Finance Agrrement When Can You Hand Car Back To Finance Comp

[angeleyes]

hi
i have neg equity on my car but need a new one short of £800- £1000 took finance out in oct due to finish in another 2 1/2 years I have been told that you hand it back to the finance company while you are still under agreement and owe nothing as long as it's in reasonable condition (it is) can anyone through any light on this and does it affect your credit at all
Many thanks

[Bob63]

If you bought the car on a Hire Purchase agreement then you have the right to Voluntary Termination (VT) on the agreement by returning the car with nothing more owed after 50% of payments have been made. It only applies to Hire Purchase agreements i.e. where the finance company is the owner of the car until you exercise your right to purchase at the end of the contract. If you took out a car loan then you need to complete the payments.

As for whether this affects your credit score, I have no idea.

Some interesting background reading on VT can be found in this government consultation paper:
http://www.oft.gov.uk/NR/rdonlyres/1742CF1C-E663-4B61-BD55-717AD727BCFF/0/oft761.pdf

And here is CAB's response to that consultation paper.
http://www.citizensadvice.org.uk/winnn6/index/campaigns/social_policy/consultation_responses/cr_consumerandebt/dti_consultation_on_voluntary_termination_of_hire_ purchase_and_conditional_sale_agreements

Mike

[plane_boy2000]

I think that you have to have made 50 % of the total - not the value of the car i.e. if the car was 8K and the interest / charges were 2K you would need to have made 5K in payments first. I am not sure on the credit score bit, but as a minimum it will be noted on your credit record as VT which may make other lenders reluctant to provide you with car finance.