Voluntary Surrender of my Car on Finance

I was weighing up whether I would carry out a Voluntary Surrender of my Car on Finance. My car finance is one of my many debts. This debt is up to date and not in arrears. To anyone looking in from the outside, this debt appears to be a healthy and normal loan being repaid each month. Looks can be deceiving!

Because my car is financed on hire purchase, until the finance is paid off in full I do not own it, Carmoola do – they are the lender who I refinanced with to reduce the cost slightly. I reached out to Carmoola to ask about this option and what the impact would be.

This post isn’t a review or anything like that, I am trying to keep that sort of thing off here, it is more a story about why I considered this option, what the pitfalls are and why I ultimately decided against it.

It is important to note at this point that this option is different to a Voluntary Termination. I wouldn’t qualify for this option because I have not paid at least 50% of the loan off. This is the amount that needs to be paid off the loan for a Voluntary Termination to be possible.

What is Voluntary Surrender?

With a Voluntary Surrender you are basically handing the car back to the lender because they own it. Carmoola broke down the process like this: –

• They will take possession of the vehicle.
• They will sell it at auction on your behalf.
• The proceeds of the sale are then applied against the balance of your loan.
• If there is a shortfall, you will need to repay that.
• With this option, a default is reported on your Credit File. This is a bad thing.
• The process takes several weeks.
• You will pay the cost of recovering the vehicle, auction fees, replacement keys and V5C if those are missing.

I think the collection cost was around £350. When this amount is added onto what I owe, and given the amount of negative equity on my car, this made me consider whether it would be the right thing to do.

Carmoola did propose selling the vehicle then making up the difference myself. The problem with this is my car is not worth anywhere near what I owe. This is in part because I bought it right when the second hand prices hit their peak. This in itself was a mistake I made but can’t change that now.

Why was I considering Voluntary Surrender of the Car?

I wanted to cut down my expenses and I don’t need a car, it is a nice to have but is not absolutely essential. Something always seems to need repairing in part because it spends a lot of time sat idle. I also pay Insurance, Tax and Fuel so over the course of a month, I could reduce my outgoings by around £250.

The downside would be that I would still have a debt owed to Carmoola, so I would be paying for something I no longer have, whilst this could be offset against the fact I no longer need to pay Insurance, Tax, Petrol or maintenance costs it just didn’t make sense to me. That and the fact it would mean another default being registered on my credit report and I decided this wasn’t an avenue I wanted to pursue right now.

What will I do instead?

If I can wait until I have repaid at least 50% of the loan, I could do a Voluntary Termination instead. This means I wouldn’t get a default and can use the car up until that point. This may well be what I do in about 18 months time. I will update you if that does turn out to be what I do.

I do have some good use cases for the car but there are alternatives available. These alternatives just take longer in terms of getting where I need to be. It’s the convenience that’s hard to let go of but if my situation was even worse than it is now, I may have gone all in on the Voluntary Surrender and accepted all the downsides. The benefits as they stand today just don’t outweigh the downsides by enough of a margin for this to be a simple decision.

And Carmoola?

I found them very easy to deal with in terms of talking through the process. Carmoola was also helpful in providing an understanding of the downsides of doing this. There was no pressure to go either way and the experience was much different to how I was treated by a company called Vehicle Trading Group a number of years ago.

My Debts in General

Once I have either Voluntary Terminated or paid off this car in full, I can use the money I was paying towards this to repay more off my other debts. As it stands right now, 2030 seems like a realistic date to be debt free. Of course a lot could change between now and then. As a result, I could be in debt for more or less time than this. Time will tell and I am sure you will read about it here!