understanding and explained the process. Okay, a little intimated that this might show up on my Credit Report. Advised someone from the BCA will inspect my car. My Agreement shows no fees owing (as I have paid over the 50% marker) and I am under mileage so now all depends on the inspection.
Looking at various websites about VT, they all mention not to complete or sign any VT Packages as this will lose my legal rights but the Finance Company have send a very basic template to complete and send and that will then start everything. No signature required. Am I allowed to complete and send this? If I do not send, then this will go on longer with no VT action taking place. The template will take 30-seconds to complete as its that basic. What do I do?
Sara (Debt Camel) says
I can’t tell what the template says. If you are in any doubt, I suggest you talk through it with National Debtline on 0808 808 4000.
Also make sure the car is clean and you have photographed it in detail, inside and out. Make sure you return the service record and both sets of keys.
Wesley Jordan says
Thank you.
Template is Name, Agreement Number, car Registration, contact number/Email, will car be collected from address on file, confirm valid MOT, reason for VT and I confirm that I have read the VT pack and understood it’s all irreversible. No signature needed and once sent, they will instruct the BCA (British Car Auctions) team.
paul bailey says
Hi Sarah, my PCP is via my Ltd company do I still have rge same rights to a VT after 59% of the total has been paid off?
Sara (Debt Camel) says
Have you read the finance agreement? It will only be one or two pages long and the right to terminate should be in there. If you can’t find it mentioned, talk to Business Debtline https://www.businessdebtline.org/ about your options.
Jordan says
Hello,
I have applied to VT my car with SMF, I have been on a payment holiday for 3 months and can’t afford the car I am 4500 away from the 50% mark. I sent my VT and they called me to say they weren’t accepting it due to me not being st 50% and said I wasn’t allowed.
I am 100% sure they are wrong i stated the CCA 1974 in my letter and advised I wanted to use my statutory right and they told me I cant.
Can you confirm is this correct? They are saying I can’t VT and I have to VS because I’m not at 50%.
Sara (Debt Camel) says
I suggest you talk to National Debtline on 0808 808 4000. They will be able to confirm your rights. You can also talk to them about your overall debt situation.
Chris says
Hi,
My 2 year pcp runs out in October. I want to change my car and have offered to pay the final 3 instalments and hand the car back early. The finance people are claiming this is highly unusual and they don’t have a process for it. They want the full settlement figure (final 3 instalments + GFV) which is some 10K over what the car is worth. Unfortunately the replacement car would be financed through the same company! I thought they were getting a good deal. Can they say no?
Sara (Debt Camel) says
Look at your paperwork and check if you are passed the point where you can VT the contract as the article above says. If you are, then say you want to VT if and look to get a new car from another finance company. For saving 10k it’s worth it! And at the moment car dealers will be queuing up to sell you a new car.
Mr C Graham says
Hi hope you can help me .I VT my car finance with marshfineance on the 23 3 20 the car is still on my drive today .it has an mot and service to November 2020 .but no road tax or insurance I cancelled both ,I just want the car removed from my drive can you give me advice
Sara (Debt Camel) says
I suggest you talk to National Debtline on 0808 808 4000 about what you can do in this situation.
Andy Medler says
Hi, I am in the process of doing a voluntary VT but my car has a damaged wing. Black horse told me not to worry as the car is sold as seen. Will I be retrospectively charged for this? I don’t want any hassle after returning the car, what is the best thing to do? The damage isn’t excessive, totally driveable, just a crease in the wing. The car is 6 years old, and only 55k miles on the clock and a FSH
Sara (Debt Camel) says
I suggest you talk to National Debtline on 0808 808 4000 about what you can do here.
Sean Davis says
Hi, I wish to VT my car. I have paid over 50%. Does that mean I can hand it back and I will not owe any money on the car other than ‘wear and tear’ costs?
Sara (Debt Camel) says
Read the article above in detail and
a) double-check the paperwork to make sure you have paid more than half (especially if your car is on PCP with a balloon payment at the end)
b) excess mileage is a grey area
c) you should not be charged for “fair wear and tear”, only damage over and above that.
K Cotter says
I have changed my mind on voluntary termination of my car but Santander Finance say it’s too late now as the paperwork has gone to Crystal Collections. I have had no contact from Crystal Collections yet. Surely, I must have the powers to change my mind but Santander are saying my account has now been closed. Can anyone please help me.
Sara (Debt Camel) says
I suggest you talk to National Debtline on 0898 808 4000. They may have seen similar situations before.
