Terminating Car Finance

matthewwallis

Hi all,

hope you’re all well. I took out car finance November 2021 and now my living situation will change end of October. 

It’s looking likely I may need to rent a place on my own and currently I’m paying £308 per month for the car finance which is just too much to pay alongside new living expenses. Luckily I’ve got a new job and have a van I use to travel with so I don’t actually use the car that much nowadays, so I could go without one. 

I’m just looking to see what kind of impact it will have on my credit file if I tell them I can no longer afford it and hand the car back to them. Everywhere on Google just seems to say that it I’ve paid 50% I can hand it back with no issue, however I’ve not paid anywhere near 50% and just want to hear from people who handed it back and took a hit on their credit rating to have a better understanding of the impact of giving it back. 

Thanks in advance 

MrFrugalFever

There’s usually 3 options here.

1st) you request a settlement letter and get a valuation, selling to the highest bidder in the hopes that it covers the remaining finance or leaves very little shortfall (you’d need to cover the shortfall / AKA negative equity)

2nd) you maintain payments and once you’ve reached 50% of the TOTAL amount payable, exercise your right to voluntarily terminate. Beware of items outside of Fair Wear & tear that you may be charged for 

3rd) you exercise your right to voluntarily surrender. This will, in effect, be a default on your credit report and therefore carry the problems and impact all that it entails…..

molerat

Firstly you need to know exactly what type of finance you have and whether any form of "termination" is available to you.  Simply handing the car back will likely be a very expensive option.at this early stage, sometimes almost as expensive as actually keeping the car !  Just handing it back and ignoring any debt incurred by that action will trash your credit file.

You need to find out the value of the car through WBAC etc and compare that to a settlement figure from the finance co and see if you could cheaply finance any gap.  Unfortunately used car prices have started sliding back to more "reasonable" figures which is not now in your favour.

macman

Finance: is this a PCP or HP? If the former, remember that the balance owing includes the balloon payment. 
Either way, as you say at 10 months you will be nowhere near the 50% point, which would typically be in the last year of the contract.