Can You Return a Financed Car Early?

The short answer - it depends on your agreement and timing

Returning a financed car early is possible in the UK, but the route you take and what it costs depends on the type of agreement, how far through it you are, and whether you are inside your 14-day cooling-off window. For many drivers on PCP or HP, two realistic paths exist. You can exercise voluntary termination once you have paid 50% of the total amount payable, or you can settle the finance in full and then sell or part-exchange. If you have just signed a new agreement, the Consumer Credit Act gives you 14 days to withdraw from the finance itself, repaying the amount borrowed plus daily interest. What happens to the vehicle after withdrawal depends on your contract and how you choose to proceed.

A separate but important thread is the ongoing car finance mis-selling issue. From early 2026, the FCA is due to finalise nationwide redress rules for historic PCP and HP agreements where commission disclosure was inadequate. The Supreme Court confirmed in August 2025 that undisclosed commissions do not automatically make a deal unfair, but lenders still owe clear disclosure duties. The FCA has said firms will resume complaint handling on 31 May 2026, with most eligible customers contacted automatically under the proposed scheme. Indicative figures point to up to £8.2bn in compensation, with average payouts around £700 per agreement, and payments expected later in 2026 once the scheme is live.

These developments matter if you are considering an early exit today. If you suspect your finance involved unclear commissions, there is no guarantee of a refund, but it is worth preserving records and lodging a complaint. Firms must retain key documents until April 2031, supporting longer-term assessments. In the meantime, weigh your early return options carefully. Early termination can be clean and predictable if you meet the 50% threshold, whereas settlement gives you more control but may cost more upfront. The right choice turns on mileage, vehicle condition, settlement figures, and your cash flow.

Returning early can be sensible - provided you know the rules and the real costs.

If you need tailored guidance, Kandoo can help you compare finance options or explore a refinance that reduces monthly strain while you plan your next move.

Who should read this

If you are in the UK with a PCP or HP agreement and wondering whether you can hand the car back, swap it, or cut your monthly costs, this guide is for you. It is also relevant if you have recently signed new finance and are within the 14-day cooling-off period. Drivers who suspect mis-selling or inadequate commission disclosure will find clarity on timelines and what to do now versus what to wait for. Whether you are an everyday commuter, a tradesperson using a van, or a motorbike rider on HP, the same core principles apply.

Your practical choices

1. Use the 14-day withdrawal right on new finance

2. Voluntary termination at or beyond 50% of total payable

3. Early settlement, then sell or part-exchange

4. Negotiate with the lender for a managed hand-back

5. Refinance to reduce costs without returning the car

What it might cost and how it could affect you

Aim to compare settlement figures against realistic sale or part-exchange values, not asking prices.

Who is eligible and when it works best

Most regulated UK PCP and HP agreements include voluntary termination rights, allowing you to end the agreement once you have paid 50% of the total amount payable, including interest and fees. If you are short of that threshold, you can top up to reach it. Fair wear and tear applies, and excess mileage may be charged on PCP. If you are within 14 days of signing a new regulated credit agreement, you can withdraw from the finance by repaying the credit plus daily interest, then handle the vehicle under your contract or a separate arrangement. For drivers considering mis-selling complaints, eligibility typically covers PCP or HP taken out from April 2007 where commission disclosure was inadequate. Outcomes will follow the FCA’s final rules and your individual circumstances. Kandoo can help you review options if the numbers are tight or if refinance could bridge a shortfall while you decide on termination or sale.

Step-by-step - a simple path to action

1. Check your agreement type and current balance

2. Request a written settlement or VT figure from lender

3. Compare market value with settlement and VT costs

4. Inspect for wear and mileage against allowance

5. Decide: withdraw, VT, settle, negotiate, or refinance

6. Confirm in writing and keep dated records

7. Prepare the car and handover evidence

8. Track timelines and follow up until closure

Pros and cons at a glance

Read this before you act

Timing is everything. If you are weeks from the 50% mark, waiting could save you money. If you have just signed, the 14-day window can spare you years of interest, but make sure you have a plan for the vehicle. Keep copies of your agreement, commission disclosures, and any broker or dealer communications. With the FCA scheme due in early 2026 and complaint handling resuming from 31 May 2026, you may receive automatic contact if you are eligible. That said, do not delay essential actions like ending unaffordable finance. A realistic car valuation, a written settlement figure, and a clean inspection can make the difference between a tidy exit and surprise charges. Treat claims management firms with caution. Most consumers are expected to be contacted directly, and using middlemen could reduce your net outcome without speeding things up.

Alternatives that might suit you better

1. Extend the term or restructure with your lender

2. Voluntary surrender with agreed shortfall plan

3. Private sale after settlement to maximise price

4. Part-exchange into a lower-cost vehicle

5. Short-term lease or car subscription for flexibility

Common questions

• Can I get a refund if I return the car early?
  Not usually. Early return is about ending obligations. Refunds relate to mis-selling and depend on eligibility, evidence and the FCA’s final rules.

• Is a PCP refund guaranteed in 2026?
  No. The Supreme Court clarified duties on disclosure, but outcomes vary. Many eligible consumers may be contacted automatically, yet payments depend on case details and the eventual scheme design.

• What happens on 31 May 2026?
  The pause on motor finance complaint handling lifts. Lenders can start processing cases within the FCA framework and timetable.

• How much might compensation be?
  Proposals indicate up to £8.2bn overall and around £700 per agreement on average, but payments and calculations will follow the final FCA rules.

• Do I need a claims company?
  Typically no. Most eligible consumers are expected to be contacted by lenders with an opt-out for court. Going direct usually keeps more money in your pocket.

• Can I withdraw from my new finance without returning the car?
  Yes, you can withdraw from the credit within 14 days by repaying the amount borrowed plus daily interest. Vehicle arrangements then follow contract terms or a fresh deal.

How Kandoo can help

Kandoo is a UK-based retail finance broker. We help you assess early return versus settlement, compare refinance options to ease monthly costs, and prepare for potential redress outcomes. Speak to us for a clear, numbers-first view and next steps that fit your budget.

Important information

This guide provides general information for GB consumers and is not advice. Finance rights and outcomes depend on your agreement, affordability and lender policies. Always confirm figures in writing and consider independent advice where needed.