What happens if I can't pay my Car Finance (PCP)?
Car finance (PCP and HP) is a special type of debt. You have a powerful statutory right under Section 99 of the Consumer Credit Act 1974 to end the agreement early and hand the car back, often wiping out thousands of pounds of negative equity.
1 The Typical Timeline
If you take no action, this is the standard statutory process. Timescales are approximate but typical for 2026.
Check 50% Point
Check your contract for the 'Total Amount Payable'. Divide by 2. Have you paid this much?
Send VT Letter
Send a formal letter. Do not simply stop paying (that damages your credit report).
Car Return
They collect the car. They will inspect for damage. Stick to BVRLA 'Fair Wear and Tear' standards.
Final Bill?
They may invoice for 'excess mileage' or scratches. You can dispute these.
2 Free Calculators & Checks
Voluntary Termination Calculator (The 50% Rule): Enter your finance figures to see if you can hand the car back for free.
PCP 50% Voluntary Termination Checker
This is on your contract. It includes the balloon payment and interest.
Not Yet Eligible (Free)
You need to pay another £900 to reach the 50% point.
Tip: You can pay this lump sum now to terminate immediately.
Excess Mileage Charge Estimator: See how much you might owe if you've gone over your mileage limit.
Excess Mileage Estimator
Usually 6p - 15p (Check your contract)
The 50% Rule (Voluntary Termination)
You can legally cut your losses and hand the car back if you have paid 50% of the Total Amount Payable (this includes the deposit, monthly payments, interest, and the final balloon payment).
- Have you paid 50%? You can VT immediately. You owe nothing more (except for damage/excess mileage).
- Not paid 50% yet? You can make a 'top-up' payment to reach the 50% line and THEN terminate. This is often cheaper than paying the settlement figure.
Voluntary Termination (VT) vs Voluntary Surrender
CRITICAL WARNING: Finance companies often try to trick you into "Voluntary Surrender".
- Voluntary Termination (VT): Your legal right. The debt is cleared. The matter is closed.
- Voluntary Surrender: You just give the car back. They sell it at auction (for a low price). You look liable for the remaining debt minus the auction price.
Never sign a 'Voluntary Surrender' form. Always use the words "Voluntary Termination under Section 99".
Summary of Options
Take Photos
Take high-res photos of every panel, wheel, and the interior + a photo of the dashboard mileage before they take it.
Dispute Damage Charges
If they charge for stone chips or light scratches, cite the BVRLA 'Fair Wear and Tear' guide. You are not liable for normal use.
Cancel Direct Debit
Once the car is collected and VT is confirmed, cancel payment. Do not let them take next month's cash.
Common Questions
Does VT ruin my credit score?
No. A specific marker 'Voluntary Termination' is added to your file. FICO scores generally ignore it. Lenders can see it, but it is much better than a Default or Repossession.
Can I VT if I am in arrears?
Yes, but you usually have to clear the arrears (missed payments) first.
Do I have to pay Excess Mileage?
It is a gray area. The Consumer Credit Act says you must take 'reasonable care' of the goods. Courts have occasionally ruled that mileage is part of 'reasonable care', but often finance companies insist on charging it. It is worth disputing.
Can I do this with a Personal Loan?
No. VT only applies to Hire Purchase (HP) and PCP agreements where the debt is secured on the car.
The car has a dent. Should I fix it?
If it's cheaper to fix it locally than the finance company's recharge rate (which is often high), fix it first.
Official Sources & References
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