Cutting Car Finance Costs

if you're struggling to meet your car finance payments, or want to cut costs, you can exit the agreement early or return the car. However, there are some conditions and fee's attached. Make sure you don't rush into any decisions before you know the conditions.

Should you end your finance deal early?

There are a few reasons why you may want to end your car finance deal early. Firstly, you're struggling to meet the repayments each month, this could be due to a change in financial circumstances, Secondly, if you want to reduce costs, you could end the car finance agreement and look at getting a car in a different way. Thirdly, you might not need the car anymore. If you're struggling to make ends meet each month, you should get free and confidential advice from a debt advice service. It's better to exit early instead of damaging your credit score, which could then prevent you from getting finance in the future.

Wear and tear of the vehicle.

When ending your car finance deal you need to keep in mind the condition of the vehicle. General wear and tear of the vehicle is fine, but if there's major damage e.g. broken wing mirros or long scratches, you'll be charged with the repair costs. If there is damage on the car, see if you can get it repaired cheaply by a garage before you return the car.

Ending a PCP early.

If you've already paid half of the car's cost or can pay it, you have the right to return the car to the car finance provider (voluntary termination). If you want to pay off your PCP agreement early you need to ask the car finance provider for a settlement figure. Once you get a settlement figure, there's two things you can do. Firstly, pay off the agreement and keep the car, this makes sense if the settlement figure is less than the monthly repayments. Secondly, you could pay off the PCP agreement early and then possibly sell the car, this could be a good option if you need money. You need to remember that you can't sell the car until you've paid the settlement, because you're not the legal owner.

Ending a HP early.

Similar to a PCP agreement, you can return the car if you've already paid half of it's cost. It would make sense to return the car if you no longer need it. The amount the lender can charge you for repaying a HP agreement early is capped by law.

What to watch out for when ending the agreement.

If you voluntarily terminate your agreement earily it'll show up on your credit file, it won't say why it ended. It will make little to no difference to your overall credit score. It's better  than missing any payments, because missing payments could have a large impact on your credit file, which could restrict you in the future. If you use voluntary termination frequently, it can look bad on your credit file, this is because it costs credit companies to end agreements early, this means that they may not be that supportive. Make sure that you send you car finance comapny a latter (you can get a letter template from citizens advice).

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