Ending a car finance agreement early can seem daunting, but it’s possible. Understanding your options and the potential costs involved is crucial before making a decision. Generally, you have a few main routes to explore:
Voluntary Termination (VT): If you’ve paid at least 50% of the total amount payable (including interest and fees), you have the right to voluntarily terminate the agreement under the Consumer Credit Act. This means handing the car back and walking away. However, you’re still liable to pay the difference between what you’ve already paid and that 50% mark, plus any costs for damage beyond fair wear and tear. Before VT, carefully calculate if you’ve reached the 50% threshold. Check your finance agreement for the exact total amount payable. If you haven’t reached it, you’ll need to make a lump sum payment to get there.
Early Settlement: This involves paying off the remaining balance of the loan in one go. Request a settlement figure from your finance company. This figure will include the outstanding principal, accrued interest up to the settlement date, and potentially an early settlement fee. Compare the settlement figure to the current market value of the car. If the car’s worth more than the settlement figure, you could sell it privately and use the proceeds to clear the debt. Keep in mind that you’ll need to arrange the sale and potentially deal with the hassle of finding a buyer. Selling to a dealership might be faster but often results in a lower price.
Part Exchange: Trading in your financed car for a new one can be another option. The dealership will assess the value of your current car and offset it against the price of the new vehicle. However, be realistic about the trade-in value; dealerships typically offer less than the car’s market value. Any negative equity (where the outstanding finance is more than the car’s trade-in value) will be added to the new finance agreement, meaning you’ll essentially be financing the old debt on top of the new car. Carefully evaluate the terms of the new finance agreement and ensure you can afford the repayments.
Selling the Car Privately and Settling the Finance: This can potentially give you the best return but requires more effort. Get a settlement figure from your finance company and advertise your car for sale. Once you have a buyer, you can use the proceeds to pay off the finance. The finance company will usually require proof of funds and may need to be involved in the transaction to ensure the debt is cleared before releasing ownership of the car. This option is only viable if you can sell the car for more than the settlement figure.
Before taking any action, carefully review your finance agreement. It will outline the terms and conditions of early termination, including any fees or penalties. Contact your finance company to discuss your options and obtain accurate settlement figures. Always compare different options to determine the most financially sensible path for your circumstances. Consider seeking independent financial advice if you’re unsure about the best course of action.
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800×565 guide voluntary termination car finance vt hp from www.compareukquotes.com