From
www.itsyourmoney.ie
Ending your hire purchase agreement using the half rule
You have the right to end a hire purchase agreement by using the half rule. You can do this if you have paid half the 'hire purchase' price, you can return the car and give notice, in writing, that you are ending the agreement. Your agreement with the finance company must show half the hire purchase price, so check to see how much you would need to pay in order to return your car under the half rule.
Steps to take when returning a car under the half rule:
- Write to your car finance provider or bank, informing them you want to return the car using the half rule - use our sample letter to help you. Speaking to someone over the phone could be interpreted as [broken link removed] – putting it in writing makes it very clear how you want to end the agreement.
- Agree a pick up point or return the car yourself. If you don’t you may be charged a collection fee.
- Take pictures of the car, inside and out, to confirm the condition of the car so you are not liable for any additional costs if the car gets damaged after your return it. If there are damages to the car, you may want to get the repairs done by your own mechanic before you send it back or your provider may charge you for th cost of any repairs.
- It is very important to read any documentation sent out by your car finance company when you return your car using the half rule. Do not sign a [broken link removed] as you will give up your right to return the car under the half rule.
- Return the car to the garage or to whatever location is agreed between you and the finance company.
If you have damaged the car and are returning it under the half rule you must pay for the cost of any repairs. You will not need to make any further payments from the date you return the car. However, if your next payment has already been processed you should contact your provider to get a refund.
The example below shows how the half rule works.
Joe picked a car that cost €13,300 from a car dealer. The dealer arranged a five-year hire purchase agreement for Joe, and asked for a deposit of €1,000. The [broken link removed] is €16,790.69
.
In month 37 of the agreement, Joe wants to end the agreement but he doesn’t want to pay the balance and keep the car. Half the hire purchase price of €16,790.69 €8,395.35 Total amount Joe has paid to date:
(Broken down as follows)
Deposit
36 repayments of €260.92
Documentation fee €10,465.12
€1,000.00
€9,393.12
€72.00
Joe will also be responsible for any repair costs that are necessary and must pay any arrears that are due.
Can you end your agreement under the half rule even if you are in arrears?
Yes – you can avail of the half rule while you are in arrears provided you have paid half the hire purchase price. However, you will still owe the arrears to the finance company.
They may also have the right to charge you additional interest on your arrears - called surcharge interest. You need to check your original agreement to confirm the amount of interest they can charge on those arrears.
If you have not paid off half the hire purchase price
If you have not paid half the hire purchase price, work out how much you would have to pay to bring your payments up to be equal to half the hire purchase price. If you can afford to pay the extra amount, you can then return the car under the half rule. In some cases, this could be cheaper than having the car [broken link removed] or [broken link removed].
The following example shows the cost of bringing repayments up half the hire purchase price.
Joe picked a car that cost €13,300 from a car dealer. The dealer arranged a five-year hire purchase agreement for Joe, and asked for a deposit of €1,000. The [broken link removed] is €16,790.69.
In month 25 of the agreement, Joe realises that he cannot afford the repayments. He wants to return the car under the half rule even though he has not yet paid half the hire purchase price. Half the hire purchase price of €16,790.69 (1) €8,395.35 Total amount Joe has paid to date:
(Broken down as follows)
Deposit
25 repayments of €260.92
Documentation fee (2) €7,595.00
€1,000.00
€6,523.00
€72.00
Amount owed (1) – (2)
(€8,395.35 less €7,595.00)
€800.35 Joe will also be responsible for any repair costs that are necessary and must pay any arrears that are due.