Car loans in the UK: the little-known clause that means you could walk away from your deal
If you are one of the thousands of people across the UK struggling to meet their car finance repayments, do you know that you can return the vehicle and drive away debt free a after you've repaid half the amount owed?
Car finance payments are typically the second largest household expense after mortgage costs, and the auto industry looks forward to seeing how many people grapple with the cost of defaulting on loans, or using a little-known clause to voluntarily terminate their agreement.
In recent years , more than 90% of new car purchases and a growing number of used cars were purchased on finance deals - in most cases through Personal Contract Purchase Plans (PCPs) that offered attractive monthly payments.< /p>
The size and scale of outstanding loans taken by Britons in recent years is nothing short of extraordinary. According to an analysis by the website Car Expert, in total they are worth around £40bn a year, up from £11bn in 2009. The website says the average amount financed for each new car has more than doubled in the over the past decade to reach £11 billion. 25,000 or more. Used car purchases are now almost as likely to involve a PCP deal.
“The automotive industry has become completely dependent on people who buy cars that they don't need with money they don't have. The problem, of course, is that if people can no longer afford to borrow, the auto industry will collapse. It was a real concern during the Covid shutdowns and remains a risk today as the cost of living soars,” says Stuart Masson, the site's editorial director.
Buyers were sold cars on the basis that monthly payments were low and affordable. However, in order to keep the car at the end of the three or four year period, a final "lump sum payment" (the estimated future value of the vehicle) must be paid. This payment will depend on the car, but can run into the thousands of pounds.
In the past buyers would simply swap and sign up for another PCP, or give away the car to the finance company, in hopes that its true value would pay off the loan.
However, for those who are having trouble getting to the end of the loan term , or those who know the value of their car won't cover the final lump sum payment, there is another option, although car dealerships rarely advertise it.
The right to v Voluntary termination is enshrined in the Consumer Credit Act and allows the buyer to escape the deal provided they have refunded 50% of the total amount payable, and the car is undamaged and in "reasonable" condition. It applies to used and new cars purchased on finance.
Before people get too excited, they need to know it's not 50% of the duration of the contract, nor 50% of what you...
If you are one of the thousands of people across the UK struggling to meet their car finance repayments, do you know that you can return the vehicle and drive away debt free a after you've repaid half the amount owed?
Car finance payments are typically the second largest household expense after mortgage costs, and the auto industry looks forward to seeing how many people grapple with the cost of defaulting on loans, or using a little-known clause to voluntarily terminate their agreement.
In recent years , more than 90% of new car purchases and a growing number of used cars were purchased on finance deals - in most cases through Personal Contract Purchase Plans (PCPs) that offered attractive monthly payments.< /p>
The size and scale of outstanding loans taken by Britons in recent years is nothing short of extraordinary. According to an analysis by the website Car Expert, in total they are worth around £40bn a year, up from £11bn in 2009. The website says the average amount financed for each new car has more than doubled in the over the past decade to reach £11 billion. 25,000 or more. Used car purchases are now almost as likely to involve a PCP deal.
“The automotive industry has become completely dependent on people who buy cars that they don't need with money they don't have. The problem, of course, is that if people can no longer afford to borrow, the auto industry will collapse. It was a real concern during the Covid shutdowns and remains a risk today as the cost of living soars,” says Stuart Masson, the site's editorial director.
Buyers were sold cars on the basis that monthly payments were low and affordable. However, in order to keep the car at the end of the three or four year period, a final "lump sum payment" (the estimated future value of the vehicle) must be paid. This payment will depend on the car, but can run into the thousands of pounds.
In the past buyers would simply swap and sign up for another PCP, or give away the car to the finance company, in hopes that its true value would pay off the loan.
However, for those who are having trouble getting to the end of the loan term , or those who know the value of their car won't cover the final lump sum payment, there is another option, although car dealerships rarely advertise it.
The right to v Voluntary termination is enshrined in the Consumer Credit Act and allows the buyer to escape the deal provided they have refunded 50% of the total amount payable, and the car is undamaged and in "reasonable" condition. It applies to used and new cars purchased on finance.
Before people get too excited, they need to know it's not 50% of the duration of the contract, nor 50% of what you...
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