First and foremost, if you are struggling to meet a car or any finance agreement, always speak to your lender, and do so at the earliest possible point.
Car finance and loans. Advice if you cannot afford the payments.
Depending on the type of finance you have, your rights will vary. You either own the car from the time you took out the finance, or the lender is still the owner until you have paid all that you owe. With Hire Purchase, you cannot sell the car because you do not own it until it is paid off. But you may get a payment break if you cannot pay.
- StepChange debt management charity
Lenders do not want to repossess a car, and typically, it represents a last resort option.
Usually, it only occurs when all other attempts to help customers who, for various reasons, have fallen into arrears to get their finance agreement back on track have been exhausted.
Repossession of a car by a lender will often require a court order. However, it can take place without a court order if the borrower has paid less than one-third of the Total Amount Payable, a figure that will be shown on the finance agreement documentation. (This can vary across different parts of the UK)
Once a car has been repossessed, the lender will seek to sell it, often at auction, to repay the borrower’s debt. If insufficient money is raised from the sale of the car to pay the whole amount off, the borrower is still liable for whatever balance is left, plus any court costs.
Voluntary Termination
If a borrower is struggling financially or if their circumstances change, meaning they no longer need or want the car, there is another helpful option: voluntary termination.
Voluntary termination is a customer’s statutory (legal) right to cancel or end their car finance agreement early, provided they have met specific criteria.
By seeking to terminate a car finance agreement voluntarily, borrowers must return the car to the lender and are responsible for paying off half of the Total Amount Payable. This figure will be laid out in the original finance agreement. This amount doesn’t include any late payment fees or arrears you may have accumulated.
The borrower must return the car in good condition without excessive damage. Anything above general wear and tear is seen as excessive damage.
If there is no damage to the car and 50% of the Total Amount Payable is paid, there should be nothing left to pay