Is there anything you can do if you've bought a vehicle on a hire purchase (HP) car finance agreement but you want to end the deal early?
Let's look at the options...
Return the car
With an HP agreement, you can return the car early if you’ve paid off half of the car – or can pay the difference to meet the rest of the credit agreement. If you’ve already paid more than half of the car’s cost though, you won’t get a refund!
The amount the lender can charge you for early repayment is capped by law – and the most you can be expected to pay is what you owe - but not the interest – plus whichever is lowest of these three amounts:
> 1% of the amount repaid early – for example £100 if you have an outstanding debt of £10,000
> 0.5% of the amount repaid early if there are less than 12 months remaining – for example, £50 if you have a debt of £10,000
> The remaining interest
Bear in mind that that if you’re repaying less than £8,000 early, you shouldn’t be charged any extra fees.
While it might not seem to make sense to return the car early, this could be an option if you no longer need it, or you can get something similar for less than the monthly repayments would have cost you.
See more videos in our ‘What If…’ series playlist here: