Hire Purchase Hand Back

[Dave's E55 AMG]

Does anybody know about the "Hire Purchase Hand Back".

At what stage of the purchase can you hand the car back?

What are the consequences of this process personally?

Anything?

 

[television]

There is an HP act, but individual small print also counts.

If the car is re processed they can auction it off and claim the balance from you, and the same if you hand it back

 

[Xtractorfan]

You can hand a car back to the Finance Company provided it is on hire purchase. When you have paid half the purchase price..basically 2yrs into a 4 yr agreement..then you can legally hand the car back.
You have to write to the company and inform them that you wish to terminate the agreement under the terms and conditions of that agreement..
The vehicle must be in reasonable condition otherwise they can penalise you for the poor condition of the vehicle..
Whoever comes to collect your vehicle, get them to inspect the vehicle and sign a written note to state the condition of the vehicle. Do not let the vehicle go until you have written evidence that they are satisfied with the condition..

And finally make sure you have a hire purchase agreement and not a personal loan or PCP. these have to be fully paid up..and have no let out..

Ps. If your car is worth more than the amount owing it may be better to try and sell the car and then pay off the difference..
Oh and no black marks on your credit score for the hand back, check your credit file about a month after hand back to make sure..some of the cowboys do make a note of it..and lots of cowboys now in finance ...as real cowboying is no longer a viable trade

 

[hawk20]

You can hand a car back to the Finance Company provided it is on hire purchase.

And finally make sure you have a hire purchase agreement and not a personal loan or PCP. these have to be fully paid up..and have no let out..

Ps. If your car is worth more than the amount owing it may be better to try and sell the car and then pay off the difference..
Oh and no black marks on your credit score for the hand back, check your credit file about a month after hand back to make sure..some of the cowboys do make a note of it..and lots of cowboys now in finance ...as real cowboying is no longer a viable trade

Not quite correct. Under the law a PCP deal is Hire Purchase and as I have posted elsewhere it is subject to the same get-out clauses once half paid. In addition you can get a settlement figure at any point and that figure is closely defined by law to be fair to both parties. I have settled a PCP deal after 12 months with no problems.

BTW there is as yet no firm evidence that I have seen on other threads about to what extent 'walking away and giving the car back' at the half way point does or does not affect your credit worthiness. I have seen numerous conflicting views but no link to hard evidence.

 

[hawk20]

You will find more details in this thread: -
http://mbclub.co.uk/forums/showthread.php?t=48970

But to save you wading through all 19 pages of it the relevant bit was this from me: -

IMPORTANT : - More Info: -

I have waded through the T’s and C’s on my old A class PCP. It may interest some that it is headed:
“Hire Purchase Agreement Regulated By the Consumer Credit Act 1974” so legally that is what this PCP deal was.

It also says: -

TERMINATION: Your Rights
You have a right to end this agreement. To do so, you should write to the person you make payments to. We will then be entitled to the return of the goods and to half the total amount payable under this agreement. If you have already paid at least this amount plus any overdue instalments and have taken reasonable care of the goods, you will not have to pay any more.

 

[rf065]

BTW there is as yet no firm evidence that I have seen on other threads about to what extent 'walking away and giving the car back' at the half way point does or does not affect your credit worthiness. I have seen numerous conflicting views but no link to hard evidence.

As I remember it from years ago, the "half way point" was not about being able to hand the car back. It meant that if you had paid for over half the car, they could not repossess it if you fell behind with your payments, only take you to court for the balance owed.
As far as I'm aware you can cancel the agreement & return the car at any time, after all, that is what happens if you trade it in while monies are still owed on it and the garage will always ask if there is any outstanding finance.

Russ

 

[jberks]

I believe there are 2 things that kick in at the half way point. One is the hand back and the other the non repo rule. Worth asking the finance co as they are generally up front on your rights and will tell you your options. I suspect they could put something on your credit history if they wanted to (after all, your record shows everything whether it be query, default or fully paid up), but it's up to other finance cos as to whether they take that into account on the next deal. I do know of people who have handed cars back under this rule and they don't seem to have had any problems getting another.
Also it should be noted that the 50% relates to the agreement value, not the original purchase price. So if you put up a 50% down payment that doesn't count.

 

[Dave's E55 AMG]

Thanks for the info supplied, it is as I thought - 2 stages "handback or snatchback" halfway through the agreement.