David says
Good morning,
Due to a change in circumstances (Covid related) I can no longer afford the repayments on my HP. I am more than half way through my agreement, but took a 3 month repayment holiday whilst salary was reduced to 80%. I have made 2 full payments since. Lender is Money Barn, and they agreed to add the the 3 months onto the end of the agreement.
I need to VT as I cant afford this moving forward (£460 a month) – Car price was £13,500, total payable was £21,769, I’ve repaid £12,963. The car is worth somewhere between £7k and £8k (whether it will get anywhere near that at auction is anyones guess). Will they ask me to catch up on the Repayment Holiday?
Sara (Debt Camel) says
I haven’t seen one of these cases. My guess is that you should be fine as you are clearly more than half way through, so even if the total payable has actually been increased by the break, you will still be over half way.
Can I suggest you ask National Debtline on 0808 808 4000 about this? They may have seen a similar case in the last few months.
MRS ZIVILE says
Hello,
I had HP agreement. I paid every month 3 years. I don’t had any missing payments. Now I ask them to do voluntary termination. They send me End of contract invoice. I paid and they confirmed that my agreement was closed.
Did finance company should return for me that 50 percent or not? In 3 years I have paid around £12000 and now I return the car. So no car no money. Its looks now that I was renting that car?
Sara (Debt Camel) says
I suggest you talk to National Debtline on. 0808 808 4000 about exactly what happened.
alesha cooper says
Hi, I have been furloughed so my financial circumstances have changed for the worse and I want to VT my car however my finance company have said I can’t even though I’ve paid over half. They said because I defaulted 20 months ago I’m now not eligible for VT. The account is up to date and not in arrears currently. They won’t even look at reducing monthly payments to help me as they said it wouldn’t be responsible of them and they told me to do a surrender – which I obviously don’t want to do! Please help! Fundamentally, I do want to hand the vehicle back.
Sara (Debt Camel) says
Can I ask what the rest of your finances are like? Do you have credit cards, other loans etc? Are you renting or buying? Do you have any priority debts such as rent/mortgage arrears, council tax, utilities? Or do you have any of these on current payment holidays?
Do you need a car?
Do you expect to be back to part time work, back to full time work or made redundant in the next few months?
How much is owed on the car finance at the moment?
alesha says
The rest of my finances are ok and we were on a mortgage payment break but that has ended. I don’t have credit cards as I entered into a DAS a couple of years ago so that got things back on track. I am going back to work part time next month with the expectation that I return to full time come January. There is around £4400 left on the finance, the total finance was just over £9k I think. I don’t want the car any longer though, it’s become a burden more than anything!
Sara (Debt Camel) says
Were you sent a Default Notice when you had arrears before?
alesha says
Yes I think so
Sara (Debt Camel) says
ok, that would have had a time limit in it – did you pay the arrears or set up an agreed repayment plan before that time limit ended?
alesha says
I set up a payment plan, I think it was march 2019
Sara (Debt Camel) says
yes, but was that as soon as you got into arrears?
Can you find that default notice?
do you have email or letter correspondence with the finance company from that time?
I know this sounds odd, but the dates may make a difference to your right to VT now which is why I am asking. See this guide to VT from the Legal Beagles website: https://legalbeagles.info/forums/filedata/fetch?id=1513400
alesha says
I can’t find any letters I’m afraid, I think with it being so long ago I’ve thrown then out. It was the march of 2019 though.
Sara (Debt Camel) says
No emails? it’s only 18 months ago…
Unless you can find these, it’s hard to say if you can VT or not.
One option would be to send the car finance company a Subject Access Request (SAR) asking for a copy of all your personal information. If their website has a section headed Privacy that will normally say how make a SAR. They have 30 days to reply to that.
Or phone National Debtline on 0808 808 4000. They may have something useful to suggest.
alesha says
I have one email from them dated 18th march, it only said that the account was in arrears, I have nothing else
Sara (Debt Camel) says
can you tell from your bank statements when you missed a payment and when you started repaying the arrears?
If you can’t you can send them a SAR which should say what yoyu payments you made and also when/if they sent you a deafult notice and when you set up a payment arrangement.
alesha says
I’ve looked at my bank statements, it looks like I missed a DD in February 2019 as it showed that I paid by a card, then I started paying additional in the march.
Sara (Debt Camel) says
It would be unusual to issue a Default Notice if you had only missed 1 months payments.
I do suggest you talk to National Debtline tomorrow. It may be that the lender can’t refuse a VT.
Bernice Akintola says
I just got an hire purchase car, and I noticed some dents on the car which was not stated during the time I got the car. Please what can I do to get this done.
