Voluntary Termination is a legal right under Section 99 of the Consumer Credit Act 1974, allowing you to end your car finance agreement early, without paying the full remaining balance. As long as you've repaid 50% of the total amount payable, you can return the car and walk away.
This is not to be confused with voluntary surrender, which occurs when a borrower cannot make payments and hands the car back outside the legal protection of VT. Voluntary Termination is a legitimate, structured option designed to give borrowers flexibility and peace of mind.
Step-by-Step: How to Voluntarily Terminate Your Car Finance
It’s important to note, processes might differ depending on your lender.
1. Check Your Finance Agreement
Locate the total amount payable and what you’ve already paid. Some finance providers might have these numbers listed for you on their portals.
You need to have covered 50% of the total amount payable to qualify for VT, so work out if you’ve already paid that amount. If you have - happy days - if you haven’t, cover the remaining amount before moving onto the next step.
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2. Write to Your Lender
Send a formal notice stating that you wish to voluntarily terminate under Section 99 of the Consumer Credit Act. Always do this in writing (i.e by email) and keep a copy for your records.
Circumstances change, and anyone can end up in a tough financial position, but do remember you are still going back on a commitment you made to the lender, so they might not be the happiest. Nevertheless, lenders providing regulated consumer credit must accept your request, so long as you meet the requirements.
3. Return the Vehicle
Arrange a suitable time and location for the vehicle handover. Make sure to clean it, remove personal items, and document its condition with photos.
Fair wear and tear policies do apply, meaning you have to return it in reasonable condition. Excessive damage or mileage can lead to further charges, so give it an extra lil shine before handing it back.
4. Request Written Confirmation
After the return, ask your lender to confirm that the account has been closed and the agreement terminated.
Missed payments before your VAT remain on your credit file (even after you VT), so make sure the right steps have been addressed to prevent your credit score taking a hit.
Tips to Avoid Charges When Terminating Early
- Keep the car clean and damage-free - Fix minor scrapes, dents, or stains before return. Fair wear and tear fees could hit you like a truck.
- Stay within mileage limits - Check your agreement for excess mileage fees and monitor your usage. You will be charged per mile if you exceed the company’s policy.
- Document the return - Take photos and get written proof during the return process to avoid disputes.
Remember, processes and policy can differ depending on the lender, so your best bet is to read your contract and communicate openly with your finance provider.
Of course, it goes without being said, VT should be your last resort. While it doesn’t directly affect your credit score, it still shows up on your credit history, and some lenders might take this as a sign of you being a risky customer.
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