Car Repossession

Introduction to Car Repossession

Debt from Car Financing can cause problems

In this section we will explain the procedure when a hire purchase company is going to repossess the vehicle. Also, we will explain the correct way to hand back you vehicle on finance. Alternatively you may want to sell your vehicle on finance, if so we will explain how to do it correctly.

Car Repossession explained

If you feel you are struggling with you car on finance you should let the finance company know as soon as possible, as they may be able to help you.

Your lender has the right to take back the goods if you don't keep up your repayments. You'll be sent a notice first, giving you the chance to put things right. But you will have to act quickly - within seven days.

If you haven't got the money to put things right, explain this to the lender. If they won't agree to less than full payment, they may take you to court. You can ask the court to give you extra time to pay if you really want to carry on with the deal.

If you've paid more than a third of the total cost of the HP or CS (not including any insurance), your lender will need a court order to take the goods back. If you've paid less than this, the lender still can't enter your property to take the goods without a court order, unless you give them your permission to.

If you are having problems keeping up with repayments it may be cheaper in the long run to hand the goods back.

back to top

Ending your contract early

If your HP agreement is for under £25,000, you have two ways of ending your contract early:

• You can terminate an HP agreement and return the goods at any time by writing to the lender, as long as you bring your total payments up to half the price of the goods (the exact amount will be stated in a box on the front of your contract). But you will also have to pay off any credit you took out to pay for insurance. If you have already paid half, you only have to pay for any missed payments or damage to the goods. But if you have already paid more than this amount, you will not get a refund of the difference. You should not be charged to return the goods. If under the terms of your contract you must take the goods back, this should only be to premises within a reasonable distance of your home.
• You can also pay off your loan early (including any credit for insurance) and keep the goods. Contact your lender and find out how much this will cost. You will be entitled to a rebate on future charges. There are rules on how this is calculated.  Credit agreements should include examples of how much it will cost to pay early at different times.

back to top

Checklist to avoid car repossession problems in the future:

If you are considering HP, have you:

• Reduce the risk of car repossession by shopping around for a cheaper credit deal?
• Reduce the risk of car repossession by deciding whether HP is the right form of credit for you?  
• If you work out the total amount you will have to repay then hopefully car repossession will not be a problem.
• Have you checked that you can afford the repayments, if not then you car my get   repossessed.
• You should read the small print carefully to avoid car repossession in the future.
• You should check whether you really need any insurance offered, as this often fuels car repossession.
• To avoid car repossession  you check the small print to really understood what your rights are.  
• If you have any doubts about a hire purchase or conditional sale agreement, you should consult a trading standards officer or lawyer.

back to top

Car loans causing debt problems?

The law regarding car finance problems.

Although the car remains the property of the finance company throughout the deal (even on a purchase arrangement, you do not obtain ownership until the final payment has been made), you will still have to do most of the legwork if things go wrong.

There are a number of common problems.

1. The car is faulty.
2. You will have to force the dealer to repair or replace it. This is why it pays to use a reputable dealer.
3.  If your business is unincorporated (a partnership or sole trader), and you are buying a car or cars worth less than £25,000, you can require the finance company to take some responsibility under the Consumer Credit Act.
4. But it could be hard work, unless you have a cast-iron case.
5. The car's performance falls short of your expectations.
6. This is too bad. Once you have signed up, you are committed.
7. You have an accident and write the car off.
8. It is your responsibility to arrange comprehensive insurance cover. This usually costs more for business use.
9. Make sure the insurance company knows who is going to drive the car, and anything that affects their driving status (eg endorsements).
10. You default by failing to keep up your payments, or by breaching any other terms (eg an arrangement with your creditors).
11. Ask about this before you sign. The finance company will be entitled to take the car, but you may be able to come to an arrangement.

back to top

Types of Car Finance

Right, you've got a figure in mind and a car waiting to be yours. But in order to decide which type of loan you need, you need to consider your plans for the car.

