I recently handed my car back to the finance company, not because I was under pressure financially but because it made financial sense.
I bought an Audi A6 (second hand) for €54,000 in October 2007. Remember, that was when times were good. I borrowed the full amount under a consumer hire purchase agreement. Reviewing the documentation I found that I would pay back a total of approx €64,000.
What I also noticed on my documentation is the handwritten figure that relates to the half way point in your agreement.
Under the half way rule once you have paid half of the total finance amount you have a statutory right to return the car to the finance company and walk away.
In my case in May I had paid my €32,000. the car was worth about €18-€22k and my repayments were €1054 per month.
I wrote to my lender and they arranged for me to return the car. I did offer to buy the car off them immediately on returning it to them but they wanted €27,000 for it. I wasn’t willing to pay that but it is worth noting that this would have knocked €5,000 off my loan with no hassle.
There are a few things you need to be careful of.
- The car must be in good condition, they will allow for reasonable wear and tear. They may suggest to you that mileage is an issue but it is not.
- Don’t get caught out with collection charges. If possible drop the car to them and if this is not possible find out how much collection will be.
- If there is damage to the car it might be best to fix it yourself first.
- Make sure you write to them saying you are returning the car under the half way rule, you don’t want any confusion that this is seen as a voluntary surrender which will destroy your credit rating.
By using the half way rule correctly it will not effect your credit rating. According to the regulators office it should not effect your ability to borrow in the future. In fact the regulators office would take a very dim view on any lender refusing you credit on the basis that you previously exercised a statutory right. (that’s not to suggest they won’t find another reason).
I do know of one case that after returning the car the person checked their credit rating because they were refused a loan. They found that the return was put down as a voluntary surrender and it had effected there credit.
After several initial calls and being told this is the way it was, the complaint was escalated to management and the Credit report was corrected and a letter of apology was issued. It has to be noted this person had to fight hard to get this sorted but his record is now clean.
The banks have never had this issue before because car values have never depreciated so quickly. But watch the next time you go to get a car loan I bet your offered a lease instead of a consumer hire purchase agreement.
I can’t suggest that this is going to work for everyone , but on the face of it this looks like a very good deal to me. I am now in a car with 60,000km less than the one I handed back and I am paying about €500 per month less for it.
Review the regulators website prior to considering it http://www.itsyourmoney.ie/index.jsp?1nID=93&2nID=94&3nID=654&pID=667&nID=685#flexibleand have a look at the worked example they have and by all means call me if you want to discuss it 0876445533