Agreeing to car finance is a big commitment – there’s a lot of money involved and second thoughts can start to creep in after you’ve signed the contract, especially if you don’t think you got a good deal. Luckily, car finance companies largely understand that people get cold feet, which is why there’s often a set period of time in which you can cancel the finance.
Whether you have rushed into your agreement or you’ve found a better deal elsewhere, you should be able to cancel your car finance agreement for up to 14 days after you signed on the dotted line. This two-week period is known as a ‘cooling off period’.
Cooling off periods
Under the Consumer Credit Act, you should have 14 days to withdraw from a credit or loan agreement. This is applicable to all finance agreements, regardless of whether you made it in person with the lender, over the phone or on via an internet process.
The 14-day period begins on the day you sign/agree to the contract, when you receive a copy of the agreement or from when you get a notification from your bank records that you have received the loan.
This applies to any Hire Purchase, Personal Loan or Personal Contract Purchase that amounts to below £25,000. Any higher amount will be susceptible to the terms and conditions of the agreement and/or the lender’s decision. In addition, the right to withdraw does not apply to any loan above £60,260.
How to cancel a loan agreement
You will have to provide a notice of your withdrawal either in writing or verbally. Most often you will have to repay any interest that has occurred between taking out the loan and repayment.
The deposit you can pay to secure some car finance deals will often be kept by the car finance lender. It is possible to get this back under special circumstances (i.e. if there has been unlawful conduct or you have signed the contract away from the premises) but it is highly unlikely.
Returning the car
Whilst you can cancel a car finance agreement, you will not always be able to return the car and receive your money back. If you have bought your car on the premises of a car dealership and signed a vehicle form at that location, you must pay for the car in full within 14 days, or within the specified time limit agreed in your contract via an alternative finance option. This is because a vehicle order form is a binding contract.
There are two exceptions to this rule: if you bought off-premises (i.e. via the phone or internet) and you did not sign a vehicle order form from the dealership, or if the car is not as specified in the contract (i.e. it’s different in specification or it is faulty).
We know that sometimes rash decisions can be made and you can jump into a car finance agreement without taking enough consideration. This is one of the main reasons that a ‘cooling period’ was created. However, it’s always important to know exactly what your options are in the event that you need to cancel a finance agreement. We hope this has given you more understanding of those options, for more information visit the GOV website here.