If your circumstances change after you have taken out car finance and you wish to end your agreement, don’t worry you can end your car finance early! Both Personal Contract Purchase (PCP) and Hire Purchase (HP) finance agreements can be terminated prematurely if for one reason or another you cannot continue to make the payments. Plus, If your car has been stolen or written off you will need to end your finance deal early. But, if you are covered by GAP Insurance, you won’t need to pay a full settlement fee.
Cancelling your finance agreement could be the best option if you can’t afford the payments as failing to do so will impact your opportunity to secure credit in the future. Though the law covers both PCP and HP agreements they are different in how they work. So, let’s look at each in turn.
Personal Contract Purchase (PCP) is the most popular type of car finance, you pay an initial deposit, followed by a series of monthly payments usually paid between 12 and 48 months. At the end of your contract, you usually have three options to consider.
If you wish to cancel your finance agreement and you have repaid more than half or 50 per cent of the total finance to the finance company (including interest and fees) it should be a relatively simple process. If you haven’t repaid the 50 per cent you can still end the agreement early by paying for the difference, this is often called a balloon payment.