What is voluntary termination of car finance?

Voluntary termination (VT) is your legal right under Section 99 of the Consumer Credit Act 1974 to end a hire purchase (HP) or PCP car finance agreement early, hand back the car, and walk away without owing anything further — provided you've paid at least 50% of the 'total amount payable'. The total amount payable includes all monthly payments, interest, fees, and any balloon payment (for PCP). You don't need the finance company's permission — it's your legal right.

How much do I need to have paid to voluntarily terminate?

You must have paid at least 50% of the 'total amount payable' under the agreement. This is not 50% of the car's price — it's 50% of everything you'd pay if you completed the full term, including all interest and fees. For PCP, the total amount payable includes the balloon payment (final optional payment), so the 50% threshold is much higher than simply half the monthly payments. Check your agreement for the exact figure — it should be stated clearly.

Does voluntary termination affect my credit score?

Voluntary termination should NOT negatively affect your credit score if done correctly. It's a legal right, and the finance company should report it as 'settled' or 'terminated' on your credit file. However, some finance companies have historically misreported VT as a default or partial settlement — if this happens, you should dispute it. Having an open finance agreement closed early will reduce your total available credit, which can slightly affect your score.

Can I voluntarily terminate a personal loan for a car?

No — voluntary termination only applies to Hire Purchase (HP) and PCP (Personal Contract Purchase) agreements, because these are secured against the car. Personal loans are unsecured — you can repay them early, but you'll need to pay off the full outstanding balance (minus any early settlement rebate). You can't hand back the car to end a personal loan.

Car Finance Voluntary Termination Guide — How to End PCP or HP Early | PocketWise

If you’re struggling with car finance payments or just want to get out of your PCP or HP deal, voluntary termination (VT) is your legal right. Here’s how it works.

What Is Voluntary Termination?

Feature	Detail
Legal basis	Section 99, Consumer Credit Act 1974
Applies to	HP (Hire Purchase) and PCP (Personal Contract Purchase) only
What it lets you do	Hand back the car and walk away with nothing more to pay
Key requirement	Must have paid at least 50% of the total amount payable
Do you need the finance company’s permission?	No — it’s your legal right
Does it apply to personal loans?	No — loans are a different type of agreement
Does it apply to leasing/PCH?	No — Personal Contract Hire has different rules

The 50% Rule

Term	Meaning
Total amount payable	The total of ALL payments you’d make over the full term — including deposit, all monthly payments, interest, fees, and balloon/final payment
50% threshold	The amount you need to have paid before you can VT
Where to find it	Stated in your finance agreement — look for “Your right to end this agreement” or “Half of total amount payable”

HP Example

Item	Amount
Cash price of car	£20,000
Deposit	£2,000
Total interest	£3,500
Total amount payable	£23,500
50% threshold	£11,750
Already paid (deposit + 24 monthly payments of £375)	£2,000 + £9,000 = £11,000
Shortfall to reach 50%	£11,750 – £11,000 = £750
Action	Pay £750 to reach threshold, then VT

PCP Example

Item	Amount
Cash price of car	£25,000
Deposit	£3,000
Monthly payments (36 × £300)	£10,800
Balloon payment (optional final payment)	£10,000
Total interest	£4,200
Total amount payable	£28,000
50% threshold	£14,000
Already paid (deposit + 24 months × £300)	£3,000 + £7,200 = £10,200
Shortfall to reach 50%	£14,000 – £10,200 = £3,800

Note for PCP: The balloon payment is included in the total amount payable, making the 50% threshold much higher than you might expect. Many PCP customers don’t reach 50% until late in the agreement, or need to make a top-up payment.