Spoke to my contact in the MB dealerships finance side, the company I took the agreement with has gone under - 12 months go. He's looking into which company had bought the rights to the creditors.

 

[st4]

Yes, you can hand back half way through the financial agreement, i.e. when half of the loan has been repaid. On a PCP when half the sum is been repaid is probably nearer the end of the agreement.

I'll give an example. £12k car. £2k cash deposit, £10k on PCP with £4K GMFV. Lets spread this over 12 months for simplicty. The car can be handed back when £5k (of the £10k borrowing) has been repaid.

In other words the monthly repayment is £500 and therefore 10months into the agreement £5000 has been paid back (you pay interest on the whole sum GMFV + "depreciation" in a PCP). So its pretty near the end of a PCP agreement when half has been repaid, so its not worth bothering with on PCPs, especially ones with high GMFVs (50% of value + and its not actually a feature of a PCP at all)

Now a wee insight into me and my problems and my interest in this thread:

I took out a 5yr HP agreement to buy my E220cdi last March. Therefore by september 2010 I can invoke this hand back agreement, does the car have to be handed back halfway through the agreement or can I choose to do it anytime the half way point has elapsed.

I put a small deposit down on the car £3k (and borrowed about £17k). My job was secure @ the time. I lost that job and I earn about 60% of what I did when I signed for the car, and that looks to continue. I have masses of negative equity on the car, and given the economic climate and the collapse of the car markets this hand back would give me a way out of the expense, without having to pay back the negative equity (must be £6k+).

I have the negative equity funds saved up as we had a massive OT push @ work where I earned a lot and put it away knowing that I am agency staff and can be let go tomorrow, and I have always lived minus debt so I can repay the negative equity, but if I can hold out to september 2010 I can, as I'd like to keep the money stashed, hand car back for nowt, then buy a cheap 211 cash (there was a nice E320 V6 petrol going in MB ayr for £8k, 40k miles everything on it)

 

[Xtractorfan]

St4 .. Read your agreement ..under Termination your rights... it will tell you when you can hand back the car..when you have half the amount borrowed paid back..the agreement will tell you the exact figure, you can then hand the car back, it doesnt have a time frame, you can also hand the car back any time after you have paid the amount as quoted on your agreement..

 

[st4]

St4 .. Read your agreement ..under Termination your rights... it will tell you when you can hand back the car..when you have half the amount borrowed paid back..the agreement will tell you the exact figure, you can then hand the car back, it doesnt have a time frame, you can also hand the car back any time after you have paid the amount as quoted on your agreement..

Thanks, read it, and it confirms what you say.

 

[Rory]

Ignoring the PCP comments which aren't relevant to the thread, the law is about "halves and thirds".

After you've paid a third the car cannot be repossessed without a court order (although this is a bit hazy if the car is on the public highway). After you've paid half (or anytime after) you can hand the car back with no comebacks as long as it is in reasonable condition. There's no impact on credit rating as you're legally allowed to do this, and the Government has looked at this and considers it an important aspect of consumer protection legislation.

The reference amount (the amount you have to pay a third or half of) is the Total Amount Payable, and includes the amount you borrowed, plus interest, plus the deposit you paid (may have been as P/X valuation of a car you traded in) plus charges (but not any payment for GAP etc insurance).

Note that this only applies to Regulated agreements which, until April 2008, had a limit of £25K. The limit was removed in April 2008 and all agreements became regulated.

There's a useful page, with example calculations and sample letters here: http://www.nationaldebtline.co.uk/e...p?page=16_how_to_deal_with_hire_purchase_debt

 

[hawk20]

Also it should be noted that the 50% relates to the agreement value, not the original purchase price. So if you put up a 50% down payment that doesn't count.

I was clearly told the deposit does count as it is part of the agreement. Worth reading the rules as I posted earlier.

 

[hawk20]

Ignoring the PCP comments which aren't relevant to the thread, the law is about "halves and thirds".

There's no impact on credit rating as you're legally allowed to do this, and the Government has looked at this and considers it an important aspect of consumer protection legislation.

The PCP comments are relevant because the thread is about Hire Purchase and it was clear from posting number 3 that not all realise that a PCP deal is Hire Purchase under our law.

Nowhere have I seen anything to suggest that the govt has made it so that handing a car back only half paid for will not affect your credit rating. Numerous postings on this and other threads suggest dealers can put this info to rating agencies. In addition, if it is an MB that is handed back, funded by MB Finance, they will know and we're bound to wonder if they will lend to that person again.

