What To Do About Voluntary Termination Excess Mileage Charges?


Today in the UK 9 out of every 10 cars have been bought through a personal contract purchase or PCP plan. Having these contracts in place allows car buyers to afford the vehicle they want without having to pay a huge lump sum of money. As part of these plans, the buyer signs up to pay a certain amount of money per month until all of the finance on the car has been cleared. Once all the payments have been made, the car is officially yours.

Entering into a PCP means you may come across mileage limits. The car isn’t yours until you have made all of the payments. As a result, the finance company will want to know how many miles you are planning to do in the car. This affects what the final worth of the car will be once it is handed back to them.

However, sometimes money troubles and other reasons cause us to want to get out of a PCP early. This is what’s referred to as Voluntary Termination. When you want to be released from the agreement early, the mileage caps still come into force, amongst other wear and tear. At the beginning of your contract with the finance company, you will have given them an average. If you have already gone over your mileage allowance by the time you want the agreement to end, there may be extra charges involved.

How Much Will I Have To Pay?

Car Hire Purchase Finance Guide

The finance company will want to be compensated for the loss of worth in the car if you have gone over your mileage limit. Ending your PCP early doesn’t affect the fact that you still have to pay the excess charges. If you set your mileage allowance low at the beginning of the contract, when you hand the car back you may be facing quite a hefty bill. Usually, the company will charge you around 6p per mile that you’ve gone over the allowance.

Can I Escape The Mileage Clause?

Car Mileage Excess Charges

Most PCP contracts will have a mileage clause. It is something you should have been aware of before signing up for the finance as a set amount of miles will have been agreed with the company. When you voluntarily terminate the contract the finance company will still expect you to pay for any excess mileage you’ve used in the time that you’ve had the car.

With Voluntary Termination of a PCP, you have to have paid at least 50% of the total amount due on the finance agreement before you hand back the car. This means that you will normally have had the car for at least half of the time the contract stated. If you want to terminate it any earlier, a larger lump sum payment will have to be made.

It has been decided that the excess mileage charges on PCP’s when terminating the contract are still fair and just. However, you can still challenge the charges if you think they’re unfair for any reason. Challenging the charges takes dogged determination. There will be a lot of communication with solicitors and the company themselves involved. All in all, you could end up losing more money than you saved. A legal team will have to get involved to help you and you may even have to go to court to contest the extra mileage charge.

Following the proper steps of the voluntary termination process and keeping the car in a good condition may help you to avoid any excess charges. This is only true of PCP agreements. If you have entered into a PCH lease, the extra mileage charge is in place throughout, regardless of whether you have exited the contract early or not.