Voluntary Termination
Voluntary Termination is your statutory right to cancel your PCP or Hire Purchase agreements early provided certain conditions are met. It can be useful way out of expensive PCP agreements should your circumstances change.
In this guide
The law
Section 99 consumer credit act
Right to terminate hire-purchase etc. agreements.
  • At any time before the final payment by the debtor under a regulated hire-purchase or regulated conditional sale agreement falls due, the debtor shall be entitled to terminate the agreement by giving notice to any person entitled or authorised to receive the sums payable under the agreement.
  • Termination of an agreement under subsection (1) does not affect any liability under the agreement which has accrued before the termination.
  • Subsection (1) does not apply to a conditional sale agreement relating to land after the title to the land has passed to the debtor.
  • In the case of a conditional sale agreement relating to goods, where the property in the goods, having become vested in the debtor, is transferred to a person who does not become the debtor under the agreement, the debtor shall not thereafter be entitled to terminate the agreement under subsection
  • Subject to subsection (4), where a debtor under a conditional sale agreement relating to goods terminates the agreement under this section after the property in the goods has become vested in him, the property in the goods shall thereupon vest in the person (the “previous owner ”) in whom it was vested immediately before it became vested in the debtor:

    Provided that if the previous owner has died, or any other event has occurred whereby that property, if vested in him immediately before that event, would thereupon have vested in some other person, the property shall be treated as having devolved as if it had been vested in the previous owner immediately before his death or immediately before that event, as the case may be.
What does this mean
Voluntary Termination was put into statute law to protect people when they were in financial difficulty and tied into long term debt contracts. The wording of the law does not prevent you from taking using it, irrespective of your circumstances. If you do so, your car finance company will almost invariably be tricky as it is likely to cost them money.

Voluntary Termination allows you to hand back the vehicle 'for free' once you have paid half the total amount under the agreement and provided that you have ‘taken reasonable care' of the vehicle.

If you have not paid off 50% of the debt, you can still use Voluntary Termination, but you will be liable for that difference.

Remember: half the total amount under the agreement includes the balloon payment, so will come towards the end of your repayment periods.
Why might you make use of VT provisions under section 99 of the consumer credit act?
You are in financial difficulty
If you realise you are struggling with your finances, using VT is a way to avoid missing payments and potentially.
You miscalculated the mileage you'd do
Under the statute, there is no requirement for you to pay additional costs for exceeding the mileage restrictions within your car finance deal. You are required to have taken ‘reasonable care' of your vehicle.
There are legitimate reasons why you may have exceeded the mileage limits:
  • You drive much more in summer than in the winter
  • You get a contract that requires you to commute further for a short period
  • You are intending to stop using the vehicle at a certain point
  • You always intended to make the balloon payment, so the mileage you do is irrelevant
However, this is an aspect of the law that is hated by car finance businesses. Much as there are legitimate reasons why you may have exceeded the pro-rata mileage within the contract period. There have been reports of unscrupulous individuals taking out a contract and deliberately driving far further than the contract allows with no intention of paying the balloon payment and then using the VT to avoid the additional mileage costs.

Car Finance companies now put provisions about this in their contracts stating that you will be liable for pro-rata excess mileage. Statute law overrules contract law and so the clauses in the contract should have no bearing.

However, the statute law states that you should have taken 'reasonable care' and this could potentially be an issue. What counts as reasonable care on a car with 30k of miles and 60k of miles could be judged to be different and understandably, finance companies will contest every last thing they can to minimise their losses through VT.

If you complain to the Financial Ombudsman (that judges every case on its individual merits), they may side with car finance company, leaving you with the choice of paying or going to court.

If you use the VT provision, you should expect to be given a torrid time by the Car Finance company who will almost invariably lose money as:
  • They won't get the interest on the outstanding balance
  • The car may be worth less than they anticipated due to depreciation flattening over time
  • The car's mileage may be higher than anticipated
  • They may argue that the condition is unreasonable for the mileage
To minimise the risks of associated with a VT, it is important to take detailed photos of the car, inside and out in good lighting to avoid any arguments further down the line.
Voluntary Termination and Voluntary surrender
If you voluntarily surrender your vehicle, you will not have any of the protection afforded by Voluntary Termination, it is important that you do not muddle or be muddled by the dealer or the car finance company. If you voluntarily surrender your vehicle, you will remain liable for mileage and other costs.

Voluntary Termination will leave a mark on your credit file
If you VT, it will leave a mark on your credit file stating that your credit agreement was ended by VT, but nothing about the circumstances that brought it about.

A VT won't affect your credit score, but still could affect your capacity to get credit in the future.

The law could change
The car industry has been lobbying for a change in the law to protect itself from those it sees as ‘bad apples' who have misused law to drive for less. If it does, this could leave you substantially out of pocket and if you have done more miles than the contract allows

How to inform your finance company that you would like to Voluntarily Terminate your agreement.
The following guidelines have been compiled to help you navigate through the Voluntary Termination process, but is not legal advice and use of the information is at your own risk.

To ensure that the finance company cannot dispute you have sent them the communication about your voluntarily termination is to send them a letter by registered post and sendsending a copy digitally as well with the accompanying photographi evidence. These

What to include in your communication
The key points you may wish to include within your letter are:
  • In the letter that, that it was sent by by email as well and who it was from and to
  • In the email, that it was sent by by letter, who to and at what address as well as the date
  • Exercising your right to voluntarily terminate your agreement in accordance with section 99 of the CCA 1974
  • Informing them that have or have not paid more than (insert amount from your finance agreement
  • There is no need for you to pay any further instalments from the date of the letter
  • The vehicle is in reasonable condition, as shown by attached photos and video (upload to youtube or other similar site only viewable with the URL)
  • If there is excess mileage, state that under section 99 and 100 this is not relevant and statute law overrules contract law and so their is no liability.
  • The location of the vehicle and that it is available for collection
  • That you will not sign anything as this is not required under VT
  • If they speak to you, you will not under any circumstances agree that this is Voluntary Surrender
  • If the lender wishes you to deliver the car somewhere local, you will, but if it is any distance away they will be expected to pay your reasonable costs
You may also want to put in an explanation as to why you are having to do a VT. A car finance company may look more favourably upon your circumstances if you are VTing because you lost your job, were getting divorced or some other good reason why you need to hand the car back. It goes without saying that you should be honest.
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