# Car finance on HP



## guest123 (29 Oct 2009)

Hello all, I have a situation here and I am seeking some advice. Back in 2006 a friend of mine was selling his 4x4, it was in good condition and I contacted a financial adviser about arranging funding to buy the 4x4. He sorted me out with a loan from a finance section from a leading bank here. The cost of the 4x4 was 18500 but from the top of my head I think the total of the loan was somewhere in the 20000 mark. The contract is a HP contract. I never missed a payment until this year as I lost my job. 

I contacted the bank to inform them and asked would they accept a lower payment until I found work, I thought they accepted the payment but I may have misunderstood their conformation letter. They are still sending me invoices of the full amount and I think they accepted my lower payment as a payment on the arrears. 

Recently I went to tax the 4x4 and found out I cant tax it commercial any more, its a long story, the Government made some changes to the tax on my type of 4x4. I sent a letter to the bank thanking them for accepting my lower payment (I thought it was a lower payment on the loan not the arrears at the time of letter) I also notified them of not being able to tax the 4x4 and would it be possible to trade the 4x4 against something of the same value I can tax and use. 

Now I have changed my mind and realized I simply cant afford to be driving at the present time. I would like to just hand the 4x4 back to the bank. The bank sent me a recent letter asking me to ring them but I don't want to in case they try and make me change my mind etc. 

As it stands now, I am 3 months in arrears, I have made my first payment towards the arrears and the balance on the loan is somewhere around 8000euro. 

Is it possible for me to return the 4x4, its still in good condition overall and its easily worth 8000euro but I cant see me being able to sell it myself due to the difficulties in taxing it commercial. 

I would like to hand it back and work out some plan on paying whats left over after they sell it. 

How do I write the letter? 

Thanks.


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## TheShark (29 Oct 2009)

Its possible you may be able to give it back without penalty under whats known as the "Half-Rule". Im no expert but there are plenty here who can advise on it.
Do a search on AAM for Half-Rule.
Good luck.


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## guest123 (30 Oct 2009)

TheShark said:


> Its possible you may be able to give it back without penalty under whats known as the "Half-Rule". Im no expert but there are plenty here who can advise on it.
> Do a search on AAM for Half-Rule.
> Good luck.



Thanks I just looked at this "half rule" sounds like I can end my HP under this rule and return the 4x4, looks like I will still have to pay the arrears but I have already set up the reduced payment towards them. If some one can suggest a few pointers on the letter it would be great.


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## TheShark (30 Oct 2009)

I would just send them a registered letter informing them that you are terminating the agreement under the Half-Rule.
Dont be fobbed-off by them and get confirmation from them in writing that the vehicle has been returned under the Half-Rule.
Good Luck.


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## Danniboo7 (30 Oct 2009)

*do not sign a voluntary surrender form !!!!!!*


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## guest123 (30 Oct 2009)

TheShark said:


> I would just send them a registered letter informing them that you are terminating the agreement under the Half-Rule.
> Dont be fobbed-off by them and get confirmation from them in writing that the vehicle has been returned under the Half-Rule.
> Good Luck.



Great thanks. I haven't a clue about all this, always paid off my loans. So I can defo end this loan under the half rule, once my contract is HP and I've paid over half the contract value?

Also they cant come back and charge me for any damage as I bought the 4x4 second hand it already had some minor damage like small scratches etc? The bank to my knowledge never seen it when I bought it. Over all the 4x4 is still in the same condition as when I bought it, just some wear you would expect from almost 4 years use.   

I read about not signing the surrender form if its got voluntarily written on it!


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## Danniboo7 (30 Oct 2009)

No do not sign any forms for them whatsoever. I'm not 100% but sure someone will correct me. If you sign this form I think they flog the car at an auction and you've to pay the outstanding balance. 8k remaining on loan - Amount received at auction = Amount you have to pay : ). I rang my finance company about this a few months back and i'm well over the half way mark, I just inquired about handing the car back over and they told me I would be black listed, this is nonsense. It doesn't even affect your credit rating, Hope this helps


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## guest123 (30 Oct 2009)

Thanks, I am going to write the letter over the weekend and sent it reg post on Monday, I'll let you's know how I get on, maybe some people will be interested to know.


