Voluntary Termination of Car Finance

[MrsC2012]

[MENTION=71570]R0b[/MENTION]

Hi! I've just read through the thread advising how to VT a car finance agreement and would like a bit of advice/opinion please.

We purchased a car on a 5 year finance deal, almost 4 years ago. In the last 3 months we've spent £750 on repairing two different problems and we aren't prepared to keep forking out that sort of money on a 9 year old car.

I've just started maternity leave so we plan to go down to one car in the household but discovered we are in negative equity on the vehicle, the amount will depend on what we are able to sell it for but it's looking like around half of the settlement figure - the wonders of negative equity!

My first *surprise* upon phoning for a settlement figure was finding out that the £299 exit fee would need to be paid in addition to our outstanding payments - the representative at the car dealer specifically told us that this fee was waived if we paid off 6 months before the end but with no paperwork to back my claim it's our word against theirs 😠 This obviously bumps our neg eq up from around £700 we expected to £1000.

My second *surprise* upon referring back to our credit agreement is that we are on a "fixed sum loan agreement" despite the only options ever discussed being "PCP" or "HP". I wasn't aware of the subtle differences between the various credit agreements until I began researching this, and as the vehicle is described in detail (make, model, reg, VIN etc) on the paperwork I had also assumed we were on a conditional sale agreement (one of the types offered by Barclays Partner Finance) and thought we could VT but now I'm not so sure.

So, can we VT? Should I send the template letter off to Barclays anyway and see how we get on? Or am I wasting my time? If we do end up having to sell the vehicle and pay the finance off, we're just paying more interest for every day this goes on (there is a small rebate on the settlement) and really I'd like to get this tied up sooner rather than later, before we make any more monthly repayments.

Thanks, in advance 😊

[R0b]

Re: Voluntary Termination of Car Finance

Hello,

First of all, a lot of people get confused and assume the words hire purchase means any car finance agreement and it doesn't - they only tend to realise this when things go wrong! On a fixed sum loan agreement you cannot VT as it is the equivalent of getting a loan from a bank but for the specific purpose of using it to buy the car. The car however belongs to you from the start unlike cars on hire purchase, so you could sell it at any time without being in breach.

As for the exit fee, I am not entirely sure whether they can claim that fee back, it might be subject to the fairness test. I do know that under an early settlement figure you get a rebate from the interest and charges, and I think, but I'd have to check, the creditor can charge a % for early termination if it is within a certain amount. I can't see how it is fair for them to be legally entitled to a early termination fee plus an exit fee on top of that.

That aside, you could argue that there has been a misrepresentation by the dealer which induced you to enter into the contract believing that it was on hire purchase and not a fixed sum loan. This would be known as a misrepresentation as to law. If you wanted to go down this route, there may be some options available but by no means a guarantee that you will win. If you have any paper trail prior to signing the agreement which refers to HP or PCP or Conditional Sale that could be an indication that they were offering you this type of agreement and not a fixed sum loan.

If you have paid part of the car by credit card such as a deposit, and presuming the car's value was over £100 then you could make a section 75 claim against your credit card company for misrepresentation instead of going through the courts. The CC company will be jointly liable for any representations the dealer had made to have you enter into the contract.

Finally, the other method would be to follow the complaints procedure at Barclay's and if they do not uphold your complaint then you can seek potential redress through the Financial Ombudsman. If there were witnesses at the time of entering into the agreement who can vouch for you that you were under the impression it was HP and no fixed sum loan then the Ombudsman may take that into account when coming to a decision. They will generally look at what's fair and reasonable and one option could be to make Barclay's terminate the remainder of the contract without liability to you. If you accept the Ombudsman's decision then it is legally binding on both parties but you are not obliged to accept it.

Edit: Just to add, section 97 of the Consumer Credit Act provides that upon request, a creditor must provide in writing an early settlement figure and how it is calculated. It might be prudent to request that from barlcay's so you can work out whether it is correct or not. There will usually be an expiry date for the figure at which point it will need to be recalculated. If they fail to provide this, the agreement becomes unenforceable until it is provided.