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
Option
What It Means
Costs Involved
Buy the Car
Pay the final balloon payment and become the owner of the vehicle.
Pay the outstanding finance balance.
Return the Car
Hand the vehicle back to the finance company.
Must meet fair wear standards and mileage allowance limits.
Upgrade to Next Car
Start a new finance deal with the same provider or a different one.
New deposit and regular monthly payments.
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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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
Term
Meaning
Balloon Payment
Final lump sum needed to buy the car.
Settlement Figure
Amount required to end the agreement early.
Guaranteed Minimum Future Value
Predicted value of the car at end of term.
Fair Wear
Acceptable condition standards for returning the car.
Mileage Allowance
Agreed maximum mileage before penalty charges apply.
Conditional Sale
A finance deal where ownership passes after final payment.
Hire Purchase Agreement
A way to own the car by spreading full amount over time.
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
What happens if I can’t pay the final balloon
payment?
If you cannot pay the final balloon payment, you can often return the car without getting a
penalty. This rule is true if the car is in fair wear and fits the mileage limits.
Can I
refinance the balloon payment?
Yes, some finance institutions let you get a new loan. You can use this loan to pay off the
balloon payment if you want to keep the car.
Is it cheaper to buy or return the car at the end?
It really depends on the market value of the car and your settlement figure. If the car is worth
more than you thought, buying it might be a good choice.
What
if my mileage is over the agreed limit?
If you drive more miles than you are allowed, you will have to pay more money. This usually costs
5p to 10p for each extra mile you drive beyond the mileage allowance.
Can I trade
in the car for a new deal?
Yes. A lot of finance companies have trade-in options. This is helpful if you want to start a new
lease or finance deal for your next car.
What if I want to switch to a
used car at the end of my contract?
At the end of your contract, you can often trade in your car. You can get a used car through a
lease purchase or look at a new car loan. This way of financing might be a good choice if you
want lower monthly payments. It also helps you avoid paying the full outstanding amount all at
once. Before you agree to the new deal, always check the mileage of the car and how much it has
lost value.
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