Kind regards
Bernice
Sara (Debt Camel) says
If you have just bought the car, then you should take photographs of every problem, no matter how minor, and email the finance company saying you would like them to note the following problems with the car.
Then keep a copy of this email. And keep the photographs. Until the finance ends and it is all paid off.
Ryan says
I VT’d my car after paying more than 50%. With regards to disputing damages charges, what is the timescale? Would it be the same timescale as making the payment, if you accept it as reasonable?
Sara (Debt Camel) says
I am not quite sure what you are asking, but the place for these questions is the Legal Beagles car finance forum where there are some experts: https://legalbeagles.info/forums/forum/legal-forums/motoring-parking/vehicle-finance-and-issues
Jade says
Hi Sara,
Really useful article, thank you.
If I decide to go down the VT route, how far in advance of the next repayment (via DD) being due should I notify them, to avoid the account going into arrears (I’ll be cancelling the DD as I can’t afford the next repayment)?
Thanks,
Jade
Sara (Debt Camel) says
Have you taken a payment break so far? the regulator is looking at extending these… Unless you are sure you won’t be able to get back to paying for the car, a break may better.
These aren’t easy decisions for many people – I encourage you to take some debt advice unless you think it is a simple decision for you. Phone National Debtline on 0808 808 4000.
The lender doesn’t have to agree to your VT – you VT a car by informing the lender. If you are sure this is your best option, then I suggest doing this at the same time as you cancel the DD – which needs to be several working days before the date it is collected.
Jade says
Hi Sara,
Thanks for the swift reply.
I’ve already had 6 months payment holiday, so I believe no further payment break is available to me?
I’m self employed and had my business effectively wiped out at the start of the pandemic. I’ve been job hunting, and have come close on 3 occasions, but there aren’t that many suitable roles available and lots of people looking for work!
At the moment I could manage without the car, while I’m not having to go out to work. But if I get a job I would quite likely need a car to commute. It’s catch 22; without work I can’t afford the car, but without the car I don’t know how I’d commute when I get work!
Sara (Debt Camel) says
None of the current proposals will allow you more breaks if you have already had 6. So unless there is a surprising change (which can never be ruled out in these strange times) you are right.
That is quite a common dilemma. Not knowing where or when you will get a job… Are the sort of jobs you are looking at possible to work from home? Any chance of someone in your family helping you buy a cheap second hand car – the price of second hand cars may drop a lot if a lot of people VT their cars.
Do you have other debts as well?
Jade says
Of course, it is rough time for many.
Yes, I’m in finance, so could quite easily work from home, which I would prefer, so if I got the ideal job working from home, that would be awesome!
Yes, I have a bank loan and a couple of credit cards with outstanding balances, but the car is, by far (other than mortgage) the largest monthly repayment.
My income bottomed out very early in the pandemic so I took the payment breaks pretty much from the get-go, believing that I would be able to find employment within 3 months, then another 3, but the job market is just ultra-competitive at the moment.
Sara (Debt Camel) says
ok so you have been on Universal Credit for nearly 6 months then?
(this is of course well removed from VTing your car, just wanted to check you had a plan for the rest, even if it isn’t a great one)
Jade says
No, we don’t qualify as my wife earns and we have a small amount of savings, that is diminishing by covering living expenses.
Sara (Debt Camel) says
OK, so you probably need to ask the unsecured loan and the cards to take a token £1 a month – they should agree to remove the interest that has accrued during the payment breaks. This will harm your credit record but it doesn’t sound as though you have any alternative,
Have you talked to the mortgage lender about help, possibly switching to interest only for a while?
Jade says
Ok, I’ll do that, thanks for the advice. I presume that they aren’t obliged to accept a token £1/month or remove the interest?
I’ve read a bit about IVA’s, is this something you would suggest I consider?
I already plan to speak with our mortgage lender in the coming days.
Sara (Debt Camel) says
They aren’t legally obliged to take a token payment. But your mortgage is a priority debt & I will be VERY VERY surprised if they don’t accept one. this will harm your credit score but there are no options that won’t as you cant pay the normal amount.
Yes they should remove the interest if the last payment break hasn’t yet ended. So don’t delay asking for this.
An IVA is not possible until you have an income you can make monthly payments from. 30% of IVAs were failing before the pandemic… These are mis-sold on a hige scale as the firms make large fees from them.
When you are back to a secure job AND have repaid any mortgage arrears AND saved up for a car if you need one, then you can look at your debt options. An IVA is possible but a DMP may be better. Much too soon to think about this.
