Can I cancel a car finance agreement within 14 days?

Roman Danaev

7 July 2021

If there's been a change in your car purchase plans and you no longer require a loan, there is a 14-day cooling-off period in which it is possible to withdraw your application for car finance

You are legally entitled to cancel a car finance agreement within 14 days, according to the Consumer Credit Act 1974. If it's been more than 14 days since you agreed to the terms and conditions, then you probably won't be able to use your cooling-off period from the car finance agreement.

Therefore, you can always cancel car finance within 14 days of the lender's approval.

Those 14 days in the cancelling terms apply to every car finance credit agreement worth £25,000 or less. If your contract is of a higher total value, check its terms and conditions to learn if you can cancel it. Moreover, bear in mind that there is no withdrawal for any loan agreement over £60,260.

Can I cancel a car finance agreement after 14 days?

Can I cancel my car finance contract with a lender when the cooling-off period has passed? Yes, you can leave the agreement, but only under certain conditions. You may need to pay the penalty if you do so. If you want more information, it's in your best interest to know about the Consumer Credit Act.

Pay half the amount you owed

If you do not want to cancel your car finance agreement early and decide not to keep the car, there is a perfect option - you may repay half the loan and return the vehicle. Such an option is delivered by the Consumer Credit Act and grants a reasonable possibility to cancel the financing contract within an earlier period.

At any point, as long as you have paid 50% of your loan amount, you can terminate the agreement and return the car to the lender. Such finance cancellation can be beneficial in numerous cases:

  • You no longer require your vehicle.
  • Your income conditions changed, and you cannot afford further repayment.
  • You need cuts to your monthly expenditure cuts and are trying to lessen your debt.
  • You plan to get a better deal with another lender.

However, if you plan to use this option, ensure that the car's condition is proper for further resale. You are responsible for returning the vehicle in good shape because the lender will not take over any repairs and oblige you to do them before cancelling the finance on the car. Therefore, you should apply to a trustworthy car repairer in advance to fix any damages and prepare the vehicle for return.

If you are still on the way to a 50% payout of your debt, you can focus on repaying the remaining amount to reach that level and close the agreement.

Either way, if you decide to cancel your car finance deal with the dealership earlier, make sure to keep all the documents and copies proving the termination. It is important to avoid any confusion in the future if you are accused of not paying off the debt in full.

Returning the car

There are certain peculiarities in regards to returning a car on finance as well. If you purchase a car at the office of a car dealership and sign a vehicle order form, you are to pay it in full within the given 14 days or other period mentioned in the agreement. The special order form serves as a binding contract.

However, there are the following exceptions:

  • The car was purchased online or by phone.
  • The order form was not signed.
  • The car you have differs from the specification.

What we strongly advise is to avoid any irrational or rash decisions. Give yourself time to sleep on it, calculate your finances, and consider your possibilities and options first. Then you will not need to worry about the car finance cooling-off period and can use your car finance to get the vehicle of your dreams.

What happens if I cancel my car finance within 14 days? Does it harm my credit rating?

Returning a car on finance, as long as it is done in agreement with the lender, will not harm your credit report. Termination will be reported in your credit history. Yet, it does not negatively affect your rating. So you will be able to apply for financing in the future without a problem.

That is why it's better, when experiencing financial problems, to reach the 50% point, return the car, and close the car finance agreement rather than fail to pay off the debt fully. The latter case, without a doubt, will affect your credit score negatively and cause future problems.

Will I get my deposit back if I cancel my car finance agreement within 14 days?

You may have to make a "deposit" for car finance agreements that are meant to show you're committed. Some people are unsure whether to agree with a car finance plan or terminate it if they change their minds. If you do decide to cancel the car finance credit agreement, the company might not have to refund your deposit.

To see if you qualify for a refund, please check the terms and conditions of your contract.