There are several ways to end a vehicle finance agreement, and the right one depends on the type of agreement, how far through it you are, and whether the vehicle is worth more or less than you owe. This guide sets out every option in one place, for cars, vans, motorbikes and motorhomes alike, and links to a detailed guide on each.
In short
You can end most finance agreements by paying the final payment, settling early, handing the vehicle back (PCP), voluntarily terminating once you’ve paid half, or selling or part-exchanging the vehicle and clearing the finance. If you’re struggling with payments, contact your lender before you miss one.
Your options at a glance
| Option | How it works | Best when | Guide |
|---|---|---|---|
| Pay the final payment | Make the last payment (or balloon) and the vehicle is yours | You want to keep it | Final payment options |
| Hand it back (PCP) | Return the vehicle instead of paying the final payment | It’s worth less than the final payment | Handing back a PCP car |
| Settle early | Pay a settlement figure to clear the agreement early | You can afford to pay it off | Settling early |
| Voluntary termination | Return the vehicle once you’ve paid half the total amount payable | You can’t afford it and have paid around half | Voluntary termination |
| Sell it | Settle the finance and sell the vehicle | It’s worth more than you owe | Selling a car on finance |
| Part-exchange | A dealer settles the finance as part of your next deal | You’re changing vehicle | Part-exchanging with finance |
| Refinance | Take new finance to cover a final payment | You want to keep it but can’t pay the lump sum | Final payment options |
Before choosing, it helps to know two numbers: your settlement figure (what you’d pay to clear the finance today) and what the vehicle is worth. The gap between them is your equity. If you owe more than it’s worth, see negative equity.
What happens at the end of an HP agreement?
With hire purchase, you own the vehicle once you’ve made the last payment and paid any “option to purchase” fee, which is usually small and sometimes added to the first or last payment. The lender then removes its interest in the vehicle. Keep the confirmation letter, as it proves the finance is cleared if you sell later.
With balloon HP or lease purchase, the final payment is a larger lump sum. It’s compulsory, so plan how you’ll pay it well before it’s due.
What happens at the end of a PCP agreement?
At the end of a PCP, you have three choices: pay the optional final payment and keep the car, hand it back, or part-exchange it. The final payment is guaranteed by the lender, so if the car is worth less, you can hand it back and owe nothing more, as long as it’s within your mileage limit and in good condition. See your options at the end of a PCP.
Ending your agreement early
You have two legal routes to end a regulated agreement early:
- Early settlement. Pay off what you owe, usually with a rebate of future interest. You can then keep or sell the vehicle.
- Voluntary termination. Return the vehicle once you’ve paid half the total amount payable. You don’t get the vehicle, but you may owe nothing more.
These rights come from the Consumer Credit Act and apply to regulated agreements, which covers most personal finance. Some business agreements, and all agreements with limited companies, aren’t regulated, so check your paperwork. See business or personal: why it matters.
What if you can’t keep up with payments?
Contact your lender as soon as you think you’ll struggle, ideally before you miss a payment. Lenders must treat customers in financial difficulty fairly and may agree a temporary reduction, a payment break or another arrangement. See struggling with car finance payments for your options and rights.
Important
Don’t stop paying and wait for the lender to act. Missed payments harm your credit file, and once a default notice has expired, you can lose the right to voluntary termination.
Free, impartial help is available from MoneyHelper, StepChange and Citizens Advice.
Ending vehicle finance FAQs
Can I end my car finance early?
Yes. Most regulated agreements can be ended early, either by settling in full or, if you’ve paid half the total amount payable, by voluntary termination.
Does ending finance early affect my credit score?
Settling early doesn’t usually harm your credit file, and the account shows as settled. Voluntary termination is a legal right, but some lenders mark the account in a way future lenders may notice. Missed payments and defaults do the most damage.
Do I need my lender’s permission to sell my car?
You need to clear the finance before ownership can pass to a buyer. In practice, that means getting a settlement figure and paying it before or at the point of sale.
What is a settlement figure?
The amount needed to clear your agreement on a given date. It’s usually less than the total of your remaining payments, because you don’t pay future interest.
Can I hand back a car on HP?
Not at the end, because HP has no hand-back option. You can voluntarily terminate during the agreement once you’ve paid half the total amount payable.
Does this apply to vans, motorbikes and motorhomes?
Yes, for regulated agreements the same rights apply whatever the vehicle. Business agreements may be different, so check whether yours is regulated.