Car Hire Purchase Agreement Termination

Mst

Good evening,

Now I'm not sure if this is in the right place, please tell me if not!

I have a Honda car on a Hire Purchase Agreement. It is the single biggest regret of my financial health to have done so, but that's another point and my lesson has been well and truly learnt! Anyway, I am at the halfway point now and can therefore hand the car back without any extra cost of rental monthly payments (the law states the company is entitled to the payment up to the halfway point of agreement) and I do not wish to continue to pay the full amount for a car that will effectively be worth far less by the end of the agreement. Honda have informed me today that I have two options; I can either accept and pay a final settlement figure of £9,500 and the car is mine. I could then sell the car (currently for around £11,000-£12,500) and pocket the difference. Or I can hand the car back, with charges amounting to around £2,000 for extra mileage and light scuff mark repair.

So, option one: I do not currently have £9,500 laying around in an account (I wish! I'm just a lowly frontline NHS worker!) Is there any option to loan this amount? Is this recommended? Any other way around this?

Option two: hand the car back and pay Honda £2,000 for the privilege (again, I don't have £2,000 laying around either!) Here's a point, can they legally charge you mileage fees? I read in one place that they cannot do so, but in another that they can do so. Also, the excess mileage fee now is higher than when i signed the agreement. If I legally do have to pay this then is there any scope to pay the original price upon signing the agreement?

I hope this makes sense and thank you in advance!

Nearlyold

Can you confirm:-

Is this a PCP agreement?

What was the purchase price?

How much did you borrow?

What is the APR?

What is the term?

How many payments have you made?

What is your monthly payment?

Assuming its a PCP what is the GMFV?

What is the annual mileage allowance?

What is the pence per mile excess mileage charge?

How many miles have you covered?

Is the current value £11,000 to £12,500 a retail price or a trade in price?

Do you need a car?

What is the problem with the car is it just the monthly payment you would like to get shot of or has it been too costly to run?

National_Debtline

Hi Mst,


If the car is subject to a conditional sale agreement (either hire purchase or PCP) and you voluntarily terminate the agreement at any stage and you will be liable for 50% of the total agreement, minus the money paid to date, plus any excessive wear and tear to the car. If the car is on PCP they tend to have mileage clauses as well, so if you have gone over the mileage allowance, this can affect your liability.


If you decide to terminate and hand the car back, and Honda bill you for £2000, you can offer to repay this gradually but this would be at the discretion of the lender. A payment plan would be informal and the lender could chase this through debt collectors and the county court and it can cause damage to your credit file as well.


The only other option that you could discuss with Honda, from what you have mentioned, is to ask them for written consent to sell the car yourself first, and then pay them the settlement figure afterwards. You must have their consent to do this, as the car is not your before the final payment, and selling without their consent would be deemed as theft. Good luck,


Laura
@natdebtline

Mst

Hi folks,

Thanks for both of these replies. It's much appreciated. Apologies for the delay in response, I've been on shift today!

Nearlyold-
-It is a Hire Purchase Agreement.
-Borrowed £17,750 (price of car)
-APR = 5.75%
-I have paid a total of £8,875
-Monthly payment of £290.99
-Mileage is 18,500
-Excess mileage is 4 pence per mile
-I have covered 34,000
-The value is that of identical vehicles/mileage on Auto Trader/EBay.
-I do need another car for sure!
-£290.99 per month is money that I am no longer happy to pay! It's costly!

National Debt Line -
Thank you for this. It's sound advice. I am really looking into this mileage clause. Supposedly there is no legislation to enforce it and therefore no obligation to pay it!

Also, I am considering a loan to purchase the car and then sell it. I will most definitely consider contacting Honda and asking if I can sell the car first... Although will buyers be put off by the over hanging fee owed on Registration Checks?

Thank you both!

fwor

Mst wrote: »

I am really looking into this mileage clause. Supposedly there is no legislation to enforce it and therefore no obligation to pay it!

I don't know who told you this, but if the clause is part of the contract that you signed then it is enforceable. It certainly could not be considered an unreasonable term, because the value of the car reduces as the mileage increases.