Jade says
Is it possible to say how much damage this will do to my credit file (as you say, I don’t really have a choice, I’m more curious than anything)?
With a couple of the agreements normal repayments have resumed, does this mean I won’t be able to ask for the interest accrued during the payment break to be removed? And how do I go about requesting to make just token payments (phone, email, writing) and what do I need to say?
Thank you again for your advice that is providing a bit of clarity at a very difficult time.
Sara (Debt Camel) says
Is it possible to say how much damage this will do to my credit file (as you say, I don’t really have a choice, I’m more curious than anything)?
Not really. See https://debtcamel.co.uk/credit-score-change/ which has some numbers but it’s pretty vague.
With a couple of the agreements normal repayments have resumed, does this mean I won’t be able to ask for the interest accrued during the payment break to be removed?
did they contact you and ask if you could resume normal payments?
And how do I go about requesting to make just token payments (phone, email, writing) and what do I need to say?
See https://debtcamel.co.uk/payment-breaks-end-pay-mortgage/ which is about working out what you can pay to your mortgage, but also talks about asking for token payments from unsecured lenders. I would suggest phone unless that makes you very anxious – just say you have lost your job, it’s a struggle to pay the mortgage on your partner’s wage and you need to to make token payments and have the interest stopped. If not phone, then email or secured message – don’t write a letter!
Jade says
Thank you, again, for your great advice.
Yes, they emailed saying that normal repayments would resume, or if that was unaffordable there are other options that could be looked into. Until speaking with you I haven’t really know how to move forward, so given that I had some savings, I just let repayments resume.
Sara (Debt Camel) says
OK. it is still worth asking for the interest added in furlough to be written off. Say you have only just taken debt advice because of your mortgage and you didn’t understand before that you should have asked for forbearance at then end of the payment breaks.
Jade says
I’ll do that. Thank you Sara for all the great advice.
Jade says
Sorry Sara, a few things I’ve just thought to ask…
When I ask my creditors to accept a token payment, will I need to show them anything to support my request? And is this a short or long-term measure (I am actively seeking employment, but it is impossible to say how long it will be before I am successful)? Will they want a timescale on how long I expect to be needing to make only a token payment?
Thank you.
Sara (Debt Camel) says
Some creditors may want to go through an income & expenditure with you.
I suggest you read https://debtcamel.co.uk/token-payment-debt/ which looks at a lot of questions people ask about token payments.
in your situation, they are VERY likely to be much easier than you think for your loans and credit cards.
Jade says
Hi Sara,
I’ve started speaking to my non-priority creditors. Nothing agreed yet, as I need to complete budget planners but the accounts are on hold, so it’s a start. With the budget planners, should I include my wife’s income (we have individual bank accounts and all bills are paid from mine, so without my wife’s income and my ever reducing savings I effectively don’t have the funds to pay even our priority bills)? I’ll be approaching the mortgage company within the next few days. If we move to interest only, is this a new mortgage application? And when we’re in a position to switch back to repayment, is that a new application? I ask because if I have to take a job with a lower income, it might be that we can’t get the mortgage required due to affordability criteria, even if in reality we could afford it (we want to do everything we can to keep our house, as it has been our family home for 12 years, and is where our daughter has been growing up)? The mortgage is just in my name (at the time I had a well paid job and my wife was only working part-time, so it worked out better for us, affordability criteria wise, to have it just in my name).
Thanks.
Sara (Debt Camel) says
As you have no income and you two are sharing your finances and there will be no spare income for non priority debts (I am making some assumptions here!) then assume?) the simplest thing is to put in both your incomes.
I do suggest completing the National Debtline budget sheet first: https://tools.nationaldebtline.org/yourbudget/. It is very comprehensive and is harder to forget things. Then you can use those figures to complete the budget planner from your creditors, or some may be happy if you just send them a copy of the ND sheet.
If we move to interest only, is this a new mortgage application?
No, it is an agreement with your lender over the repayments to your current mortgage.
If you are struggling with this, do phone National Debtline on 0808 808 4000. it can be easy to get bogged down in details and lose sight of the overall picture – a debt adviser can be really helpful.
Ed Sullivan says
I am considering VT- ing my car now because for six months I have been furloughed, paying for a car that I’ve not been able to use mostly.
My question is this… Where does VAT sit with VT’s?
Sara (Debt Camel) says
Where does VAT sit with VT’s?
I am not sure what you are asking?
What do you expect to happen when furlough ends, will you be back to work? Do you need this car?