What is Voluntary Termination?
When financing a car through Personal Contract Purchase (PCP) or Hire Purchase you are committed to pay monthly for the car. Before signing a contract make sure your car is suitable for your needs and you are comfortable with your monthly payments. In the future, circumstances can always change, and if you can’t afford your monthly repayments here is where Voluntary Termination comes in handy.
Voluntary Termination can help anyone that has had a change to their financial circumstances as it essentially allows the person to hand back their debt.
How does Voluntary Termination Work?
Voluntary Termination only applies to PCP and Hire Purchase, you can’t use it on a personal loan or on a PCH agreement. VT requires you to have paid at least half of the total amount payable for finance. This includes the amount you borrowed, interest and the fees applied on top.
If you are early in your contract and you want to terminate the agreement you will have to pay the difference that makes it up to half. The earlier in the contract, the larger the difference. It wouldn’t be wise unless you have the money to pay the difference.
It’s slightly different with Hire Purchase, the monthly payments are larger, but they cover more of the cost of the car leaving you without a large sum to pay at the end. This means achieving halfway of the payable amount will be quicker, therefore the ability to implement VT can be done earlier.
How do you go ahead with Voluntary Termination?
Voluntary Termination can be done at any point however, you will have to comply with certain rules. To implement it, you need to contact the finance company directly. They will then go through the process of putting it into place. VT can take an extensive amount of time due to it costing money to the finance company. The longer the finance company takes, the longer you will have to make payments for the car.
You may not be able to go through with VT if you are behind with your monthly repayments . If you think you need to return the car early, then make sure you start the process as soon as possible. It’s important that you keep up to date with payments until the contact is officially terminated.
Are there any extra charges for Voluntary Termination?
The car will be handed back to the finance company so if the car has significant wear or tear there may be charges added. If it’s PCP that you are terminating, the mileage will need to be within the agreed amount in the contract. If it’s outside the parameters there will be an excess mileage charge.