If you intend to buy a new or secondhand car and keep it for at least four years, then a straight loan or hire-purchase will cost you less in the long run.

If you're buying new and plan to keep the car for no more than three years, then swap it for another new car, you should consider a personal contract purchase plan (PCP).

Normal Unsecured Loan

You obtain the money in advance to buy the goods outright, then repay the debt in agreed monthly instalments.

Available from: banks, building societies, independent finance companies.

Advantages of this method

• Effectively, you become a cash buyer
• You can buy from anywhere and are free to negotiate the best price
• The car is yours from the start

Disadvantages of this method

• Harder to obtain than other types of finance
• Lenders prefer homeowners who have sound finances

Two types of loans are available, secured and unsecured. Secured is cheaper, but the lender can confiscate whatever you offer as security if you fail to pay on time. In extreme cases, you can lose your home

Car Hire Purchase

You pay a deposit, a fixed amount for an agreed number of months and then you own the vehicle. Available for new and nearly new cars - used cars over two years old are often excluded because their values will be too low by the time the loan ends.

Available from: banks, car dealers, loan companies.

Advantages of this method

• Easy to obtain and straightforward
• Cheaper than some other types of loan

Disadvantages of this method

• Car remains the lender's property until the agreement ends. Until then, you cannot sell the car without obtaining permission
• If you fall behind by as little as two repayments, the finance company can repossess the car, sell it cheaply at auction then sue for anything still owed, plus their costs

f you are falling behind with your Hire Purchase agreement and are unsure what will happen them you will be pleased to know that we are here to help you.

Personal Contract Purchase

You pay a deposit (up to 20% of total), followed by agreed number of low monthly repayments for up to three years. A final payment must then be made. This is agreed at the start and is known as the Guaranteed Minimum Future Value (GMFV). At the end of the agreement that you can keep the car, hand it back, or part-exchange it for another new car.

Available for new and nearly new cars only. If you want to keep the car you must pay the GMFV. If you hand it back, you owe nothing more. But you won't have a penny of your deposit or payments refunded. If you part-exchange the car, the dealer will value it. If it's worth more than the GMFV, he'll put that amount towards the deposit on your next car. But if it's worth less you won't have to make up the shortfall.

Available from: car dealers, independent finance houses, banks

Advantages of this method

• Cheaper monthly payments than for other types of finance
• Convenient way of funding a new car every two to three years

Disadvantages of this method

• Dearer in the long run than a straight loan or hire-purchase
• Car belongs to the finance company until the PCP ends, so you can't sell it easily
• If you need to end the agreement early, you may have to pay a penalty

Car is subject to agreed annual mileage limits (you'll pay extra if you exceed them) must be serviced correctly and kept in good condition.

back to top

Popular questions on the area of hire purchase car repossession.:-

1. When can a hire purchase company repossess my vehicle?
   If you have paid less than one third of the total payments and the vehicle is parked on public ground then a hire purchase company has the legal power to  repossess your vehicle without going through the lengthy procedure of obtaining  a court order.
2. How can I reduce the risk of repossession?
   Please note that they cannot reposess the vehicle if the car is  in your drive or on a third parties property. They CAN take it if it is in the road.
   PLEASE NOTE that many people try and trick the car bailiffs by parking the car in the next road……Please note that this a common mistake as the bailiffs always check the surrounding roads and side streets for the vehicle.
3. Does the finance company need to take me to court to get my vehicle?
   The only time that court action will precede car repossession is after you have paid one third of the total payments.
4. Will they just take my car without telling me?
   No, you will always be given a a pre-possession order. So make sure you open all your post.   The pre-possession notice will allow you at least 15 days to make arrangements to avoid car repossession.
5. I have had a change in circumstances and do not need the vehicle. What shall I do?
   The rules and regulations regarding handing back your vehicle depend on how long you have had the car for.
   