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## guest123 (2 Nov 2009)

Before I send this letter I would like to double check I can end the HP under the half rule. 

Here's the figures,

Hire Purchase Price: 22086.98
Balance: 8015.49
Arrears: 636.47

So if I pay the arrears the balance is 7379.02 which means I've paid more than half @ 11043.49

In my contract is a statutory notice with loads of mumbo jumbo I cant understand but it does have that 11043.49 figure in it, worded in a way it must end up to that sum or I'll have to etc etc 

My balance is less than that sum so I can definitely end it, should I pay the arrears first and then end it or notify them first with intentions of ending HP once agreed, arrears will be paid etc? 

I can afford to pay the arrears but I'd like to hold onto the money incase the ending of the HP might not work out. 

Apology's for the silly nature of the questions but I haven't a clue about all this stuff, like to make sure I am covered. Thanks.


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## delgirl (2 Nov 2009)

guest123 said:


> Thanks I just looked at this "half rule" sounds like I can end my HP under this rule and return the 4x4, looks like I will still have to pay the arrears but I have already set up the reduced payment towards them. If some one can suggest a few pointers on the letter it would be great.


Did you purchase the vehicle as an individual/consumer or, I'm asking because it's a commercial vehicle, under and a Business Hire Purchase Agreement?

If it's the latter, the half rule doesn't apply.  You can't return the vehicle under this rule and the only options are to sell it yourself with the lender's agreement or give it back to them in which case they will sell it at auction and you will have to pay any shortfall.

Hope yours is not a business hire purchase and that you're able to get out of the finance agreement.  Good luck!


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## guest123 (2 Nov 2009)

delgirl said:


> Did you purchase the vehicle as an individual/consumer or, I'm asking because it's a commercial vehicle, under and a Business Hire Purchase Agreement?
> 
> If it's the latter, the half rule doesn't apply.  You can't return the vehicle under this rule and the only options are to sell it yourself with the lender's agreement or give it back to them in which case they will sell it at auction and you will have to pay any shortfall.
> 
> Hope yours is not a business hire purchase and that you're able to get out of the finance agreement.  Good luck!



I purchased  vehicle as a regular Joe, I have no business or VAT number. The contract seems to be a standard HP contract, no mention of business etc.


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## delgirl (2 Nov 2009)

You're very lucky that it's not a business hire purchase agreement, otherwise you would be in trouble.

Even so, with the half rule, as other posters have indicated, you need to be very careful what you sign.


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## TheShark (2 Nov 2009)

delgirl said:


> Even so, with the half rule, as other posters have indicated, you need to be very careful what you sign.


Its very simple , he informs the lender in writing (registered post) that he is returning it under the half-rule and signs NOTHING else - job done.


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## guest123 (2 Nov 2009)

Thank you for all your help folks, I am fairly confidant on what I am doing now. Hopefully I wont have anymore questions!


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## mojo (5 Nov 2009)

Hi all ,i am new to askaboutmoney and spotted this thread .I am in the same situation as the op .I have a hp agreement that has over half paid off on .I contacted the finance company and have looked at the agreement i signed and both say i can hand back the car under the half rule .

My question is that at the moment i can afford the car but just about .As with everyone else in the country my circumstances have changed .I approached the garage i bought it in to try and down size car and make repayments smaller but they did no want to know .When i mentioned well then if you don't want to deal with me i can hand it back under the half rule .The guy i was dealing with sneered at me and said well if you do that your name will be mud in the car industry and no one will touch you .He said it is not a good idea and i will be black listed .

I am wondering if this is true .I was planning on getting rid of loan as the car is in negative equity and starting again by buying a cheap second hand run around for cash no loan .I am trying to be loan free bar mortgage in case  husband loses job .