Step-by-Step: How to Voluntarily Terminate

Step	Action
1	Check your finance agreement for the “total amount payable” and “50% figure”
2	Calculate how much you’ve paid so far (deposit + all monthly payments made)
3	If you’ve paid 50% or more, you can proceed
4	If you’re below 50%, pay the shortfall to reach the threshold
5	Write to the finance company — state you’re exercising your right to voluntarily terminate under Section 99 of the Consumer Credit Act 1974
6	Send by recorded delivery — keep proof of posting
7	Keep making payments until VT is confirmed (don’t stop paying before confirmation)
8	Arrange the car return — the finance company should collect or specify a drop-off point
9	Document the car’s condition — photographs/video showing mileage and condition
10	Return the car and get a signed receipt

What to Include in Your VT Letter

Element	What to write
Your name and address	Full details
Agreement number	From your finance agreement
Vehicle details	Registration, make, model
Statement	“I am writing to exercise my right to voluntary termination of the above agreement under Section 99 of the Consumer Credit Act 1974”
Confirmation of payments	Confirm you have paid at least 50% of the total amount payable
Request for collection	Ask them to arrange collection of the vehicle
Date

Car Condition — “Reasonable Care”

When returning the car, it must be in reasonable condition. The law says you must have taken “reasonable care” of the vehicle.

Acceptable (normal wear and tear)	NOT acceptable (damage you may be charged for)
Light scratches from normal use	Deep scratches through to metal
Minor stone chips	Large dents from impacts
Tyre wear to legal limit (1.6mm)	Tyres below legal limit
Light interior wear	Ripped seats, burns, stains
Age-appropriate mileage	Excessive mileage beyond agreement terms
Small parking scuffs	Significant bodywork damage
Normal brake wear	Mechanical damage from neglect

BVRLA Fair Wear and Tear Guide

Area	Acceptable	Not acceptable
Paintwork	Minor scratches <25mm from everyday use	Scratches >25mm, dents, rust, unmatched paint repairs
Windscreen	Stone chips <10mm (not in driver’s line of vision)	Cracks, chips >10mm, or chips in driver’s line of vision
Alloy wheels	Scuffs <25mm on one face	Scuffs >25mm, damage to multiple wheels, buckled wheels
Interior	Light wear on seats and carpet	Tears, burns, pet damage, missing items
Tyres	At or above 1.6mm tread	Below legal limit, mismatched tyres, significant damage

What the Finance Company Might Try

Tactic	Your response
“You can’t VT — you need our permission”	Wrong — VT is your legal right under Section 99 CCA. No permission needed
“You need to pay all remaining payments”	Wrong — once you’ve paid 50%, you owe nothing further (if car is in reasonable condition)
“We’ll charge you for damage”	Only for damage beyond “reasonable wear and tear” — not normal use
“We’ll put a default on your credit file”	Unlawful — VT should be recorded as “settled” or “VT”. Dispute any default
“You need to bring the car to our depot 200 miles away”	They should arrange collection from a reasonable location
Delaying collection	Continue to chase. Do not continue making payments after VT is confirmed
“Excessive mileage charge”	PCP agreements may include mileage limits, but VT overrides these. You should only pay for damage, not excess mileage fees (though this is debated — document everything)

VT vs Voluntary Surrender vs Early Settlement

Option	How it works	Impact
Voluntary Termination (VT)	Pay 50% of total, hand car back, owe nothing more	No negative credit impact (if done correctly)
Voluntary Surrender	Hand car back at any time (before reaching 50%)	You may still owe the shortfall. Negative credit impact.
Early Settlement	Pay off the finance in full (get settlement figure)	Keep the car. No negative credit impact.
Part Exchange	Dealer pays settlement figure when you buy a new car	Keep or change car. No negative impact.

When to Choose Each

Situation	Best option
Can’t afford payments, have paid 50%+	Voluntary Termination
Can’t afford payments, haven’t paid 50%	Voluntary Surrender (but get debt advice first — you may still owe money)
Want to keep the car and can afford to settle	Early Settlement
Buying a new car	Part Exchange (dealer handles settlement)
Car is worth more than the settlement figure	Sell privately, pay off settlement (keep the profit)

Impact on Credit File

Action	How it should appear
Correct VT recording	“Settled” or “Voluntary Termination” → No negative impact
Incorrect recording (default/missed payment)	Dispute it — contact the finance company and the credit reference agency
If they refuse to correct	Complain to the Financial Ombudsman Service