If you want to buy a vehicle and can’t pay the full amount, there are many financing options available for you. These have made buying a car much easier than ever before. However, you might not always be able to stick with the agreement terms, and it could be due to your financial situation. In some cases, you might change your decision for some reason and look for other options. In such cases, you would want to cancel the arrangement that you’ve got into.
You might be wondering if it is possible to do so! We will answer that. That can happen only under certain circumstances. If you’re eligible, you can simply request by writing a letter to the financial institution. Apart from that, there are some other things as well that you need to know before you proceed with a voluntary termination letter.
How does buying a Vehicle with Finance works?
There are four main types of methods that are available to you. However, for the main topic being discussed here, only two of them are relevant, and they are hire purchase and personal contract purchase. Both of them essentially work in the same way, with some differences. No matter which one you go for, you have to pay a certain amount to the dealer at the beginning. Then, you have to keep paying instalments each month.
The amount depends on the rate, which in turn depends on the type of agreement. So, the main difference between the two is how the rates are decided, which is a different topic. Now, there’s a reason that these are the best types to opt for, i.e, Voluntary Termination letters can be applied to both of them. That’s why you might want to choose either of them. Thus, you can be assured that there’s a way out for you just in case you change your mind.
How can a Voluntary Termination Letter help you?
Most dealers nowadays offer various methods to help you buy a four-wheeler, and that makes it easier for you to make the purchase and for them to make profits. Now, suppose you are going through one such arrangement. Suddenly, you find yourself facing a situation where your finances are affected, this type of circumstance is faced quite commonly with people, and they feel helpless. The Coronavirus pandemic would be a good example of this.
Fortunately, there’s a way you can get out of your car finance agreement legally. All you have to do is send a voluntary termination letter to your dealer, provided that you fulfil the conditions required for it. By doing that, you can simply get out of the agreement; nothing else would be required from you.
In some cases, you can even get refunded by the institution from whom you borrowed. Being of a formal nature, this procedure is bound by a set of strict rules that can’t be broken. And, that includes protection of the customer from any kind of harassment, which makes it much better for you than any kind of informal proceedings. Therefore, you must give it a try.
Is it applicable in your case?
As we have seen, this procedure has a legal status. So, not only the rules but the eligibility criteria is strict as well, but it is quite simple. You need to pay at least half of the total cost of the agreement, and it protects the interests of both sides. On the one hand, it offers you relief in situations where you can’t continue with the payments. On the other hand, the creditors can be assured that you won’t leave the agreement at any time you want.
How do you terminate the contract voluntarily?
As we have seen, this option is available only in the case of two types of financial arrangements, and you can apply for it only if you have got into one of them. For that, you can either call or write a voluntary termination letter to your dealer. Just in case you need it, you’d want to have a record of it. That’s why you should write rather than just speak to them. Needless to say, you must also keep a copy of the application. This would be helpful in case there’s some dispute, and you have to go to court.
Apart from that, there are a few other things that you need to take care of. You have to make every point of yours very clear in the letter. You must mention specifically that you want to end the agreement and return the car, after which you won’t owe them anything.
Otherwise, you might be charged even after you have returned the vehicle. In such a case, if you haven’t properly explained your application, it would be a disadvantage for you. They would have the record that you haven’t said anything specifically about writing off the debt. Even though this doesn’t happen often, it is always better to be cautious every time.
What expenses will you have to put up with?
Like all the other ones, you have to pay a cost for this procedure as well. There are various grounds on which you’ll be charged money. It would be worth noting here that a lot of customers go for this option every year. As a result, finance companies have taken note of it as well. Needless to say, they’re not fond of applications for termination; after all, it affects their profits. That’s why they usually take measures to minimise any kind of loss at the event of the termination of the agreement halfway.
If you look at the terms, you’ll find various kinds of charges specified that you have to pay for the cancellation. This will differ from one dealer to another. The foremost among them is for just picking the car from them. That’s because only doing that is enough to reduce the value of the vehicle. Then, there would also be charges for any damage caused to the vehicle. So, you need to make sure to drive it around safely.
Otherwise, you might end up paying quite a large amount. However, this won’t include the usual wearing down of parts that are normal for any vehicle that’s regularly used.
In addition to that, they usually allow you to use the vehicle up to a limited mileage only.
If they find out that you’ve crossed that limit, you’ll be charged for each extra mile. That’s because the more a vehicle is driven around, the more its value will decrease. So, they would require compensation for it. After all, they would have to sell it in an auction after you return. They won’t be able to sell it at the original price. All the charges applied to you would be a way to recover the losses.
Will this step affect your prospects of borrowing further credit?
After all, buying a four-wheeler with a finance package is purely a form of credit. Terminating it mid-way would mean that you were not able to handle it well. Moreover, this would be mentioned on your credit history for quite a long time. Also, it is needless to say that you have to mention it to a lender during that period. Moreover, there’s no doubt about what impression it will have upon them. After all, they wouldn’t want to incur any losses due to you being not able to pay.
Further, they might see it as being risky to lend you any money. They would want adequate compensation for it, as usual. As a result, they will charge an interest rate accordingly, which you might find a little too high. Maybe you could convince them that your situation is much better now than it used to be. And, your income, expenditures and other financial details would be proof for that. They might be helpful for you in getting a favourable rate.
How do you get another car after the termination?
A lot of people often buy a car and then decide that they would like to have a different one. In this kind of situation, you wouldn’t want to keep paying for something you don’t like anymore. That’s another case in which the legal right to terminate the deal is beneficial for you. Having walked away from the last one, you are now free to go for the one that you have in mind.
Now, you might wonder how you should proceed with it. After all, your finances might not be in particularly good shape. In that case, there’s no doubt that you must wait till it gets better. However, it might be essential for you to get a vehicle for convenience. You can try out a car lease until you’re able to finally buy one. It is a very simple arrangement, and you can get it at a reasonable price.