ScoobyDoo555

Been asked a question by a work colleague - what's the catch with returning a car funded by Hire Purchase?

I'm pretty sure you have to pay off at least half the value of the loan, but what else?

Presumably, it also affects your credit rating?

Any ideas?

Dan

DonnieDarko

they hit you for

damage to the car (our company had a £1266+VAT bill for a couple of scratches to a citroen)
excess mileage (depends on contract, could be 12p a mile)
hurt your credit rating
likely to be a balancing payment (finance o/s vs residual value of car) could be £1000's

he'd be better off finding out what they'd charge if he gave it back, then selling the car on as he'd probably not lose as much that way.

obviously some people are put off buy cars with current HP outstanding, but with an HPi check, they know what it outstanding

Example -> they give him £500 + take on the remaining £8000 of finance

register the change with the finance company (if they pass the credit check)

ScoobyDoo555

righto, we were trying to work out what was in it for the finance company!!! Didn't make sense that you could just give the car back without any penalties!!!

Thanks,

Dan

DonnieDarko

^^ they ain't stupid

I'm a financial controller, been at my company 3 months, it seems a little while ago the directors thought they were signing up to a £170,000 loan, turns out they sold £200,000 worth of assets, and now lease them back at £3500+VAT per month for the next 5 years!

nice one...

Butty

iTrader: (2)

I had no trouble giving back a car under HP although I'd paid about 60% of the amount.
Under the Consumer Credit Act, as long as 50% has been paid and the car has been looked after (i.e. minor wear & tear) and is sellable then there is nothing that can be held against you - financially or credit rating wise.
If they do try anything funny then contact Trading Stds.

Your HP agreement should read:

"TERMINATION: YOUR RIGHTS

You have a right to end this agreement. If you wish to do so, you should write to the person authorised to receive your payments. They will then be entitled to the return of the goods and to half the total amount payable under this agreement, that is £XXX.
If you have already paid at least this amount plus any overdue instalments, you will not have to pay any more, provided you have taken reasonable care of the goods."


Nick

ScoobyDoo555

Hmm, intriguing. To keep it private, I've PM'd you

Dan

ScoobyDoo555

what if the car is in negative equity?

Dan

DonnieDarko

then try to sell it for as close to the loan outstanding, or take the hit, or keep it

CupraT

I handed one back years ago after paying 50% of the value.

The finance company arranged for an AA inspection who confirmed the car was in the condition it should be in for its age.

Picked it up a few days later.

Does not affect your credit rating as its a condition of the HP agreement that you can hand it back. Providing you have made all your payments on time its not an issue. You have not defaulted on a loan.

I handed mine back as the PX values I was getting offered were significantly less than the value of the car.

craigdmcd

iTrader: (2)

You are correct in saying that if you hand back a car in this way, there is no affect on your credit rating, but generally it will show on your history. This then can allow credit companies to see if you do this on a regular basis, and although they'll tell you they don't know why you've been declined, your history will be preventing you. It's like a lesser version of bumping the finance, the finance companies don't like losing money, and will always get back at you. I found all this when I did Car finance for my dad's car sales company, and got talking to the credit checkers for large finance companies. Your rating might be good, but if they don't like it, then it's them that decline you.
Craig

Wmscooby

iTrader: (24)

You can terminate the agreement when youve paid half the amout ie 10000 if youve paid 5000 you can hand the car back
Its called VT. Your agreement should state this however it WILL effect your credit rating

Mark

SiDHEaD

As is the experience of others here, my mom gave hers back after she reached the halfway point. They arranged collection and they first of all complained about the mileage but i think she got away without paying any extra

ScoobyDoo555

Thank god I'm not doing any work today Never thought I'd find finance interesting Kinda makes me wish I'd bought my car on HP!!!

After showing him your responses last night(thanks btw), he called debtbuster last night (government advice, i think) - went through the nitty gritty, and it looks like it can be done, without affecting your credit rating.
Now, my mate's interpretation was that the finance companies don't like it (for obvious reasons!!), but because effectively you hire the car/item, and only purchase it after the final payment, as long as you pay back 50%, you are entitled to give it back, without penalties (such as damage/mileage etc)

Hence the term "Hire/Purchase"...... no wonder the Finance companies tend to keep it quiet!!

Seems the only thing the Finance companies can do is decline any future applications - however, surely they'd have to give a reason though....

Dan

scubbay

iTrader: (61)

Good advice, just one thing, if you want to take another car on finance right away do so with another company before you do the handback. The delay between handback and thier disposal means that until this is complete they wont give you further finance. That particular company may not wish to do further deals with you but dont worry theres plenty more. Hope this helps.

ScoobyDoo555

Makes sense - he's not actually thinking of changing yet, but as we'd got talking about finance, where else to ask but the fountain of Scoobynet knowledge!!

Dan