 

[whitenemesis]

The PCP comments are relevant because the thread is about Hire Purchase and it was clear from posting number 3 that not all realise that a PCP deal is Hire Purchase under our law.

Nowhere have I seen anything to suggest that the govt has made it so that handing a car back only half paid for will not affect your credit rating. Numerous postings on this and other threads suggest dealers can put this info to rating agencies. In addition, if it is an MB that is handed back, funded by MB Finance, they will know and we're bound to wonder if they will lend to that person again.

I think it's a new advert for a car that states one can hand back any time without effecting one's credit rating. An attempt to encourage car sales

 

[hawk20]

I think it's a new advert for a car that states one can hand back any time without effecting one's credit rating. An attempt to encourage car sales

No. Be careful. That is not part of the standard deals. IIRC it is a firm advertising that if you buy one of their cars and lose your job, then you hand it back. But that relates to their specific deal, not all HP deals.

 

[whitenemesis]

You are correct hawk. (Just an observation, I'm not in the market for changing my car)

 

[Rory]

The PCP comments are relevant because the thread is about Hire Purchase and it was clear from posting number 3 that not all realise that a PCP deal is Hire Purchase under our law.

It wasn't specifically directed to you but the thread is entitled "Hire Purchase Hand Back". VT with PCP is all but irrelevant as the deals are structured so that you don't reach the halfway point until well through the agreement, if at all.

Nowhere have I seen anything to suggest that the govt has made it so that handing a car back only half paid for will not affect your credit rating. Numerous postings on this and other threads suggest dealers can put this info to rating agencies. In addition, if it is an MB that is handed back, funded by MB Finance, they will know and we're bound to wonder if they will lend to that person again.

I have seen it suggested that the same finance company would be reluctant to lend to you again - that's their own internal decision, and is obvious.

However as VT is a fully legal process in which the buyer does nothing wrong it cannot be put on someone's credit record. I've seen plenty of discussions about VT and no-one has ever suggested that this has happened. Some dealers encourage people to VT if the buyer wants to swap cars and the car is worth less than the outstanding balance. The Government thinks VT is important to protect consumers and it would be clearly detrimental to consumers if VT resulted in a black mark on their credit history.
Government consultation report is here: http://www.oft.gov.uk/shared_oft/reports/oft_response_to_consultations/oft761.pdf

 

[Rory]

I think it's a new advert for a car that states one can hand back any time without effecting one's credit rating. An attempt to encourage car sales

There was an item on the news yesterday that Hyundai are offering US buyers the opportunity to hand back their cars without any penalty if they lose their jobs.

 

[hawk20]

It wasn't specifically directed to you but the thread is entitled "Hire Purchase Hand Back". VT with PCP is all but irrelevant as the deals are structured so that you don't reach the halfway point until well through the agreement, if at all.

I have seen it suggested that the same finance company would be reluctant to lend to you again - that's their own internal decision, and is obvious.

However as VT is a fully legal process in which the buyer does nothing wrong it cannot be put on someone's credit record. I've seen plenty of discussions about VT and no-one has ever suggested that this has happened. Some dealers encourage people to VT if the buyer wants to swap cars and the car is worth less than the outstanding balance. The Government thinks VT is important to protect consumers and it would be clearly detrimental to consumers if VT resulted in a black mark on their credit history.
Government consultation report is here: http://www.oft.gov.uk/shared_oft/reports/oft_response_to_consultations/oft761.pdf

1. It can be put on someone's credit record. Numerous postings suggest the dealer can pass the info that the agreement has been terminated voluntarily half way through and others can bear that in mind.
2. Your point about the difficulty of reaching the half way point in a PCP is one that has come up before. It all turns on what the law means by 'total amount payable in the agreement'. (see the exact clause I posted earlier).
Some say the total amount payable is the deposit, plus the payments, plus the fees. Once half that amount has been paid, the borrower can terminate. I have been told that is the case by two dealers, as have others but who knows if they are correct.
3. Equally some say -as you do- that you must pay half the total of purchase price, plus fees. But who knows if that is correct.

I have read your link but it does not clarify this point. What we need is a link to firm legal guidance on this point.

As for voluntary termination in general, I am sad to see the law encouraging/allowing people to break a contract they have voluntarily entered into -except in extreme circumstances. And IMO if someone walks away half way through the contract, other lenders should be warned.