Overseas postings can be disruptive to your financial life. One of the questions we are often asked is what do I do if I am mid-way through my agreement, get posted abroad, and no longer need the car?
Firstly, and this applies to all types of regulated finance agreements, there will be a record of your payment history somewhere, so either not paying, or getting the car repossessed are options, but they are options people usually come to regret in time as it will damage your credit history, usually make it very hard to get finance again, and it takes a very long time to come off your credit file. You would also be in breach of your legal obligations so although you potentially could, it is usually a false economy, and will cause more pain in the long term.
So assuming taking the car with you is not an option, and you do not want to keep paying for a car that is in the UK when you are not, the options are usually as follows.
Firstly, it depends what type of agreement you have. You may need to check your original documents as the type of agreement makes a big difference. Please select the title of the loan type accurately as the information is very different.
Conditional Sale, Hire Purchase, PCP (Personal Contract Plan), Balloon Hire Purchase
These are all forms of Hire Purchase with variations in the terms. Your options are as follows.
- Sell the car, but you will need to pay off any outstanding debt at the point of sale. You are not allowed to sell the vehicle if you still owe money on it even if it is a small amount.
- If you owe more that the vehicle is worth to sell, you have what is called negative equity. If you sell the car, and use the money towards the amount owed, you will have to pay any shortfall from your own pocket at the point of sale. This is fine if the balance is small, but it can sometimes be thousands.
- You can sometimes exercise what is called termination rights. If you have paid over half the total amount payable. Amount borrowed + deposit paid + and part exchange value you put in + interest + any fees equals the total amount payable. You have reached half point when the part exchange value + deposit paid + the total of payments made so far, equals more than 50% of the total amount payable. If you have paid over this amount you can simply give the car back to the lender and you do not have to make any further payments. It is an old rule that has never been revised and it is designed to protect people who hire an item with the intention of owning it when all the payments are made. It is perfectly legal, the lender cannot refuse, you are within your rights to do it so, so it would not be considered that you have failed to pay, and your credit file would not be adversely affected (although it can be marked that you terminated the agreement, but this is very different to adverse information such as a CCJ). You must have taken reasonable care of the goods, which is a bit of a loose legal term, but the majority of lenders will consider a valid MOT, up to date service, and no obvious damage beyond wear and tear as reasonable care.
- You can also take out a personal loan to cover the amount you still owe (or the shortfall), pay off the Hire Purchase, sell the car, and keep paying the personal loan off. A personal loan is not usually tied to any asset so it is a way of getting clear title to the vehicle so you can legally sell it.
You should not, or are not allowed to;
- Give the car to someone else and have them take over the agreement. You could choose to lend the car to someone while you are away, and there is nothing illegal about them paying you compensation for the use of the car, but it needs to stay in your name, be insured by you as the main driver, and no part of the finance agreement, or title of the vehicle can be transferred until the full debt has been repaid.
- Take the car abroad without notifying the lender.
- Park the car and stop paying the insurance as you do not need it. Your agreement will almost certainly stipulate that the vehicle must be insure fully comprehensively at all times, as although it is your car, the finance company own some of it, and you will have agreed to insured their asset.
Personal Loan, Motor Loan
Now this has historically been a grey area, but it shouldn’t be. When you take out normal Hire Purchase the lender does own the vehicle, and they will register this interest on HPI to stop you selling the car which is technically their asset. When you take a personal loan, or motor loan, this is not supposed to allow the lender to register an interest in the car as they do not own it. If you do a vehicle check on HPI, you have either of these types of agreement, and your lender is showing an interest in the car which some of them do try to do, you can ask them to remove it. They have lent you money to buy a car, they have not bought the car on your behalf and are collecting payments against it as is the case with the other types of Hire Purchase loans above. Once they have removed their interest on HPI, you can do what you want with the car really, so long as you keep paying the finance. The lender usually has no rights to the car, it’s yours, they simply lent you money to buy it, so if you sell it and keep paying the original agreement, it is no business of theirs.
Lease, Contract Hire, Maintained Lease, Hire
These can be more complicated to get out of, and often there are fees to break the contract and there can be a wide scope of regulations that apply to your agreement depending on the type, term, and lender. In these circumstances you are best calling the lease company, explaining the situation, and agreeing a resolution.
Bill of Sale
This type of agreement is uncommon, but probably the worst to get out of. You cannot terminate, and the lender has legal ownership of the vehicle. If you have a bill of sale your only choice really is to either keep the car and keep paying, or sell the car and settle the finance in full. There are very few of these agreements, and in the main part it is best to avoid them.
In most circumstances, and with most agreement types, there is a way out. Peoples circumstances change, and lenders and lease companies are aware this happens. Check your original documents, read the small print, as often what seems to be a very difficult situation can be easily resolved if you know what type of agreement you have, you read the terms of the agreement, and exercise your legal rights as a consumer. More often than not, these rules will allow you to get out of the agreement, and will be legal, and cheaper in the long run, than just ignoring the issue and hoping it will go away.