Someone mentioned to me that there's a loophole in HP law given the fast depreciation (and high markups on initial purchase) of so many cars.
As I understand it, if you have paid off 50% of the purchase price of the car, you can hand it back to the HP company, owe nothing more and they are not allowed to put a black mark against your name.
Normally this would not be a problem, but at the moment many cars bought on HP are worth less than half the purchase price.
I've tried googling and found this which was interesting but doesn't quite answer all the questions: www.nationaldebtline.co.uk/england_factsheets/fact...8
Does anyone know if this is the case? It doesn't apply to me (one old car owned outright, one company car) but seemed interesting!
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Yes, it's been discussed on here at length in the past. Consumer Credit Act is the basis ISTR.
You just have to make sure it goes back in good condition.
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Here you go:
www.honestjohn.co.uk/forum/post/index.htm?t=9647
I used to be the chap handling vehicle returns and the odd repo for the local office of a vehicle financing company.
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Alan, perhaps you can help me on this one then...
I'm not in this situation but a friend of mine will be in about two years.
www.honestjohn.co.uk/forum/post/index.htm?t=12011
I think it's s.100 of the CCA that says that you must have paid 50% of the total credit price, but I can't find a definition of the TCP. Is that the full amount, including normal interest, over the life of the credit agreement? Or is it just half the loan principal?
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The total Credit Price is the cash price of the car plus all the finance charges.
Once you have paid 1/3rd of this, the car cannot be reposessed(in the event of non-payment), without a court order. Once you have paid 1/2 of this, you can return the car as mentioned - but it must be in reasonable condition for it's age etc etc.(You will be charged for rectification, for instance if there are dents there)
You will not have a "black mark" as such i.e a default - but I would be very surprised if a voluntary surrender was not recorded. If it is, rest assured no sane company will advance credit to you again - and why should they if they or another financier has lost money on the transaction?
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"Rude, crude and socially unacceptable"
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It's a great loophole for the punter on finance. I've never had finance myself, but it's tempting.
i.e. one mate handed back his Griffith 500, the garage advised it needed a 5k engine rebuild (bottom end going). You would never notice, it was just a bit down on power. Another mate handed back his Accord-R. Effectively cost him 6k to thrash the knackers off it for 2 years and 40k miles (no faults obviously, it's a Honda!).
I bought a similar Accord an put 6k on it in 18 months and lost the same amount. Now who's the mug? And who had the TVR?
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There is a Voluntary Termination flag that is put onto your credit file (two main agencies are Experian and Equifax). This is not a 'black mark', nor does it impact your ability to gain credit.
I work in the the finance sector - and incidentally have terminated a Hire Purchase Agreement having paid 50% of the total balance in order to get rid of a 50K Saxo that was only 2 years old. Heard nothing back from the finance company, and on requesting my credit file, found the Voluntary Termination flag had dropped off after a year.
So, yes, it is a good way of getting rid of a car that is in negative equity. However, I wouldn't use this method to buy and run a car, only to get out of an iffy equity situation.
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Hi David,
Sorry for not getting back sooner, I just re-read your original post and thought I would try and clarify.
The Total Credit Price, as mentioned above, is the total amount for the car, plus all credit costs. The 50% figure will actually be detailed on the credit agreement.
Please note that this is only applicable to secured loans, regulated under the consumer credit act. The documents should state that it is regulated (at the top of the first page) and must specify the goods (chassis or reg no.) to qualify. I seem to recall that the type of agreement is known as either \"conditional sale\" or \"hire purchase\" under the CCA.
There will be a section on the agreement entitled \"Termination - Your Rights\" This will confirm the 1/3 and 1/2 figures mentioned elsewhere in this thread.
You will be pleased to note that the GAP cover shouldn\'t be included in the figure.
If it\'s not a secured regulated agreement and does not specify the goods then your friend can do what he wishes with the car, but is stuck for the repayment of the loan in some way, shape or form.
Hope this helps.
No Dosh, aka Alan_moderator@honestjohn.co.uk
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