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Car finance ›
How does voluntary termination of car finance work?
Updated: Monday, 18 September 2023
Car finance can help spread the cost of a car over an agreed period of time. However, if your circumstances change over the course of the agreement, you have the legal right to end your agreement by voluntary termination.
Our guide will explain how voluntary termination of car finance works. We’ll explain what it is, the difference between voluntary termination and voluntary surrender, and how you would voluntarily terminate your car finance agreement.
If you’re a Moneybarn customer and want to use this option to end your agreement early, please contact us so we can run you through all of your options to end the agreement and confirm how much each option may cost you.
In this guide:
What is car finance voluntary termination?
Often, a person’s circumstances can change over the course of a car finance agreement, and they may need to end the agreement early. In that case, voluntary termination might be the most cost-effective option.
Voluntary termination is your legal right as a customer to cancel or end your car finance agreement early, provided you meet the necessary criteria. You would need to return the vehicle and are liable for half of the total amount payable, plus any outstanding payments (inclusive of any previously agreed payment breaks or payment holidays) and charges.
This legal right is detailed in Section 99 of the Consumer Credit Act 1974 and allows you to end your finance agreement and return the vehicle.
This is a statutory right and can’t be excluded from your contract with a car finance company. However, the process for voluntary termination will differ depending on the lender. If you aren’t sure about the criteria for voluntary termination, contact your lender.
What is the difference between voluntary termination and voluntary surrender?
Voluntary termination ends your car finance agreement early (before the agreement term ends). It requires mutual agreement between the lender and the borrower. This is dependent on whether you meet the criteria for voluntary termination.
Voluntary surrender is when you return your car to the lender, usually because you’ve missed payments. In this case, the lender will repossess the car, and you may still be liable for any payments still owed.
Reasons why you might voluntarily terminate your agreement
You might want to terminate your car finance agreement for several reasons. Car finance agreement terms can last for several years, and your financial or personal situation might change during this time.
You might not be able to make the repayments anymore and decide that you need to change your car on finance to something with lower monthly repayments. If so, voluntary termination is one of the options you have.
If you can no longer afford to make your repayments, you might want to end the agreement and return the vehicle to avoid your car being repossessed. If you are experiencing financial difficulty, contact your lender and they can outline the support available to you and explain the process of voluntary termination.
There are also some not-for-profit organisations such as MoneyHelper and StepChange, who can provide free, unbiased advice to help you get back on track.
Depending on the type of car finance you have and how far into it you are, you may be required to make a further payment to meet the 50% threshold of the total amount payable. Keep reading, as we will explain this further in the next section.
If you’re struggling to make your repayments, you may be considering voluntary termination of your car finance agreement. If you’re a Moneybarn customer, contact us today to discuss your options with a member of our team.
We're here to help...
Financial difficulties
If you’re experiencing financial difficulties, we want to help. Please take a look at the different support available to you and together we’ll find a solution suitable for your personal circumstances.
Contact us
You can call our Customer Services Team on 0330 555 1230. Please see our contact us page for opening hours.
How does voluntary termination work?
To end your agreement by voluntary termination, you must tell your lender either verbally or in writing. It’s best to contact them directly, as they will be able to discuss your options. They can also guide you through the voluntary termination process if you decide that is the best option.
The criteria for voluntary termination may vary between lenders. Some common requirements are that the car is in good condition with no excessive wear and tear, and that you must have paid 50% of the total amount payable. Any arrears or charges that have built up over the agreement would also need to be repaid.
It also depends on the type of finance you have. Let’s examine some of the most common car finance types and see how voluntary termination might work.
Voluntary termination with a CS (Conditional Sale) agreement
If you want to terminate your Conditional Sale agreement early through voluntary termination, you’ll be liable for half (50%) of the total amount payable, plus any arrears or charges if applicable.
If you haven’t met the 50% threshold, you can make additional payments on your car finance to reach this point.
Voluntary termination with a PCP agreement
If you’d like to end a PCP agreement early, you will need to have paid 50% of the total amount payable. This includes interest and fees or charges as applicable. The car will also need to be returned in good condition.
