Thanks for your patience.
Without knowing exactly what type of arrangement you have or being able to see the agreement I can only advise you in general terms on your rights and obligations.
The first thing you need to look at is the type of agreement you have. There are two types that may apply to you:
- a personal contract purchase; where you make monthly payments for a fixed term and have the option to buy at the end of it, and
- a personal car leasing agreement, which is also called personal contract hire; where you pay a monthly payment, which includes maintenance costs, and hand the car back at the end of the term
Personal contract/Hire Purchase
If you wish to terminate this agreement early your rights and obligations are set out in the Consumer Credit Act and Consumer Credit (Early Settlement) Regulations.
In short, if you have already made half of the payments or you make payments up to half the amount, you have the right under the Consumer Credit Act to return the car to the finance provider. This is called ‘voluntary termination’.
This might make sense, for example, if the car has already depreciated in value to the extent that your remaining payments would add up to more than its current value. If the car’s value is greater than the value of your remaining payments then getting a settlement figure and selling the car might make more sense.
Paying off the agreement early
If you want to pay off your personal contact purchase agreement early, the first step is to ask for a settlement figure. This is the amount of money you will need to pay to end the agreement. You then have two choices:
- pay off the agreement and keep the car – this will make sense if the settlement figure is lower than the cost of carrying on paying and you have enough funds to make the payment
- pay off the agreement by selling the car. However, you only own the car once you've made the final payment so you would have to 'buy' the car by settling the contract early and then decide whether to keep or sell the car
If paying off the agreement by selling the car, you need to be sure that the price you get for the car will cover the remaining monthly payments, including the final ‘balloon’ payment worked out by the finance company or in the settlement figure.
Under a personal contract purchase agreement, although you have the right to drive the car you don’t own it unless and until the balloon payment is made. Therefore you need to check with the lender that you can sell the car. Also, remember that you will be liable for any money outstanding.If you have a personal car leasing agreement
With these sorts of agreements, if you return the car early you can still be liable for paying off the lease in full.
It is likely that if you return the car early and exit the agreement the finance company will stick to the black and white of the lease agreement and expect you to pay all outstanding sums under that agreement including the balloon payment.
Unfortunately under a leasing arrangement the value of the car is immaterial for calculating early settlement. There is no provision in law for this to be taken into account and much depends on the agreement that you entered when you first obtained the car. If you do not have a copy you should request one from the finance company to check your rights.
Under a leasing arrangement you never own the car - you are only using it for a period of time at a pre-agreed price. Consequently, the value of the car is not relevant because the ownership and, therefore, the value never pass to you.
I'm sorry of this is not the answer you're looking for but I have a duty to give you honest and objective information and explain your position in law.