   The general rule is that if you have paid more than half of the total amount outstanding then just give the vehicle back and there can be no legal comeback for you or your family.
   
   Always read the terms and conditions of the hire purchase agreement as we have noticed they can somewhat vary.
   
   Always read the small print. Remember theses contracts are drawn up by clever and cunning solicitors who want to make it as difficult as possible for you to cancel the finance contact.
6. I have only had the car for 3 weeks and I have just lost my job, What can I do?
   You may be forced to pay expensive early redemption penalies if you want to hand the vehicle back. This amount can vary but the general pattern of what you are made to pay is difference between the payments already made and half the original price of the goods. In addition there may be various administration fees to pay.
7. My friend has offered to buy the car of me even though there is outstanding finance on the vehicle. Can I sell it to him?
   It is actually against the law to sell a car if it still has finance on it. Please make sure you always settle outstanding finance before ownership is changed.
8. What are the key factors determining what my monthly regular payments will be?
   1. Interest rate - normally quoted as the Annual Percentage Rate (APR)
   2. Repayment Period - terms of loans for cars will normally be in the range of one to three years or can be as high as five for a new car.
   3. Deposits - can be very low for some schemes such as contract hire or will often be determined by value current be traded in or sold privately.
   4. Credit checks will be made by lending organisations and you will be asked for personal details including income, loans, bank and credit card details.
   5. Signing Credit Agreements - there is a legal five-day period for cancelling an agreement following signature. Note that this does NOT apply if signed on the issuing premises.
   6. Terminating credit agreements - there may be penalties for early termination of a credit arrangement and so read the small print.
9. What advice would you give me on buying a car on finance?
   1. Decide whether you want to own the car or prefer a hire arrangement.
   2. Make sure you can sensibly afford repayments.
   3. Compare interest rates for different schemes offered.
   4. Check if payment protection insurance is provided in the event of loss of income
   5. Read and understand the terms and conditions particularly about early termination.
   6. Sign agreements away from premises as it gives you five days to change your mind.
10. I bought a car on finance and then it got written off. Now I am liable for the whole finance. The car insurance only covered a small proportion. What can I do to avoid this in future?
    Gap Insurance will protect you if you write off your vehicle. Your motor insurer may not pay you enough either to settle any finance outstanding on your vehicle or purchase a replacement vehicle. Gap Insurance will ensure that you are not left out of pocket if you have a total insurance loss by covering any shortfall between your insurance pay out and the amount outstanding on the finance agreement.
    
    Over half a million cars are stolen each year, most of these are written off or vandalised. Add to that the large number of accidents each year and you could be the next person to suffer a vehicle write off. A Gap Insurance policy will cover you against financial loss should your car be stolen and/or written off.
    
    Most of us think our Comprehensive Motor Insurance covers us if our vehicle is written off... THINK AGAIN - you do need Gap Insurance
    
    Also consider Payment Protection Insurance as this will pay your monthly payments on any motor finance agreement, mortgage, or any type of loan if you become unemployed or cannot work due to accident or illness.
    
    Also consider early Termination Insurance. This  will protect you against any termination charges you will face if you return your vehicle early to the Finance House.

back to top

Sources of Help and advice for car repossession

The following provide help with motoring problems. Some services are free, others charge a fee, and a third category advises members only (m).

Legal

• AA – 0906 010 1300
• ABS – 0800 35 85 855
• RAC – 0870 5333 533 (m)
• Consumer Direct – 08454 04 05 06
• RMIF – 08457 585 350
• Scottish Motor Trade Association – 0131 225 3643
• ABS – 0800 35 85 855

Problems with makers

• SMMT – 0870 751 8270
• ABS – 0800 35 85 855

Insurance Problems

• Insurance Ombudsman – 0845 080 1800
• ABS – 0800 35 85 855

Financial Problems

• Consumer credit and Trade Association
  01274 390 380 - www.ccta.co.uk
• ABS – 0800 35 85 855