Mst

Quote from http://legalbeagles.info
"Excess Mileage Charges
Lenders charging for excess mileage is one of the hottest topics at the moment. Strictly speaking, the CCA says (as per the provisions above) that your liability is limited to one half of the total price payable plus any overdue instalments. However lenders will argue that despite this being set out in the CCA, they can still recover the excess mileage charges because its in the contract. Put simply, it is well settled that if there is a conflict between common law contract and legislation, then the legislation will prevail. This is also explained at section 173 of the CCA, that you disapply the provisions of the CCA."

molerat

Legalbeagles offer one opinion on the matter and the FOS opinion is the opposite stating that you have contractually agreed to care for the vehicle and not to reduce the value by scratching, denting or exceeding the agreed paid for mileage, the CCA allowing for this. You therefore have no appeal route through the ombudsman and can only use the courts to dispute the charges. So far no one on either side, including Legalbeagles, is willing to put their money where their mouth is to get a binding decision.

forgotmyname

If the car really is worth more than you owe then take it to a garage and see how much they will give you.

If their quote is more than you owe then contact the finance and get their permission to sell it and get the buying dealer to send them the money directly.

You dont need a loan then.

Nearlyold

Sorry Mst but I can't see how you are at the VT point at the moment, you need to have paid 50% of the total amount payable. The total amount payable is the cash price of the item (this also happens to be the amount borrowed in this case) plus interest plus any arrangement or option to purchase fees - you need to have paid 50% of that total - so far you seem to have paid 50% of the original purchase price. I think a good part of the £2000 "charge" is the amount you need to pay to bring you up to the 50% point.

In any event paying the settlement and selling the car (assuming your valuation is achievable) would at least put a bit of cash in your pocket towards buying a replacement vehicle

Brock_and_Roll

Spot on NearlyOld. The OP appears to be under the impression that you can VT at halfway through the term, whereas you have to be halfway through the total amount contractually due over the agreement.


With regards to excess mileage charges, this is a blind avenue to pursue. These have been in car leasing, PCP hire agreements for as many years as I can remember and I don't recall this ever being sucessfully challenged in the courts.


Such clauses can hardly be seen as unreasonable - the manufacturer/lender is taking a substantial equity position in the car at the end of the agreement so clearly the mileage is 100% relevant - a 3yr car with 30k is worth a lot more than the same car with 100k on the clock.


Hypothetically, if mileage clauses were successfully deemed to be unenforceable, the contract hire and PCP products would effectively disappear from the market and there would be a perverse incentive for 1,000s of individuals to rack up mileage on existing vehicles under contract.

verityboo

Brock_and_Roll wrote: »

Spot on NearlyOld. The OP appears to be under the impression that you can VT at halfway through the term, whereas you have to be halfway through the total amount contractually due over the agreement.


With regards to excess mileage charges, this is a blind avenue to pursue. These have been in car leasing, PCP hire agreements for as many years as I can remember and I don't recall this ever being sucessfully challenged in the courts.


Such clauses can hardly be seen as unreasonable - the manufacturer/lender is taking a substantial equity position in the car at the end of the agreement so clearly the mileage is 100% relevant - a 3yr car with 30k is worth a lot more than the same car with 100k on the clock.


Hypothetically, if mileage clauses were successfully deemed to be unenforceable, the contract hire and PCP products would effectively disappear from the market and there would be a perverse incentive for 1,000s of individuals to rack up mileage on existing vehicles under contract.

The excess mileage charge has not been judged in court but I have not heard of a case where it has gone that far as I presume the finance company would not want to loose

The problem is that PCP is a type of HP agreement. You can buy a car on PCP over 3 years with an agreed maximum mileage over the term to calculate the size of the balloon payment. You can often buy the same car on straight HP with similar monthly payments over 5 years. In both cases the VT point would be two and a half years. Considering your rights should be the same in both cases, as long as the car has been maintained why should mileage be chargeable on a PCP but not HP