Can you cancel car finance? A comprehensive guide

Are you considering cancelling your car finance agreement but unsure about the process and what it might mean for you? Lots of people ask us: Can you cancel car finance? And ‘What happens if I pay off my car loan early? You’re not alone, and we're in your corner. In this guide, we'll address common questions and concerns around cancelling car finance, giving you everything you need to help you make informed decisions.

Is it possible to cancel a car finance?

Yes, you can cancel a car finance agreement, but the process depends on the type of agreement you have and the terms outlined in your contract. Some agreements, such as regulated finance contracts, may include a 14-day cooling-off period, allowing you to cancel without penalty. If you want to cancel after this period, you will likely need to either pay off the loan balance or consider voluntary termination (VT), if eligible. It’s best to check your contract and speak to your finance provider about your options. 

Can you cancel finance after signing?

If you have signed a regulated car finance agreement, you have a legal right to cancel within 14 days under the Consumer Credit Act. This is known as the "cooling off period". If you wish to cancel after this period, your ability to do so will depend on the terms of your agreement. It’s likely there will be certain terms and conditions laid out in your contract that you’ll need to stick to if you choose to do this. These terms may include the option for early termination or cancellation after you’ve signed your contract, but may be subject to early settlement fees. Always check your contract or speak with your lender to understand your options.

Does cancelling car finance affect credit score?

Ending your car finance early can have an impact on your credit score, although the extent of this impact largely depends on how the cancellation is handled. If you cancel responsibly and stick to any financial obligations, such as paying off outstanding balances, the impact on your credit score could be reduced. However, if you miss any payments during the cancellation process or break any of the conditions of your contract, this can negatively affect your credit rating, so make sure you check your contract properly.

Can you come out of car finance?

Yes, you can exit a car finance agreement, but the process depends on how much you have paid and the type of agreement you have. In most cases, you can either settle the remaining balance, use voluntary termination, or return the car if you are within the cooling-off period. Each option comes with different financial implications, so reviewing your agreement and discussing it with your lender is essential.

Is there a way to get out of car finance early?

Yes, early settlement and voluntary termination are the most common ways to exit a finance agreement early.

• Early settlement: You pay off the remaining balance in full, which may include an early repayment fee.

• Voluntary termination (VT): If you have paid at least 50% of the total amount payable (including interest and fees), you can return the vehicle and end the contract under the Consumer Credit Act.

Both options have financial considerations, so it’s best to check with your lender before proceeding.

Is there a charge for paying off car finance early?

Yes, there is usually a charge for paying off car finance early. This charge, known as an early settlement fee, is there to compensate the lender for financial loss due to early repayment, as lenders make most of their money through charging you interest over the course of the full finance agreement. However, under the Consumer Credit Act, regulated agreements may limit these fees. Check your contract to see if an early repayment charge applies. The amount you could be charged for paying off car finance early can vary depending on how long is left on the contract, the remaining balance on the finance and the terms of your agreement.

Is paying off finance early good?

Paying off car finance early can offer several potential benefits. Firstly, it could save you money in interest payments over the long term. It can also provide you with greater financial flexibility and peace of mind, knowing that you're free from the debt obligation sooner. However, it's crucial to weigh these benefits against any associated costs, such as early settlement fees, to make sure you don’t end up worse off financially. 

Can you pay off car finance straight away?

While it's technically possible to pay off car finance straight away, it might not always be in your best interests financially. If you are able to pay off the total amount on  a car finance agreement straight away, that could mean that a car finance agreement isn’t entirely necessary for you in the first place, and you might be better off using a personal loan or paying for the car outright. Many finance agreements do include options for early repayment, but these often involve paying early termination fees. Before deciding to pay off your car finance early, it's essential to review the terms of your agreement and consider any potential costs involved.

Can you make extra payments on car finance?

Some car finance agreements may allow for making extra payments towards the total balance. However, it's important to review the terms of your agreement to see if this option is available and if there are any restrictions or fees involved with making extra payments. If your lender does allow you to make extra payments on your car finance, this can help reduce the overall interest costs and shorten the length of the finance agreement.

How much does it cost to cancel car finance?

The cost of cancelling car finance can vary depending on how much is still left to pay on the finance, any early settlement fees you might have to pay, and other potential charges outlined in your agreement. It's a good idea to check your contract carefully and talk to your finance provider to understand the total cost of cancellation before you go ahead. If you cancel within the 14-day cooling-off period, you won’t face cancellation charges, but you may need to repay any borrowed amount.

Can I change my mind on car finance?

If your agreement is regulated under the Consumer Credit Act, you have a legal right to cancel within 14 days of signing. This cooling-off period allows you to withdraw from the contract without penalty. However, you may still need to repay any borrowed funds and return the car. This cooling-off period, also known as a "right to cancel" or "withdrawal period," is usually a protected right for you as a consumer by law, and it’s designed to give you time to consider your decision and cancel your agreement if you need to. The length of this cooling-off period can be different depending on the terms of your agreement, though it is usually around 14 days.

Can I give my car back to the finance company?

Returning the car to the finance company, also known as voluntary termination, is possible on most PCP car finance and HP car finance agreements if you have paid at least 50% of the total amount payable (including interest and fees). Voluntary termination rights may allow you to return the car and end the finance agreement early, usually without you needing to pay extra charges beyond what is outlined in the contract. However, it's important to check the terms of your agreement carefully and make sure you understand any conditions or limitations that come with voluntary termination.

Do you have 14 days to cancel car finance?

Yes, consumer protection laws often stipulate you should get a 14-day cooling-off period for cancelling a car finance agreement in the UK. This period of time, also sometimes called the "right to cancel" period, allows you to change your mind and cancel the agreement within 14 days, typically without having to pay any penalty fees, but you must return the car (if applicable) and repay any borrowed amount. However, the availability and conditions of this cooling-off period can vary depending on local laws and regulations, so make sure you check this in your contract before you sign.

What if I am not happy with my car on finance?

If you're not happy with the car you bought through finance, you may have rights under consumer protection laws (Consumer Rights Act 2015) or the terms of your agreement. These rights may include provisions for returning the car, seeking repairs or replacements for faulty vehicles, or other fixes for issues you have come across. If you have a problem with the car, you should contact the finance company and tell them what’s wrong so you can find out what your options are.

What rights do I have with a finance car?

Your rights with a finance car are typically outlined in your agreement and may include various protections and entitlements. These rights may include things like a 14 day cooling-off period, warranty coverage, recourse if the vehicle has defects or issues, and other consumer protections. Checking your agreement and understanding your rights can help you deal with any issues that may come up during your car finance agreement.

Is there a 14-day cooling off period when buying a car on finance?

For most regulated finance agreements, you have a 14-day cooling-off period under the Consumer Credit Act. This allows you to cancel the agreement within 14 days without penalties, though you must return the vehicle and repay any borrowed funds. However, the availability and conditions of this cooling-off period can vary depending on local laws and regulations, as well as the terms of your specific agreement so always review your agreement.

So, yes, cancelling car finance and paying off car finance early is certainly possible, but it's important to first make sure you understand the terms of your agreement, potential costs, and any rights you may have. If you're considering cancellation or early repayment of a car loan, we recommend contacting your finance provider for guidance and clarification of what this would involve.