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## Danniboo7 (5 Nov 2009)

Mojo - This is exactly what I was told, it does not affect your credit rating and it is a right, it is in your contract. You should have asked him where in your contract it says "your name will be mud if you hand back you car under the half rule." I think it's a disgrace that finance companies are allowed to give you the complete wrong information. Is this not illegal, they are lying about your contract.


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## mojo (5 Nov 2009)

Believe it or not the finance company were very nice about it and it was the salesman in the car dealership that sneered at me and made the comments .I was in there as i was trying to downsize as the car i have at the moment.I bought in better times before i had to reduce hours in work .I was trying to trade in big 2006  7 seater for a more up to date small car .I had a couple of grand saved to help me bridge a gap so i could buy the smaller car and pay 200 euro less a month in a car loan and rearrange the loan .I felt i was being proactive instead of just handing back the car which i am entitled to do.I now feel like just handing it back and using the money saved for a small reliable run around.


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## Danniboo7 (5 Nov 2009)

Mojo - That's exactly what you should do I thought about doing this a few months ago but it turns out the interest isn't as high on my car finance as I first thought which is my main reason for wanting to hand it back. There a bunch of chancers.


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## Staples (5 Nov 2009)

Many people don't realise that under a HP agreement, you don't actually own the car until the last payment (sometimes a balloon payment) is made.  Often, people coming the end of a HP agreement are encouraged by dealer to roll the value of the remaining amounts payable into a new agreement for a new car.  This can get messy as you're effectively paying interest on interest while never building up "equity" in any car.  If you miss a few payment, you car may be repossessed and you're back on the bus.

IMHO, it's better to put clear one HP agreement definitively (whether by the half-rule or otherwise) before entering into another one.


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## mojo (5 Nov 2009)

Thanks staples i agree fully with what you are saying .It was actually the dealership that contacted me asking would i like to upgrade to a 2009 model car and extend the finance .I said no as the tax and petrol were costing me so much that i was looking to downsize if anything .This would correspond with what you are saying .The first thing i did ask was about a balloon payment and thankfully i don't have that in the contract .It was actually the bank that told me about the half rule thing when i went in for a financial review and was giving out about my car loan and how stupid i was at the time not foreseeing i would have to cut hours .

I have learnt my lesson with car finance and i plan never if possible to have a car loan again .If it has 4 wheels and runs that will do me from now on .It is funny how priority's change with circumstances.


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## guest123 (10 Dec 2009)

Just an update for anyone who is interested, the finance company have agreed to terminate the HP contract, I got a mumbo jumbo legal letter from them. I happened to have MABS appointment same day I got the letter so I brought it with me.

The MABS adviser said yes all is well and ends well, also I don't have to pay any of the arrears, once I've paid over half, I can challenge any attempts of the finance company trying to claim arrears. I am legal entitled to do so, the MABS adviser said the finance company and Banks are literally chancing their arm during this recession so don't be afraid of them. 

Strange thing is, the finance company confirmed the HP contract is ended but never mentioned when and where to return the car. The car is going to sit in the driveway until I get some form of notification on what to do with it. 

Also worth mentioning I have a small outstanding debt from a personal loan, on my copy of the loan agreement the MABS adviser noticed I had signed to take the option of payment protection, I wasn't even aware of it and neither are the lenders. They have been sending me final notices all the time with legal threats. I have given them the good auld 1 finger salute by sending off a copy of the loan agreement. 

Thanks for all the advice and a big shout out to MABS people, you are without doubt the best public service during this crisis.


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## Bronte (11 Dec 2009)

guest123 said:


> Strange thing is, the finance company confirmed the HP contract is ended but never mentioned when and where to return the car. The car is going to sit in the driveway until I get some form of notification on what to do with it.
> 
> .


 
That's not a very good idea, it's like burying your head in the sand.  You need to find out what has to be done with the car.  

In relation to purchasing cars, hire purchase should be avoided if at all possible.


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