You usually also have to pay some or all of the balloon payment. This depends on how much you’ve repaid out of the total amount payable. Because the balloon payment is at the end of your agreement, you likely won’t have paid back 50% of the total amount payable at the time you choose to voluntarily terminate.
Voluntary termination with a HP (Hire Purchase) agreement
Voluntarily terminating a Hire Purchase (HP) agreement is like voluntarily terminating a CS agreement.
When you have paid half the total amount payable, you should meet the criteria for voluntary termination. However, if you choose to end the agreement earlier, you will need to pay the difference between what you’ve already paid and the halfway point of your repayment plan to meet the 50% threshold.
How do I voluntarily terminate my car finance agreement?
If you are thinking of voluntarily terminating your car finance agreement, you could check your contract. Your contract will outline the criteria for voluntary termination and will say if there are any charges or fees for doing so.
Some lenders might need written confirmation such as a letter or email to accept your voluntary termination request. Contact them directly and they will be able to discuss your options.
Once the process has begun, you must settle the amount payable, including any charges or fees, with your lender. Then, you will need to give your car back to the finance company.
Before returning the car, you might want to take some photos to prove that it is in good condition. When the vehicle is returned to the lender, they will assess its condition, and you may be liable if there is excessive wear and tear or damage.
It’s important to remember that voluntary termination is only one of the many options available to you. If you’re unsure which option is best for you, you should contact your lender and they can help.
How long does it take to terminate a car finance agreement?
The process of voluntary termination varies because there are lots of different factors involved. It may take anywhere from days to weeks, depending on when your car is collected and when you settle the amount payable.
If you are experiencing financial difficulty, it’s best to contact your lender as soon as you can as there are options available to help. If you want to choose voluntary termination, your lender can help start this process.
Does voluntary termination affect my credit score?
A common myth about voluntary termination is that it will affect your credit score.
Voluntary termination will show on your credit report, but if you haven’t missed any repayments then it shouldn’t affect your credit score.
If you have missed car finance payments, it will negatively affect your credit score. This might make it more difficult to get credit in the future.
To find out more about your credit score, check out our guides:
Car finance can help spread the cost of a car over an agreed period of time. However, if your circumstances change over the course of the agreement, you have the legal right to end your agreement by voluntary termination.
Our guide will explain how voluntary termination of car finance works. We’ll explain what it is, the difference between voluntary termination and voluntary surrender, and how you would voluntarily terminate your car finance agreement.
If you’re a Moneybarn customer and want to use this option to end your agreement early, please contact us so we can run you through all of your options to end the agreement and confirm how much each option may cost you.
In this guide:
What is car finance voluntary termination?
Often, a person’s circumstances can change over the course of a car finance agreement, and they may need to end the agreement early. In that case, voluntary termination might be the most cost-effective option.
Voluntary termination is your legal right as a customer to cancel or end your car finance agreement early, provided you meet the necessary criteria. You would need to return the vehicle and are liable for half of the total amount payable, plus any outstanding payments (inclusive of any previously agreed payment breaks or payment holidays) and charges.
This legal right is detailed in Section 99 of the Consumer Credit Act 1974 and allows you to end your finance agreement and return the vehicle.
This is a statutory right and can’t be excluded from your contract with a car finance company. However, the process for voluntary termination will differ depending on the lender. If you aren’t sure about the criteria for voluntary termination, contact your lender.
What is the difference between voluntary termination and voluntary surrender?
Voluntary termination ends your car finance agreement early (before the agreement term ends). It requires mutual agreement between the lender and the borrower. This is dependent on whether you meet the criteria for voluntary termination.
Voluntary surrender is when you return your car to the lender, usually because you’ve missed payments. In this case, the lender will repossess the car, and you may still be liable for any payments still owed.
Reasons why you might voluntarily terminate your agreement
You might want to terminate your car finance agreement for several reasons. Car finance agreement terms can last for several years, and your financial or personal situation might change during this time.
You might not be able to make the repayments anymore and decide that you need to change your car on finance to something with lower monthly repayments. If so, voluntary termination is one of the options you have.
