2
If you have a car nance agreement,
rather than a loan.
Hire purchase agreements are different to loans
in many ways, but one of the main differences is
how you can end the agreement.
If you have a loan, you can pay back the loan
either by using money you already have or by
selling the car and using the proceeds to pay off
the loan.
With a hire purchase agreement, you cannot sell
the car during the period of the agreement as
you do not own the car until the last payment has
been made. If you want to end the agreement
early, and become the owner of the car, you can
pay off the full amount at any time. If you decide
to do this, you are entitled to a reduction in the
cost of credit. Make sure you ask your lender/
provider about this.
The third rule
Your car can be repossessed if you break the
terms of the agreement, for example, by missing
payments. If you have paid off less than one-
third of the hire purchase price, the car finance
company can take back the car without taking
legal action against you. If you have paid more
than one-third of the hire purchase price, a
lender cannot repossess the car without taking
legal action against you.
Your car cannot be repossessed from your
home, regardless of how much money you have
paid back.
YES
Talk to your finance company and explain
your situation. Ask them to restructure the
agreement – but be aware that a rescheduling
charge might apply. Ask your finance company
to confirm in writing what conditions are
included in the restructuring and what impact, if
any, the restructuring will have on your original
hire purchase agreement. For example, your
finance company may lengthen your existing
agreement, or you may be entering into a
new agreement. Be sure you are happy with
the restructuring before agreeing to it. If you
restructure your agreement you can still return
the car later using the ‘half rule’.
NO
You have 2 main options:
1 If you are near the start of your agreement,
it may be more beneficial for you to ask for
your finance company’s permission to sell
the car yourself and use the proceeds to
repay the loan. If your lender agrees to this,
ask them to confirm in writing before you
sell the car. Be aware that you may not get
enough money from selling the car to pay
back all the money owed. Ask your finance
company what will happen in this case.
2 Return the car using the ‘half rule’
(see below)
How you end a hire purchase agreement depends on whether you
want to keep the car.
DO YOU WANT TO KEEP THE CAR?