Voluntary Termination or Repossession of Car on HP?

getmeouttahere

Hi all,

Sorry for the long post, but I wondered if I could get some advice please.

My wife and I are about to start a token payment plan with StepChange because our outgoings for priority bills are more than our current income, without even taking into account repayments for our debts.

One of my priority bills is my car which is on finance. I am 18 months into a 60 month finance agreement and my monthly payments are £220pcm. If we didn't have this to pay, we might actually be able to find a way out of this mess.

I am currently 2 months behind on the payments for my car (including a payment due 4 days ago), plus all the charges they've hit me with, so I am currently £520 in arrears.

My wife and I sat down together to work out all of our finances, and we had a frank discussion about the car. We're not happy with the car anyway, and we would, in all likelihood, hand the car back once we're 50% through the agreement, meaning another 10 payments of £220 per month. With this in mind, we've decided it's pointless struggling to pay the £520 arrears and continue to struggle on a monthly basis to find the £220 for another 10 months, if the end goal is to give the finance company the car back anyway.

I have had numerous conversations with the finance company, where I have informed them of our situation, and asked about the possibility of extending the finance agreement and they are unwilling to do so.

The finance company have said that I can voluntarily terminate the finance agreement by handing the car back to them. They will then send me a bill for the difference between what I've paid so far and 50% of the total agreement value (approx £2200), plus any excess for anything that will devalue the car (excess mileage at 15p per mile, etc). They have said the process of handing the car back takes about 4 weeks.

One of the letters that they have sent says that I have paid over 30% of the total agreement amount so they would need to get a court order to repossess the car.

If I were to hand the car back to the finance company, I would need to find an alternative car, probably a cheap runaround, but it would take a couple of months before I can afford one, so we're definitely looking at after Christmas.

So, my questions are:

1. What are the consequences if the car is repossessed? Will that cost me more in the long run? My credit file is going to be stuffed anyway, so not too bothered about that.

2. Roughly how long will it take for the finance company to get a court order for repossession of the car?

3. In my situation, should I voluntarily terminate, or should I wait for them to repossess the car?

seanavfc92

getmeouttahere wrote: »

So, my questions are:

1. What are the consequences if the car is repossessed? Will that cost me more in the long run? My credit file is going to be stuffed anyway, so not too bothered about that.

2. Roughly how long will it take for the finance company to get a court order for repossession of the car?

3. In my situation, should I voluntarily terminate, or should I wait for them to repossess the car?

1. The consequence is that you'll have a shortfall that you'll need to pay. However, that can be included in your repayment plan as a non-priority debt.

2. I would imagine the turnaround would be quicker if you VT'ed the agreement, compared to waiting for the finance to apply for a court order.

The court order is a similar process to applying for a CCJ. I think the timescales are roughly the same.

3. VT the agreement. Could you delay the plan by a couple of months and use some of the £220 to buy a cheaper car outright?

getmeouttahere

seanavfc92 wrote: »

1. The consequence is that you'll have a shortfall that you'll need to pay. However, that can be included in your repayment plan as a non-priority debt.

2. I would imagine the turnaround would be quicker if you VT'ed the agreement, compared to waiting for the finance to apply for a court order.

The court order is a similar process to applying for a CCJ. I think the timescales are roughly the same.

3. VT the agreement. Could you delay the plan by a couple of months and use some of the £220 to buy a cheaper car outright?

Thanks for your input.

1. I will have the shortfall anyway, because if I VT the agreement, I will still owe the difference between what I've paid and the 50% figure. Either way, StepChange said the remaining balance could be added to my token payment plan.

2. Thanks. In that case, I am wondering whether it's better to let them repossess the car as that would buy me more time to find another car?

3. Our income is currently less than our outgoings, so on our payment plan, money is being taken from food/household/etc to meet the payments of the car finance. If I VT the agreement, we would have the recommended amounts for food/household/etc, so we could still minimize what we spend on groceries to save up for a cheap car.

