Can I Cancel My Hire Purchase (HP) Agreement?

There are various reasons you may want to cancel a Hire Purchase agreement.

The good news is that it may be possible to cancel. However, it can have consequences 😒

Whether it's due to a change in circumstances or a reassessment of your needs - understanding your rights and the procedures involved when cancelling a Hire Purchase contract is crucial.

To help you make the right choice, here we'll guide you through the key points to consider before ending a Hire Purchase agreement 👍😊

Got a specific question in mind? Why not jump ahead:

Can you cancel a Hire Purchase agreement?

Cancelling a HP agreement is possible, but it depends on specific terms and conditions outlined in your contract.

You generally have the right to cancel within a cooling-off period, which is usually 14 days after signing the agreement.

After 14 days, cancelling can be more complex. It could involve paying off the remaining balance, or at least a portion of it.

It's important to review your agreement thoroughly to understand any financial implications or penalties involved in cancellation.

If you are thinking of ending your agreement, you should talk to the lender.

They can provide information about the process and any potential costs you may need to pay.

They may also be able to help with alternative solutions, which could work out more beneficial than cancelling the contract.

Common reasons to cancel a Hire Purchase agreement

There are several reasons why you may choose to cancel a Hire Purchase agreement including:

  • You’re struggling to meet the repayments
  • A change in personal circumstances
  • You’ve found a more suitable car finance option
  • You are unhappy with the vehicle you purchased

If you’re struggling financially or you’ve experienced a change in circumstances, you may no longer be able to afford the monthly repayments.

Cancelling the agreement may be the best option if you expect these changes to affect your repayments in the long-term.

Or perhaps you’ve found a more suitable deal elsewhere? In this situation you could choose to refinance your car loan with the other lender.

Dissatisfaction with the vehicle, whether due to mechanical issues or a change in needs, is also a valid reason for wanting to cancel.

Your right to cancel: Exploring the legal framework

Under UK law, you have a legal right to cancel a Hire Purchase agreement during the cooling-off period.

As mentioned earlier, this period typically lasts 14 days from the agreement date, giving you time to reconsider your decision without penalty.

It's an essential consumer protection measure, giving you a safety net if you need to back out of a financial commitment. It’s worth noting that this will not always cancel the purchase of the vehicle, unless the dealership and finance company agree. This means that although you can withdraw from the credit agreement, you may still need to keep the vehicle and pay the finance company back the amount that was borrowed.

After the cooling off period the legal framework becomes more complex, and the right to cancel can lead to possible financial implications. The terms of the agreement usually set out the process and consequences of cancelling after the cooling-off period.

These may include paying off all or part of the remaining balance, along with any early termination fees. It's crucial to understand these terms, as they define your responsibilities and the lender's rights in case of cancellation.

If your circumstances change across the course of an agreement, you also have the right to leave your agreement through something called voluntary termination. This is a legal right (detailed in the Consumer Credit Act 1974) to cancel your agreement earlier than the stated term.

You will be required to return the vehicle and will have to repay a minimum of 50% of the total payable amount plus any outstanding debts owed (due to payment holidays) as well as possible charges set out in your terms and conditions.

The process and details surrounding a voluntary termination agreement will be different depending on your lender, so the next step would be to contact your lender to discuss this option further.

Factors to consider before deciding to cancel

Before deciding to cancel a Hire Purchase agreement, there’s a few things to consider. Here’s a rundown of some of the main factors to think about:

  • Early termination fees

When cancelling a Hire Purchase agreement, you may need to pay early termination fees. These fees compensate the lender for the loss of interest and can vary depending on the agreement terms.

  • Remaining balance

Consider the remaining balance on your agreement. This is the amount you'll need to pay to settle the finance. Depending on how early you're cancelling, the early settlement fee could be quite high. We recommend using an online early settlement calculator to work out how much it will cost.

  • Impact on credit score

Cancelling a Hire Purchase agreement can affect your credit score. It's important to understand how it could influence future credit applications.

  • Alternative financing options

Explore other financing options available. For example, you may find a more affordable or flexible finance agreement that better suits your current situation.

  • Current vehicle value

Assess the current value of your vehicle compared to the remaining balance. This can determine whether it’s a good idea to cancel the agreement and potentially sell the vehicle.

How to cancel a Hire Purchase agreement

If you want to cancel a hire purchase agreement, it’s important to follow the correct process.

Begin by reviewing your contract to understand the terms of cancellation, including any penalties or fees involved.

While the process will differ between lenders, here's a general step-by-step guide:

  • Contact the finance company: Inform them of your intention to cancel. It's best to do this in writing so you have a record of it.
  • Review the financial implications: Understand the costs involved, including how much you need to pay if you're past the cooling-off period.
  • Formally request cancellation: Submit a formal cancellation request following the company's procedure, often outlined in your agreement.
  • Settle outstanding balances: Pay the outstanding balance to complete the cancellation process.

Remember, before you cancel it’s worth looking into all your options. If you’re in any doubt over what to do or how much you’ll need to pay, contact the lender.👍

Read more about cancelling hire purchase agreements:


FAQs about cancelling a hire purchase agreement:

Can I cancel my car finance agreement?

Yes, you can cancel a car finance agreement, usually within a cooling-off period, or through voluntary termination after paying a percentage of the loan.

Is it possible to cancel a car finance agreement?

Cancelling a car finance agreement is possible, but there may be financial implications depending on the terms of the agreement.

Can you cancel finance on a car after purchase?

Yes, finance on a car can be cancelled after purchase, subject to the terms of the finance agreement and any associated costs.