If you can no longer afford to make your repayments, you might want to end the agreement and return the vehicle to avoid your car being repossessed. If you are experiencing financial difficulty, contact your lender and they can outline the support available to you and explain the process of voluntary termination.
There are also some not-for-profit organisations such as MoneyHelper and StepChange, who can provide free, unbiased advice to help you get back on track.
Depending on the type of car finance you have and how far into it you are, you may be required to make a further payment to meet the 50% threshold of the total amount payable. Keep reading, as we will explain this further in the next section.
If you’re struggling to make your repayments, you may be considering voluntary termination of your car finance agreement. If you’re a Moneybarn customer, contact us today to discuss your options with a member of our team.
We're here to help...
Financial difficulties
If you’re experiencing financial difficulties, we want to help. Please take a look at the different support available to you and together we’ll find a solution suitable for your personal circumstances.
Contact us
You can call our Customer Services Team on 0330 555 1230. Please see our contact us page for opening hours.
How does voluntary termination work?
To end your agreement by voluntary termination, you must tell your lender either verbally or in writing. It’s best to contact them directly, as they will be able to discuss your options. They can also guide you through the voluntary termination process if you decide that is the best option.
The criteria for voluntary termination may vary between lenders. Some common requirements are that the car is in good condition with no excessive wear and tear, and that you must have paid 50% of the total amount payable. Any arrears or charges that have built up over the agreement would also need to be repaid.
It also depends on the type of finance you have. Let’s examine some of the most common car finance types and see how voluntary termination might work.
Voluntary termination with a CS (Conditional Sale) agreement
If you want to terminate your Conditional Sale agreement early through voluntary termination, you’ll be liable for half (50%) of the total amount payable, plus any arrears or charges if applicable.
If you haven’t met the 50% threshold, you can make additional payments on your car finance to reach this point.
Voluntary termination with a PCP agreement
If you’d like to end a PCP agreement early, you will need to have paid 50% of the total amount payable. This includes interest and fees or charges as applicable. The car will also need to be returned in good condition.
You usually also have to pay some or all of the balloon payment. This depends on how much you’ve repaid out of the total amount payable. Because the balloon payment is at the end of your agreement, you likely won’t have paid back 50% of the total amount payable at the time you choose to voluntarily terminate.
Voluntary termination with a HP (Hire Purchase) agreement
Voluntarily terminating a Hire Purchase (HP) agreement is like voluntarily terminating a CS agreement.
When you have paid half the total amount payable, you should meet the criteria for voluntary termination. However, if you choose to end the agreement earlier, you will need to pay the difference between what you’ve already paid and the halfway point of your repayment plan to meet the 50% threshold.
How do I voluntarily terminate my car finance agreement?
If you are thinking of voluntarily terminating your car finance agreement, you could check your contract. Your contract will outline the criteria for voluntary termination and will say if there are any charges or fees for doing so.
Some lenders might need written confirmation such as a letter or email to accept your voluntary termination request. Contact them directly and they will be able to discuss your options.
Once the process has begun, you must settle the amount payable, including any charges or fees, with your lender. Then, you will need to give your car back to the finance company.
Before returning the car, you might want to take some photos to prove that it is in good condition. When the vehicle is returned to the lender, they will assess its condition, and you may be liable if there is excessive wear and tear or damage.
It’s important to remember that voluntary termination is only one of the many options available to you. If you’re unsure which option is best for you, you should contact your lender and they can help.
How long does it take to terminate a car finance agreement?
The process of voluntary termination varies because there are lots of different factors involved. It may take anywhere from days to weeks, depending on when your car is collected and when you settle the amount payable.
If you are experiencing financial difficulty, it’s best to contact your lender as soon as you can as there are options available to help. If you want to choose voluntary termination, your lender can help start this process.
Does voluntary termination affect my credit score?
A common myth about voluntary termination is that it will affect your credit score.
Voluntary termination will show on your credit report, but if you haven’t missed any repayments then it shouldn’t affect your credit score.
If you have missed car finance payments, it will negatively affect your credit score. This might make it more difficult to get credit in the future.
To find out more about your credit score, check out our guides:
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