The only issue is, having to find a cheap car before my car is either VT'd or repossessed.

seanavfc92

getmeouttahere wrote: »

Thanks for your input.

1. I will have the shortfall anyway, because if I VT the agreement, I will still owe the difference between what I've paid and the 50% figure. Either way, StepChange said the remaining balance could be added to my token payment plan.

2. Thanks. In that case, I am wondering whether it's better to let them repossess the car as that would buy me more time to find another car?

3. Our income is currently less than our outgoings, so on our payment plan, money is being taken from food/household/etc to meet the payments of the car finance. If I VT the agreement, we would have the recommended amounts for food/household/etc, so we could still minimize what we spend on groceries to save up for a cheap car.

The only issue is, having to find a cheap car before my car is either VT'd or repossessed.

1. That's what I mean; that will be as severe as the consequences get as far as I'm aware.

2. Possibly. The only potential issue if you do it this way is the possibility of incurring more charges? I suppose that doesn't matter too much if you're only paying £1 per month to them.

3. Is there a family or friend who can maybe lend you £500 or so to buy a cheap runaround, with the view to repay them once you're in a better financial position?

getmeouttahere

seanavfc92 wrote: »

1. That's what I mean; that will be as severe as the consequences get as far as I'm aware.

2. Possibly. The only potential issue if you do it this way is the possibility of incurring more charges? I suppose that doesn't matter too much if you're only paying £1 per month to them.

3. Is there a family or friend who can maybe lend you £500 or so to buy a cheap runaround, with the view to repay them once you're in a better financial position?

Ah right, ok. I just wasn't sure if I'd have to turn up to court, or whether the additional costs would be high.

The only possibility would be my mother but she loaned me money to buy a car before and it took me two years of her nagging before she was paid back in full, so I wouldn't blame her for saying no.

glentoran99

IF you sold the car how much of a shortfal would there be between what you owe and the car sale?

seanavfc92

getmeouttahere wrote: »

Ah right, ok. I just wasn't sure if I'd have to turn up to court, or whether the additional costs would be high.

I wouldn't know to be totally honest.

I've only seen it where the finance company takes someone to court who wants to keep their car. I would only assume that they follow the process, you don't turn up to court, they file for immediate repossession.

getmeouttahere

glentoran99 wrote: »

IF you sold the car how much of a shortfal would there be between what you owe and the car sale?

The settlement figure is about £7,800 and I would probably get £6,800 - £7,000 for it, but the finance company won't let me sell the car unless I clear the finance with them.

I asked the finance company if I could sell the car then pay the difference at so much per month but they said no.

getmeouttahere

seanavfc92 wrote: »

I wouldn't know to be totally honest.

I've only seen it where the finance company takes someone to court who wants to keep their car. I would only assume that they follow the process, you don't turn up to court, they file for immediate repossession.

Thanks. To be honest, I want to be as fair with the finance company as I can be. It's not their fault I'm in this mess so I will probably just VT the agreement.

glentoran99

getmeouttahere wrote: »

The settlement figure is about £7,800 and I would probably get £6,800 - £7,000 for it, but the finance company won't let me sell the car unless I clear the finance with them.

I asked the finance company if I could sell the car then pay the difference at so much per month but they said no.

The really are being unhelpful :mad:

Have sold a car that was on finance a few times without hassles. 1 time I didnt even bother telling the finance company first, Person buying made the cheque payable to the finance company so they knew they werent going to get stung for the finance

getmeouttahere

glentoran99 wrote: »

The really are being unhelpful :mad:

Have sold a car that was on finance a few times without hassles. 1 time I didnt even bother telling the finance company first, Person buying made the cheque payable to the finance company so they knew they werent going to get stung for the finance

I can kinda see their point though. I owe them around £7800, which is currently secured on a car. If I sell the car for £1000 less, and they release the car, they will have nothing to secure the £1000 on.

They know that they have me over a barrel. It wouldn't make any difference to them really if they let me sell the car and settled the additional £1000 or so with them in monthly payments, but I guess they're not obliged to do so.