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Voluntary Termination of car finance agreement - how does it affect your credit rating?

(5 Posts)
MrsBartlet Mon 17-Aug-09 21:40:31

DH has just accepted a new job which comes with a company car. We are over halfway through paying for his current car which is now "surplus to requirements". We have the option of voluntary termination of the finance agreement with the car company but I am worried about whether this will affect our credit rating. We have never had a credit problem and as we want to move next year I don't want to create a problem when it comes to getting a new mortgage. Does anyone know if this would be a problem?

I have spoken to the car finance company and they said that they would put a note on our credit file but it would not be an "adverse" note and should not affect any mortgage application. I also spoke to Experian, the credit rating company and they said the same but I am finding it difficult to believe that we can just walk away from the car which is now worth less than we still owe on it!

Any advice will be appreciated.

OldLadyKnowsNothing Fri 21-Aug-09 01:16:18

This depends very much on the kind of credit agreement you had. I think if you've paid over one-third on Hire Purchase you can hand it back and walk away; a leasing or rental agreement may have different conditions. And, of course, a personal loan or one guaranteed on the car would be something else again...

MrsBartlet Fri 21-Aug-09 07:51:48

Thanks for replying, OldLady! The finance company say that it is allowable as we have paid over half - I think this is our only option. They have told us once again that it should not affect our credit rating adversley so we will have to trust them. I just hope this doesn't come back and bite us next year when we want to get a new mortgage to move!

kellykateneedsaholiday Fri 21-Aug-09 18:14:27

Hi, We have handed back 2 cars this way,the garage we were buying new one from said it would be noted on our credit report blah blah blah may cause us problems in future blah blah so i checked with finance company and they said it definately wouldnt as it was part of the contract agreement, garage were just at it cos we werent trading the car in (we handed cars back cos finance owing was more than the trade in value).We have since had finance for 2 cars and changed mortgage twice) It definately doesnt cause a problem.
I know a few friends who have done the same.

MrsBartlet Tue 15-Sep-09 21:40:14

Thanks kelly (only just seen your message as I went on holiday the day after you posted!) Very reassuring to know you didn't have problems getting a mortgage because of this.

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