How to End PCP Early

Why This Guide Matters

With the rise of personal contract purchase (PCP) agreements across the UK, many motorists find themselves rethinking their commitments before the end of the term. Whether driven by circumstance, a change in financial position, or simply wanting a different vehicle, understanding how to end a PCP early is crucial. Early termination can seem daunting, but knowing your rights and the available routes can save you money and stress. For those considering this move, clarity is key. This guide breaks down your choices, the costs involved, and how to avoid common pitfalls, ensuring you make confident, informed decisions about your next steps.

The Basics Explained

PCP, or Personal Contract Purchase, is a popular way to finance a car in the UK. Under a PCP agreement, you typically pay a deposit, followed by fixed monthly payments over two to four years. At the end, you can buy the car outright by paying the “balloon payment” (the Guaranteed Minimum Future Value), hand it back, or part-exchange it for another vehicle.

Ending a PCP agreement early means concluding your contract before the scheduled end date. This might be due to a change in your financial situation, job relocation, or simply wanting to switch vehicles. However, PCP contracts are legally binding, and exiting early usually comes with specific terms, costs, and conditions. There are two main routes: Voluntary Termination (VT) and Voluntary Surrender. Each carries different financial implications and potential impacts on your credit score, so understanding these fundamentals is essential before making any decisions.

How It Affects You

Early termination of a PCP can significantly impact your finances and future credit options. If you end your agreement before completing 50% of the total amount payable (including fees and interest), you may face additional charges. Exiting the contract early means you could owe more than the car’s current value, especially in the first half of your contract when depreciation is steepest.

Your credit score could also be affected, depending on how you handle the process. Voluntary Termination, when done correctly, should not negatively impact your credit file, as it is a legal right under the Consumer Credit Act. Voluntary Surrender, however, may be reported differently and could influence how future lenders perceive your application.

In practical terms, ending your PCP early could mean being without a car, facing extra costs, or needing to arrange alternative transport. It’s important to weigh these factors against your reasons for leaving. For some, the flexibility and peace of mind outweigh the immediate costs. For others, it might make sense to see the agreement through or explore other options.

Our Approach

At Kandoo, we believe in demystifying finance. We guide customers through the complexities of ending PCP early by presenting clear, unbiased information and practical solutions.

Step-by-step support:

1. Review your contract: We help you identify the terms around early termination, including any penalties or settlement figures.

2. Calculate the 50% threshold: Our advisors assist in determining if you’ve paid at least half the total payable, qualifying you for Voluntary Termination.

3. Assess your vehicle’s condition: We explain what counts as fair wear and tear, helping you avoid unexpected charges when returning the car.

4. Contact your lender: We guide you on how to formally notify the finance provider, ensuring all communication is documented.

5. Understand settlement figures: If you’re outside of Voluntary Termination, we help you get accurate, up-to-date settlement figures and explain what they mean.

We recognise that every customer’s situation is unique. Our approach is personal, confidential, and always focused on your best interests. We’re not here to push products, but to empower you with knowledge, whether you continue with us or find a different solution.

Quote:

“Knowing your rights and understanding your agreement are the strongest tools you have when considering ending your PCP early.”

We also work with a wide network of lenders, so if remortgaging or refinancing is a better option, we’ll explore that with you too.

Before You Decide

Before making any moves to end your PCP early, ask yourself some key questions:

• Have I paid 50% of the total amount payable?

• What is my car’s current market value compared to the settlement figure?

• Am I prepared for possible charges related to excess mileage or damage?

• Do I need another vehicle immediately, and what finance options are available?

• Will ending the agreement affect my credit rating?

It’s also wise to:

• Request a settlement figure from your finance company.

• Check your credit agreement for any clauses around early termination.

• Inspect your vehicle for damage beyond normal wear and tear.

• Consider the timing—ending a PCP early can be more expensive at the start of the term.

Careful reflection and preparation can save you from costly surprises.

What’s Real, What’s Hype

There are many misconceptions about ending PCP agreements. Let’s separate fact from fiction:

Don’t let misinformation guide your decision—use verified facts.

Pros & Cons

Pros:

• Legal right to end agreement after paying 50%

• No further monthly payments once process is complete

• Can avoid negative equity by returning the car

• Frees you to explore other finance or vehicle options

Cons:

• Potential for additional charges (damage, mileage)

• May be left without a car

• Early in the agreement, settlement figures can be high

• Not all lenders treat voluntary surrender the same on your credit file

Careful consideration of these points ensures a balanced decision.

Other Options to Consider

If ending your PCP early doesn’t feel right, you still have choices:

1. Part-Exchange the Car: If your car’s value exceeds the settlement figure, you can use the equity towards your next vehicle.

2. Refinance: Some lenders allow you to refinance the remaining balance, reducing monthly payments or extending the term.

3. Sell the Car: With lender permission, you may be able to sell the car and settle the outstanding finance.

4. Transfer the Agreement: In rare cases, you might be able to transfer the PCP to another individual, subject to lender approval.

Each alternative has its own eligibility criteria and financial implications. Speaking to your finance broker or lender can help clarify which route suits your circumstances best.

FAQs

Q: When can I end my PCP early? A: As soon as you’ve paid 50% of the total amount payable, you can end your agreement using Voluntary Termination. You may also settle early by paying the outstanding balance, known as the settlement figure, at any time.

Q: Will I owe money if I return the car? A: If you’ve paid less than 50%, you’ll need to pay the difference. You may also be charged for excess mileage or damage beyond fair wear and tear.

Q: How does Voluntary Termination affect my credit score? A: Done correctly, it should not harm your credit file. It will be recorded as a completed agreement. Voluntary Surrender, on the other hand, may be viewed less favourably.

Q: Can I keep the car after ending the PCP? A: Only if you pay the balloon payment in full; otherwise, the car is returned to the finance company.

Q: Who do I contact to start the process? A: Speak to your finance provider first. If you need support, a finance broker such as Kandoo can guide you through the steps.

Q: What about insurance and road tax? A: You must maintain insurance and tax until the car is returned or ownership is transferred.

Next Steps

If you’re considering ending your PCP agreement early, start by reviewing your contract and contacting your lender for a settlement figure. We recommend speaking to a reputable finance broker for impartial advice. Kandoo’s team is ready to help you weigh your options and support you at every stage of the process. Make your next move with clarity and confidence.