Voluntary Termination of Car Finance: Your Legal Right Explained

Summary

• Legal right: Under the Consumer Credit Act 1974, you can end PCP or HP once 50% is paid.
• Hand back the car: Return the vehicle and owe nothing more (if in good condition).
• No early repayment fee: VT is free, unlike voluntary surrender.
• Check your agreement: Your "half point" figure is stated in your contract.

Stuck in a car finance deal you can't afford or no longer want? Voluntary termination could be your way out.

This guide explains how VT works and how to do it properly.

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What Is Voluntary Termination?

Voluntary termination is your legal right to end a Hire Purchase (HP) or Personal Contract Purchase (PCP) agreement early, once you've paid at least half the total amount payable.

After VT:

• You return the car
• The agreement ends
• You owe nothing more (if the car is in reasonable condition)

This right is protected by Section 99 of the Consumer Credit Act 1974.

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When Can You Voluntarily Terminate?

You can VT once you've paid 50% of the Total Amount Payable.

The Total Amount Payable includes:

• All monthly payments
• Interest
• Fees
• The final balloon payment (for PCP)

Your finance agreement must state the exact 50% figure. Look for "Half the Total Amount Payable" or similar wording.

Example (PCP)

Item	Amount
Deposit	£2,000
Monthly payments (36 x £250)	£9,000
Final balloon payment	£8,000
Total Amount Payable	£19,000
50% (VT Point)	£9,500

With the deposit of £2,000 and 30 monthly payments (£7,500), you'd have paid £9,500 - now eligible for VT.

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How to Voluntarily Terminate

1. Check your agreement: Find the Total Amount Payable and 50% figure
2. Calculate what you've paid: Deposit + all monthly payments so far
3. If below 50%: You can make a payment to reach the threshold
4. Write to your finance company: Send a VT letter (see template below)
5. Keep proof: Send by recorded delivery or email
6. Arrange vehicle return: They'll inspect and collect the car

VT Letter Template

Dear [Finance Company],

I am writing to exercise my right to voluntarily terminate my agreement under Section 99 of the Consumer Credit Act 1974.

Agreement Number: [Your Agreement Number]

Vehicle: [Registration and Description]

I confirm I have paid at least half the Total Amount Payable. Please arrange collection of the vehicle at your earliest convenience.

Yours faithfully,

[Your Name]

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Car Condition Requirements

When you VT, the car must be returned in "reasonable condition" considering its age and mileage.

What's Acceptable

• Normal wear and tear
• Minor scratches and stone chips
• Wear appropriate to mileage

What Could Trigger Charges

• Excessive damage beyond fair wear
• Damage from accidents (not repaired)
• Missing items (parcel shelf, spare wheel)
• Interior damage (burns, stains, tears)
• Significantly exceeded mileage

Most finance companies follow BVRLA fair wear and tear guidelines. Review these before return.

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VT vs Voluntary Surrender

Voluntary Termination	Voluntary Surrender
Legal right after 50% paid	Handing back before 50%
No further payments due	May owe the shortfall
No negative credit impact	Can affect credit score
Use Section 99	Not a statutory right

Always aim for VT if possible. Voluntary surrender can leave you owing money.

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Does VT Affect Your Credit Score?

Voluntary termination shouldn't negatively affect your credit score. You're exercising a legal right, not defaulting.

However:

• Some lenders may view VT less favourably for future applications
• If you had missed payments before VT, those will show on your record
• The account will show as "settled" or "terminated" - not as a default

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Common Reasons for VT

• Changed financial circumstances
• The car is worth less than the remaining finance (negative equity)
• Want to switch to a different car
• Monthly payments are unaffordable
• No longer need a car

For more on negative equity, see our negative equity guide.

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Things to Watch Out For

• Excessive damage charges: Get the car valeted and photographed before return
• Mileage: Check you're within the agreed mileage limit
• Keep records: Document everything in writing
• Don't just stop paying: This is default, not VT
• Get confirmation: Ensure you receive written confirmation the agreement is terminated

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Common Questions

Can I VT a lease or PCH?

No. Voluntary termination only applies to HP and PCP, not leasing (PCH). Different early exit rules apply to leases.

What if I've exceeded the mileage limit?

You may be charged for excess mileage, just as you would at the end of a normal PCP agreement. Check your contract for the per-mile rate.

Can the finance company refuse VT?

No. It's your statutory right. They must accept it (though they can charge for damage beyond fair wear).

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Final Thoughts

Voluntary termination is a valuable right that many drivers don't know about. If you're struggling with payments or the car is worth less than you owe, VT can be the cleanest exit.

Check your agreement, make sure you've reached 50%, put your request in writing, and return the car in good condition.

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