Voluntary Termination: How to Hand Back a PCP or HP Car (UK)

If a PCP or HP car finance deal has become unaffordable, you may have a powerful legal right most drivers do not know about: voluntary termination. It lets you hand the car back and walk away once you have paid enough. Here is how it works.

The 50% rule

Under section 99 of the Consumer Credit Act 1974, you can end a regulated hire purchase or PCP agreement once you have paid (or bring your payments up to) 50% of the total amount payable — including interest, fees, and any final balloon payment. After that, you can return the car and owe nothing more, provided it is in reasonable condition.

What counts and what to check

• The 50% figure is on your agreement, usually labelled as the amount at which you can voluntarily terminate.
• If you have not yet reached 50%, you can still terminate but must pay the difference up to the halfway point.
• You are responsible for "fair wear and tear" only — not normal use. Excessive damage or mileage can be charged.

How to do it

1. Check your agreement for the voluntary termination figure and how much you have paid.
2. Notify the finance company in writing that you are exercising your right to voluntarily terminate.
3. Prepare the car: clean it, gather service history, and photograph its condition to head off unfair damage charges.
4. Get written confirmation that the agreement is ended and nothing further is owed.

A voluntary termination letter template

Dear [Finance company],

Re: Agreement [number] — voluntary termination

I am exercising my right to voluntarily terminate this agreement under section 99
of the Consumer Credit Act 1974. I have paid [or will bring payments up to] 50% of
the total amount payable.

Please confirm the termination, arrange collection/return of the vehicle, and
confirm that no further sums are due beyond any charge for damage exceeding fair
wear and tear.

Yours faithfully,
[Your name and agreement details]

Voluntary termination can protect your credit far better than missed payments or repossession. If the finance company tries to charge beyond fair wear and tear, dispute it — and escalate to the Financial Ombudsman if needed.