Worried about Voluntary Termination

SmartRT

Hi

I really need some advice and not sure who to ask. I've been through various discussions on this forum/site but seem to get conflicting views.

Basically, I have a car on a standard HP agreement with VW Finance. I am well over the 50% mark. The car is worth £9.5k and the balance on the agreement is £12k. I was told by VW finance today that I can hand the car back (VT) with no payments etc as long as the car is in good order (which it is, perfect) and the mileage is as per the agreement - which it is.

My worry though is that this VT will stop me getting future credit. I know a flag is put on your credit file but will it affect me getting a mortgage or other credit. Or, a new car on finance which I will do a week or so after VT'ing as we'll need a car.

By the way, all my payments are direct debit and never missed one.

Many thanks,

National_Debtline

Hello there,

A Voluntary Termination is a legal right that you have under the Consumer Credit Act 1974. It is a right that can only be exercised if an agreement has been stuck to and not defaulted. When you VT the creditor may place a flag on your file to show that you've exercised as your right but it should not have a detrimental effect on your credit file. Afterall, you have adhered to the terms of the contract.

Do take plenty of photos of the car and, if possible, get a mechanic friend to agree that the vehicle is in perfect working order.

Also make sure that you VT in writing via a recorded delivery letter. We have a sample letter at the end of our HP fact sheet.

Very best wishes,

David @ National Debtline
Twitter: @natdebtline

SmartRT

Thanks so much David. That's very helpful. How soon after I hand the car back (VT) can I purchase my new one? I'm not VT'ing because I cant afford the payments, rather I'd like a new car and VT appears to be the most cost effective. My new car will also be on finance hence the worry.

mtk1983

Hello,

We have recently moved abroad for work purposes, (permanent move), and as the move was a sudden one and basically rushed I am trying to finalise the VT of one of our cars with Mini Finance. We bought a Mini in January 2012 on a 4 year PCP deal, (however the agreement states "Hire Purchase" - not sure if there is much of a difference), which had a 6K balloon payment at the end of the term should we wish to purchase the vehicle outright.

Obviously if we had stayed in the UK we would have waited until the term was almost up then handed the vehicle back, and avoided the balloon payment at the end.

I have been in contact with Mini Finance to discuss a VT, however they are sticking to including the optional balloon payment within the VT cost. Are they able to do this? Surely the balloon payment is optional and they cannot include this within any VT cost calculations as the value of the car currently is greater than any GFV?

To my mind we are more than half way through the term, and have made more than half the payments we would have made to Mini Finance, however when you add in the balloon payment the amount payable under the agreement increases drastically.

I have not found any information on this, and I am hoping someone shed some light on this.

SeanG79

SmartRT wrote: »

Thanks so much David. That's very helpful. How soon after I hand the car back (VT) can I purchase my new one? I'm not VT'ing because I cant afford the payments, rather I'd like a new car and VT appears to be the most cost effective. My new car will also be on finance hence the worry.

A VT mark is supposed to have no detrimental impact on your credit, and for mortgage and personal loans, this is true, however I have known instances where there has been no issue, but also instances where after VT'ing an agreement and then trying to get a new vehicle that lenders have requested a larger deposit or shorter term, to discourage customers from VT'ing in future (people generally only VT when they are in a negative equity position) - this is usually the case if you go back to the same lender for the new vehicle or if you have "several" VT markers on credit searches.

thebritishbloke

mtk1983 wrote: »

Hello,

We have recently moved abroad for work purposes, (permanent move), and as the move was a sudden one and basically rushed I am trying to finalise the VT of one of our cars with Mini Finance. We bought a Mini in January 2012 on a 4 year PCP deal, (however the agreement states "Hire Purchase" - not sure if there is much of a difference), which had a 6K balloon payment at the end of the term should we wish to purchase the vehicle outright.

Obviously if we had stayed in the UK we would have waited until the term was almost up then handed the vehicle back, and avoided the balloon payment at the end.

I have been in contact with Mini Finance to discuss a VT, however they are sticking to including the optional balloon payment within the VT cost. Are they able to do this? Surely the balloon payment is optional and they cannot include this within any VT cost calculations as the value of the car currently is greater than any GFV?

To my mind we are more than half way through the term, and have made more than half the payments we would have made to Mini Finance, however when you add in the balloon payment the amount payable under the agreement increases drastically.

I have not found any information on this, and I am hoping someone shed some light on this.

You should have started your own thread really, as you can see the person below you replied to a comment from 6 months ago :P

The VT cost is calculated based on 50% of the loaned amount. Lets say you agreed to:
Car cash price - £15,000
Your deposit - £1,000
Total borrowed - £14,000
GFV/Balloon Payment - £6,000

Total you need to pay over 4 years - £8000 (I'm saying it's 0% interest for easy numbers).
Monthly payment - £166.67

The way voluntary termination works, is that you have to have paid off at least 50% of the total amount borrowed, in this case you borrowed £14,000. You would need to pay off at least £7,000 before you can VT, this would take 42 payments.

Basically, the way they've explained it to you is correct. The VT calculation is calculated based on the total amount borrowed, as you have technically borrowed the £6,000 final balloon payment, you just have an option to give the car back rather than pay that.