Problems making car repayments
What to do when you have problems making car payments
If you’re having trouble making car payments, your options depend on how the car was financed. This page explains how Personal Contract Plan (PCP), hire purchase and personal loans work, what voluntary surrender and the half rule mean and how to deal with arrears or repossession. It also outlines how to contact your lender early and where to get free support from the Money Advice and Budgeting Service (MABS). Learn how to protect your rights and avoid costly mistakes.
What is voluntary surrender?
Voluntary surrender means you give the car back but still owe the full debt. The finance company takes back the car, sells it, and uses the money to reduce what you still owe. You must continue repayments until the debt is cleared. Voluntary surrender usually costs more than using the half rule.
PCP and hire purchase
With PCP and hire purchase agreements, you don’t own the car until the final payment is made. The finance company owns the car until then.
If you're having difficulties:
- You may be allowed to sell the car to pay off what you owe – but you must get permission from the finance company before you can sell it
- You may be able to end your agreement using the half rule
- Many car dealers offer Personal Contract Plans (PCPs) as a way to pay for a car. PCPs can appear very attractive because they usually have lower monthly repayments than other types of loans. However, PCPs are very complex compared to other types of car finance and it’s important to understand all the terms and conditions before you sign up.
What is the half rule?
The half rule is part of the Consumer Credit Act 1995. It allows you to end a PCP or HP agreement at any time.
- If you've paid less than half the PCP or HP price, you can return the car and only owe the difference
- If you've paid more than half, you can return the car and owe nothing further – but you're responsible for any necessary repairs
- You can use the half rule even if you're in arrears, but you’ll still owe the arrears and possibly surcharge interest
How do you use the half rule?
- Write to your car finance provider. The CCPC offers you a sample letter which you can copy and personalise to your situation
- Agree a pick-up point or return the car yourself
- Take photos of the car to document its condition
- Read all documentation carefully
- Do not sign a voluntary surrender form
- Return the car to the agreed location
- You won’t need to make further payments after returning the car
- If a payment has already been processed, contact the finance company for a refund
Personal Loan
If you took out a loan to buy your car, you own the car from the start.
If your circumstances have changed and you are now in financial trouble:
- Contact your lender and explain your situation
- Ask to restructure the loan agreement
- Be aware of any extra fees and interest
- You may also consider whether selling the car and using the proceeds to pay off the loan is a better approach
- If your car still has a high value, you might be able to repay your loan and buy a less expensive model
What is repossession?
With PCP or HP, your car can be repossessed if you fall into arrears.
- If you've paid less than one-third of the purchase price, the car can be repossessed without legal action
- If you've paid more than one-third, the lender must take legal action
- The car cannot be repossessed from your driveway
- After repossession, the car is sold and the money from the sale goes towards your debt – but you must still repay any remaining balance
