Has anyone any experience of ending a hire-purchase agreement by handing back the car after paying half the payments? My agreement says that I can do this so long as the car is in generally good condition for its age. I am wondering whether the finance company would use this to claim back extra money even though the car has been serviced according to schedule at main dealerships. Does the mileage matter? If not, then with the plummetting used prices, this seems to be a good way to finance some high-mileage driving.
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If the car is worth less than the outstanding balance on the agreement then you've bought the wrong car, the wrong finance, or most likely both. If you're already in this situation, then you can hand the car back. However, choose correctly and keep the finance agreement reasonably short so you're never making payments on an unreliable old car and a good car should be worth half what you paid half way through the agreement.
It is a legal requirement that they accept the car back. S.100 (4) of the Consumer Credit Act 1974 says that:
If the debtor has contravened an obligation to take reasonable care of the goods or land, the amount arrived at under subsection (1) shall be increased by the sum required to recompense the creditor for that contravention...
The provision in the agreement is enforcable only to the extent that it is 'reasonable' - i.e., if you're willing to go to court over it they can't make excessive charges. Dealer servicing doesn't cover everything, of course - if there are cigarette burns in the upholstery and dents in the wings, the service will leave them alone but they would still seriously affect the value of the car to the finance company or any buyer.
If there's no provision in the contract about mileage then no, it doesn't matter. If they try and go beyond this then it's an unenforceable penalty. There was a case on this in Leicester a couple of years back.
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I did exactly this a couple of years ago on a car, which was bought on the wrong finance and depreciated quite quickly (I was young and naive!). I had done 50k in two years, hence the depreciation. Handed the car back, and have heard nothing more from the finance company.
I am aware that if you do this your credit file is updated with a 'Voluntary Termination' notice - but most lenders ignore this when decision making.
I wouldn't be tempted to do it regularly though - it was a logistic nightmare getting them to come and pick the car up etc!
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This is to do with the optional purchase price isn't it? As in, x is left to pay after so many monthly repayments. Usually excess mileage is charged at 5-10p a mile and the mileage allowance is low eg 5000 annual allowance over 3 years = 15k. If you do 60k then thats another £2250 to pay. On a small car you may as well keep it and put up with the interest.
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No - I think this is referring to a Hire Purchase Agreement, where you have a right to end the agreement after 50% of the original amount owed, including interest and any insurance premiums, has been paid. You can then return the car to the finance company, who after all, are the legal owners until the last instalment is paid.
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No Dave18 - With HP you can simply hand the car back after paying 50% off. My HP with Black Horse has no mileage restriction and my excessively depreciating Vectra will be being sent their way in "reasonable condition", fully serviced but with rather a high number of miles on.
I think you're thinking of PCP which is a different kettle of fish completely and has mileage restrictions etc.
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What constitutes "reasonable condition" My Vectra has a small dent on the rear wheel arch and a cracked back light, should i have thes sorted first?
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