What Happens at the End of the Rental Period?

When you finish your rent-to-own car finance agreement, you have several options. You can buy the car, give it back, or sometimes get a new car. It is important to know the financial steps you need to follow. This includes understanding the final balloon payment, any penalty charges, and the total amount due.

No matter if you paid for your new car through hire purchase or personal contract purchase, it’s important to take the next steps. These steps are key to protecting your financial stability.

Key Options at the End of the Agreement

Fact: The Financial Conduct Authority (FCA) says that about 30% of UK drivers decide to buy a next car instead of paying the balloon payment at the end of their PCP car finance term.

Paying the Balloon Payment to Own the Car

Most rent-to-own or personal contract purchase (PCP) agreements need a final balloon payment. This is a specific amount you must pay to fully own the vehicle.

• Final balloon payment: This payment usually ranges from £2,000 to £8,000. The amount you pay depends on the market value of the car and the full value of the car at the beginning of the agreement.
• Ownership of the car: After you pay this amount, you own the car completely. No further payments are needed.

If you can pay the full amount or take a personal loan for the settlement figure, it may be a good idea to keep a car you enjoy.

Returning the Car Without Buying

If you choose not to make the final balloon payment, you can give the car back to the finance company. You need to follow some rules to do this:

• Fair wear and tear: The car should show usual wear, as the British Vehicle Rental and Leasing Association (BVRLA) describes.
• Mileage allowance: You must stay within the allowed mileage for the car. Exceeding this may result in penalty charges, which are usually between 5p and 10p per mile.
• Outstanding finance: Damage that goes beyond normal wear could lead to extra payments.

Fact: In the UK, the mileage allowance for lease cars and rent-to-own agreements is usually 8,000 to 12,000 miles a year.

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Upgrading to a New Car

If you like to change cars often, the best option is to upgrade at the end of the term. Many finance companies have special leasing deals for their current customers.

• New vehicle value: Starting a new plan can help you get lower prices for a new car.
• Lower monthly payments: If you pick a car with a higher guaranteed minimum future value, your monthly instalments may be smaller.
• Ease of calculation: Many providers offer simple estimates of future payments before you choose a new car.

Some drivers choose a personal contract hire plan. This is a smart option for those who want set monthly payments. They can enjoy the benefits without the stress of owning the car.

Early Settlement and Ending the Agreement Early

You may want to think about finishing the agreement before you pay all your monthly payments. Here is what you should know:

• Early termination clause: Many contracts let you end them early. You might have to pay some early settlement penalties.
• Settlement figure: This is the full amount you must pay to close the contract.
• Deposit amount: Some companies take away the original deposit amount when they figure out the early termination fees.

Always take time to read your finance deal. If you think you will end it early, ask for a rough estimate of your total costs.

Key Terms You Should Know

Common Mistakes to Avoid at the End of the Contract

• Ignoring the mileage limit: If you go over the mileage limit, you could face extra penalty charges.
• Forgetting the final payment: You need to pay the balloon payment to fully own the car.
• Overlooking car condition: If you do not keep the car in good shape, it can lower its market value and raise costs.
• Not checking your credit score: Before you refinance or buy a new car, make sure your current score is good enough.
• Rushing your next deal: Take time to compare leasing companies, personal loans, and car finance offers to find the best option.

FAQs About the End of the Rental Period