Voluntary Termination (or VT) is every consumers right when buying good on Hire Purchase or Conditional Sale to be able to return the goods to the Finance Provider (not the vendor) once they have paid half of the total repayable for the whole finance agreement (including any deposit).
For example, if you took out a finance agreement where you are due to make 10 monthly payments of £100 and paid a deposit of £200 (£1200 total repayable), then once you have made your first 4 monthly payments to total £400 (plus the original deposit of £200) then you will have the right to terminate the finance agreement from that point on.
Finance companies have a legal requirement to not prejudice against customers that VT, it does leave a marker on your credit report – if you used VT to settle a car finance agreement in the past, the agreement would show as Settled and there would be a special instruction stating ‘Voluntary Termination’ so it would be visible to anyone who chose to look at your credit report.
Most finance companies tend not to manually look at your credit report and have scorecards that make their lending decisions rather than people looking at them so there’s no way to know how or if they factor this into their decisions. In my previous role at a bad credit car finance provider, they didn’t factor it into their scorecard meaning their automatic decisions weren’t impacted by this at all.
From our personal experience, if you have an existing car finance agreement, you just need to know whether the new finance provider is asking for proof of settlement of your current car finance before VTing your current car. If you VT rather than settle by part exchanging, the finance provider might not accept this as a satisfactory proof of settlement.
Yes. There are some rules around the condition of the vehicle;
If you can tick off both of the above, and have repaid half of the total repayable (including any charges or arrears for missed payments) then you can voluntary terminate your car finance.
If you can say yes to all of the following then Yes you can;
The first step is to contact your finance company (not the dealer you bought the car from) and let them know that you’re looking to do this. They should advise you whether they will collect the car or whether you need to drop it off somewhere and the timescale to sort. They will also let you know what to do regarding your direct debits. We would recommend NOT cancelling your direct debit until you’ve discussed this with your finance provider.
We would recommend making sure you can sort out your new finance agreement and make sure this is definitely in place before initiating the voluntary termination.
