Finance Questions

Question: Are you able to cancel your Car Finance after a year?

I signed a 5 year contrat for my Car Finance but I have only had it for a year, now my circumstances have changed and I now cannot afford my finance, what can i do? My finance is with carcraft.

Answer: If the finance is a 'Regulated Hire Purchase' agreement, then the Finance Company actually own the car until the very last £ of the contracted payments are paid. Therefore you cannot legally sell it yourself if a shortfall will remain.

As it is so early in the term of the 5 year agreement, there will undoubtedly be a fairly large difference (shortfall) between the actual second hand resale value of the car (i.e what you can get for it if it is sold) and the balance of the remaining finance.

You need to contact the Finance Company IMMEDIATELY. They are not normally OGRES, and if you explain the situation, and it is only a tempoary financial blip, they will be more than accommodating. They would rather reschedule an agreement than have to reposess the car.

If it is a case that you have a serious long term problem, then you will probably be better to cut your losses and give the car back. If the agreement was regulated by the 'Consumer Credit Act 1974', then you will have the option to Voluntarily Surrender the car back to the Finance Company. If you do this, you simply write them a letter stating your wish to surrender the car. The date of the letter is the date to which the Finance Company recalculate an 'early settlement figure', and this amount will be your final liability to the company.

They will sell the car for as much as they can get through specialist large auctions, and it should get 'Trade' value of the car. It is in their interest to get as much as possible for the car, as they ideally want to recoup as much of the debt in one lump sum. The difference between what the car sells for, less costs incurred in selling it, and the 'settlement figure' is what you will still be liable for.

If you still owe anything, don't worry, as that amount will be now an unsecured debt, and you will be able to negociate an affordable amount to pay weekly/monthly, eg £5.00/week, depending on your overall finances.

SURRENDERING your car under the terms of the agreement that actually allows this option, is nowhere near bad as if you let payments default and have it REPOSESSED, as in that case you would be liable for the FULL balance you would have paid upto the end of the 5 years, instead of the early settlement amount. To avoid nosy questions from neighbours or relatives, you could always say you sold the car, or that it was faulty and you demanded they take it back etc?

People answering above have wrongly suggested struggling on with things, or default and let them REPOSESS, but if your financial situation has changed, you have to be realistic and take immediate steps to adjust your expenditure. The fact that you have asked this question is great, as it shows that you are not the type that buries your head underneath a ton of unopened brown letters!

Cut out the large monthly payments you were paying them, give the car back and get a few hundred £ together, if you can, to pick up a cheap little runner if you really need a car.

You don't need the added stress of being chased for payments you can't afford.

One final option that depends of your situation, is you may be able to arrange a loan from family or a bank or use a credit card to raise funds to clear the finance (Get an early settlement figure from the company). You could then keep the car and pay this 'unsecured' loan over a longer period/ lower monthly rate, but seriously NOT the best option! You will be adding interest onto interest at a very high rate! As you opted to have it on a 5 year term, I would guess you already were stretching yourself on the monthly repayments to afford a more expensive car?

I worked for the TSB in their Car Finance dept for 6 years, dealing with defaulting customers and dealing with surrendered and reposessed cars all lhe time, at the height of the early 90's Housing Crash.

Read the credit agreement you signed, as it will lay out your options and give the Finance Company a ring NOW and they will be VERY sympathetic and advise you on all your options in more detail!

Good luck.

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