Can I give my car back to the finance company?
Alisa Dan
If your agreement is a Hire Purchase (HP) or Personal Contract Purchase (PCP), you have a legal right called Voluntary Termination under Section 99 of the Consumer Credit Act 1974. It lets you end the agreement early and hand the car back once you’ve paid at least 50% of the Total Amount Payable. You must also return the vehicle in fair condition and give written notice to your finance company.
If you haven’t reached the 50% mark, you can still return the car by paying the difference.
But if your contract is Personal Contract Hire (PCH) or a personal loan, you can’t use Voluntary Termination. Returning the car in those cases counts as a Voluntary Surrender, which usually leaves you owing money after the lender sells the vehicle.
Can I cancel my car finance and give the car back?
Yes, you can cancel your car finance agreement and give the car back, but only under specific conditions.
Here’s what the facts show:
- You may have a 14-day cooling-off right, depending on the contract type and delivery circumstances (under the Consumer Credit Act 1974)
- For a contract such as a hire-purchase (HP) or a personal contract purchase (PCP), you can end it early under a right called Voluntary Termination, returning the car to the finance company.
- Under Voluntary Termination you must have paid (or be willing to pay) 50% of the Total Amount Payable before you can simply hand the car back and walk away.
- If you are not eligible under those conditions (for example you’re on a lease such as personal contract hire (PCH) rather than HP/PCP) then handing the car back may not discharge your liability: you may still owe money.
If you like, I can check exactly which types of agreements and which lenders allow cancellation and what you will owe in each case (so you know your options precisely).
What happens if I give my car back on finance?
If you give your car back while it’s on finance, the outcome depends on the type of agreement.
Under a Hire Purchase (HP) or Personal Contract Purchase (PCP), you can use a legal option called Voluntary Termination. It allows you to return the car and end the agreement once you’ve paid half of the Total Amount Payable, provided there are no arrears outstanding and the vehicle is in fair condition. You must send a written notice to your finance company and ensure the car has no excessive damage.
If your agreement is a Personal Contract Hire (PCH) or a personal loan, that right doesn’t apply. Returning the car in those cases is treated as ending the lease or loan early, which usually means paying early termination fees or still owing the remaining balance.
Why might you return your vehicle to the finance company?
You might return your vehicle to the finance company when keeping it no longer makes financial sense.
The most common reason is financial difficulty — if monthly payments have become unmanageable, handing the car back can stop further debt from building up. Some drivers also choose this route when they’ve already paid around half of the agreement and want to avoid paying the rest for a car they no longer need.
Others use it to avoid repossession. Returning the vehicle voluntarily looks better on your credit record than having it taken back after missed payments.
And in some cases, people simply want to change cars or end their finance early because their circumstances have changed — for example, a new job, relocation, or reduced mileage needs.
Can I give my car back on finance if I can't afford it?
If you can’t afford your car finance, you may be able to end the agreement early instead of falling behind on payments.
For Hire Purchase (HP) or Personal Contract Purchase (PCP), the law allows you to voluntarily terminate the agreement once you’ve paid half of the total amount owed. This helps prevent repossession and further arrears.
If you’re already struggling before reaching that point, contact your lender — they may accept reduced payments, a payment plan, or allow voluntary surrender, where you hand back the car but still owe any shortfall after it’s sold.
Acting early is important. Ignoring payments can lead to repossession, extra fees, and long-term damage to your credit record.
How to hand the car back to the finance company?
1. Confirm your agreement type
Check whether your car is on Hire Purchase (HP) or Personal Contract Purchase (PCP). These agreements give you the legal right to end the deal early and return the vehicle. This right is normally called voluntary termination under Section 99 of the Consumer Credit Act 1974.
If you’re on a lease (Personal Contract Hire) or paid with a personal loan, this process will not work the same way and you may still owe the full balance.
2. Check how much you’ve paid so far
Find the “Total Amount Payable” in your agreement. Add up how much you’ve already paid, including fees and interest, and (for PCP) the balloon payment when calculating the halfway point. If you have paid 50% or more, you can usually return the car and walk away from future monthly instalments. If you have not paid 50% yet, you can offer to pay the difference so that you reach that point.
3. Get the car into fair condition
Clean the car. Repair obvious damage. Normal wear and tear over time is expected. Heavy damage, cracked panels, and very high mileage are not. The finance company can charge you for excess damage or excess mileage even if you end the agreement correctly, so it’s cheaper to deal with this before handover.
Write to the finance company (do not just drop the car off)
Send written notice stating that you are ending the agreement using your right to voluntary termination under Section 99 of the Consumer Credit Act 1974.
Include:
- Your name and agreement number
- The vehicle registration
- A clear statement that you are exercising voluntary termination and will make the car available for collection / return. Keep a copy and proof of delivery. This protects you if there’s a dispute later.
4. Arrange inspection / collection
The finance company will either:
- ask you to deliver the vehicle to a named location, or
- arrange to collect it.
At this stage they may also ask you to complete a voluntary termination pack confirming mileage and condition. Make sure someone notes the condition and mileage when they take the car. Photograph everything (inside, outside, odometer) on the day.
5. Pay anything still owed under your liability
After the car is handed back, the lender may confirm if you owe anything further.
This can include:
- payments needed to reach 50% of the Total Amount Payable, if you hadn’t already reached it
- reasonable charges for damage beyond fair wear and tear, or excess mileage. Pay this promptly. Settling it now prevents escalation, debt collection action, or negative marks.
6. Keep all records
Keep:
- your termination letter
- their acknowledgement
- condition report / photos
- any final settlement receipt
These documents prove the agreement ended properly and that the car was returned. They’re useful if another lender later questions why the old agreement ended early when checking your credit file.
Can handing your car back affect your credit rating?
Returning your car can affect your credit file, but not always negatively.
A correctly handled Voluntary Termination shows the agreement as closed and settled, not defaulted. It signals to lenders that you met your legal obligations, though some may still view it as a warning sign if they see multiple early terminations.
A Voluntary Surrender, however, harms your record. It appears as a default or partial settlement because you still owed money after the vehicle was sold. This mark can stay on your credit file for up to six years, reducing your chances of getting new credit during that time.