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I would like to borrow
£1,500
To pay back over
3.5 years

Representative Example: Borrowing £5,500 over 48 months with a representative APR of 19.8%, the amount payable would be £163 a month, with a total cost of credit of £2,283 and a total amount payable of £7,783.

Can you cancel car finance?

At Car.co.uk, we take pride in offering advice on all aspects of car finance. If you’re currently wondering whether you can back out of a car finance arrangement, we can help. So can you cancel car finance? In short, you have a legal right to nullify a car finance contract within 14 days of signing it. 

Read on for information on any factors that might affect your cancellation, or important details worth considering before you make a decision to end your agreement with your finance provider.

Cancelling your car finance agreement when you wish to keep the vehicle

If you’d like to end your car finance early but keep the car, you’ll need to pay the total amount outstanding on your loan as per your initial agreement, in what is commonly referred to as a lump sum. This figure will include any fees such as administration charges set out in your agreement at its onset. An ideal example of this is the “option to purchase” fee in hire purchase (HP) car finance agreements, which is usually £100 to £200.

Unlike an HP agreement, if your car finance is a personal contract plan (PCP), it means that on top of the amount owed plus fees, you will also have to settle a guaranteed minimum future value payment (GMFV). This is also commonly called a balloon payment. In addition to this, if you’ve overstepped your agreed mileage, this amount will need to be paid at a rate of seven to 10 pence per mile.

Cancelling your car finance agreement when you don’t wish to keep the vehicle

Voluntary termination

One option is voluntary termination. You can cancel your finance agreement and return your vehicle to the lender if you’ve fulfilled your payments for half of the total sum of debt.

As a component of the Consumer Credit Act, this powerful clause affords you the ability to cancel your hire purchase agreement earlier than planned. In order to qualify for voluntary termination status you must have paid at least an amount equal to 50% of the total amount loaned to you. At this point, you can cancel your agreement and return your unwanted car to your finance company.

If you have not reached halfway in your payment plan but still wish to cancel your finance, you can pay further funds to reach 50% of the total costs and then end your agreement.

This clause can be highly beneficial if you longer require the car, need to reduce your outgoings or can no longer keep up with your monthly payments. It can also be helpful to cancel your finance agreement if you discover a car for a lower cost than the sum total of your outstanding payments including fees, such as an option to purchase payment.

Return your car in good condition and get written confirmation of payment

To cancel your agreement without further charges requires the vehicle you’re returning to be in perfect condition and ready for resale. If there is damage to the car you’re taking back that you believe to be beyond reasonable wear and tear, it’s worth getting it fixed beforehand at your own cost to avoid any surprise costs when you end the agreement.

If you choose to cancel your car finance early, always ensure that you receive confirmation in writing from your lender or car dealer stating that your agreement is terminated. Copies should be kept as evidence against any false claims that you’ve defaulted on your finance agreement.

As specialists in the auto industry here at Car.co.uk, we welcome the opportunity to assist car owners across the UK with all their questions regarding car finance and if you are looking for more information then please refer to our guide on cancelling car finance.

Other related FAQs

Looking for more related content to this? We’ve picked a selection of related topics that you may find helpful

You’ll be able to get out of a car finance agreement with a UK lender as long as you’ve paid off at least 50% of the amount that you owe (including interest and fees). This is known as a ‘voluntary termination’ and designed to protect people who can no longer afford their monthly repayment.

Within 14 days of entering into a car finance deal, you have a legal right to cancel the agreement. This is permitted by the Consumer Credit Act 1974 as part of your Right to Withdraw.