Cancelling Hire Purchase half way through agreement?

jellybean09

In April we will be exactly half way through our 5 year Hire Purchase Agreement.
For over a year, realistically we wanted/needed to change the car as its not really suitable for our circumstances. Initially when we looked in to 'trading in' our car and entering into a new agreement, we were told we would be in negative equity.

The original plan was to wait until the half way mark (April) and trade the car in and set up a new HP agreement for another car.

However looking into Leasing as an option as well im wondering if this may suit us better. If we continued paying for our current car until the end of the plan the car would be hardly worth anything at all and all we will be doing is entering straight into another agreement.

Im going to read up a little more on the leasing option and whether it would suit us. My only problem is the current HP agreement we have. Am I in a position to end the agreement in April, give the car back and all is well? or am I likely to be in negative equity even though we would be half way through the agreement? Not sure if this is even an option to do and whether im effectively stuck in HP until I can either give it back and pay the surplus owing or trade in for a new HP deal?

Any advice would be appreciated.

wealdroam

First, I suggest you read the terms of your current agreement.

What does it say about termination?

wba31

http://www.nationaldebtline.co.uk/england_wales/pdf/16_hire_purchase_debt.pdf

This fact sheet is pretty useful...

birkee

The car is not yours to sell, until it is paid for!
When traded in, the dealer usually settles the outstanding debt by paying you for the car, MINUS the outstanding debt. (He will possibly get a discount from the lenders for 'early settlement' of the debt.
If you are thinking of leasing, what are you going to do with your current car, if it's not your to sell?

No....the lender won't accept taking the car back and you stopping paying the HP. They are not car dealers....what do they want with it?
If they have it siezed because you stop paying, you will incurr enormous extra charges for admin, baliffs, selling it etc etc plus the remainder of the debt, and there is no way on earth you will get any more HP to buy another car, or even lease one I should think.

Fraid you're stuck with it until you settle the debt.

wba31

Birkee you're wrong, once 50% of the agreement has been made the car can be handed back and the debt is cleared

birkee

wba31 wrote: »

Birkee you're wrong, once 50% of the agreement has been made the car can be handed back and the debt is cleared

Well, it has been a long while since I bought anything on HP, and there IS a chance that rules may have changed, BUT....I would check the small print VERY carefully!

What happens if when the 50% mark is reached, the car is in such a state, that the lender can't recover the other 50% of money borrowed by selling it? Are they supposed to take a loss? And what about the costs involved in selling it, to recover their money?
My suspicion is that YOU are wrong. (Unless you can quote me a regulation that covers it.).

birkee

Oh, and don't forget, you can't hand the car BACK to the finance company, as THEY didn't sell it to you!

wba31

birkee wrote: »

Well, it has been a long while since I bought anything on HP, and there IS a chance that rules may have changed, BUT....I would check the small print VERY carefully!

What happens if when the 50% mark is reached, the car is in such a state, that the lender can't recover the other 50% of money borrowed by selling it? Are they supposed to take a loss? And what about the costs involved in selling it, to recover their money?
My suspicion is that YOU are wrong. (Unless you can quote me a regulation that covers it.).

The following is taken from my original post on this thread. Under the section heading "You End The Agreement."

You have the right to terminate and end your
agreement under Section 99 of the
Consumer Credit Act 1974 at any time
before your last instalment is due, although you
will have lost the right to terminate your
agreement if the creditor has already terminated
it or if the full balance of the agreement has
become payable.
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.

In addition you will also owe any damages if you
have failed to take reasonable care of the goods
(over and above normal wear and tear). The
creditor might argue that there will be an extra
charge for damage or unusual wear and tear. It
is important to look at any charges to see if they

are reasonable.

I work in debt advice, not for NDL however... I doubt I am wrong...

wba31

birkee wrote: »

Oh, and don't forget, you can't hand the car BACK to the finance company, as THEY didn't sell it to you!

The HP company own the vehicle as they have provided the finance to purchase the vehicle from the original garage

birkee

wba31 wrote: »

The following is taken from my original post on this thread. Under the section heading "You End The Agreement."

You have the right to terminate and end your
agreement under Section 99 of the
Consumer Credit Act 1974 at any time
before your last instalment is due, although you
will have lost the right to terminate your
agreement if the creditor has already terminated
it or if the full balance of the agreement has
become payable.
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.

In addition you will also owe any damages if you
have failed to take reasonable care of the goods
(over and above normal wear and tear). The
creditor might argue that there will be an extra
charge for damage or unusual wear and tear. It
is important to look at any charges to see if they

are reasonable.

I work in debt advice, not for NDL however... I doubt I am wrong...

You return a wreck, you pay to restore it to original condition.
The goods have also been devalued by added mileage, so I query whether the above refers to cars. Have there been any test cases? This otherwise, seems like a cheap way to rent cars. Can't believe the lenders will accept this exposure to loss.

birkee

p.s. Should this strange situation above be correct, I expect your credit rating will be shot.
No more cars on HP or lease agreements, credit cards, mortgages etc etc. You have defaulted on a loan.