There are three quite different ways a financed car goes back to the funder and people ask about all of them in the same words. One is a statutory right with a known ceiling. One is a request the funder may accept, and it leaves you owing whatever the sale does not cover. One is simply the end of a personal contract purchase. Which of the three you are in decides what it costs and what it does to your credit file.
Voluntary termination is the statutory route and it has a ceiling
On hire purchase or conditional sale you have a right to end the agreement once you have paid half the total amount payable, including fees, hand the car back in reasonable condition and owe nothing further. If you have not reached half you can still terminate by paying up to that point. The right is in the Consumer Credit Act 1974, it cannot be removed by the agreement, and the funder does not have to agree to it.
Voluntary surrender is a request, and the shortfall is yours
Handing the car back outside the statutory right means the funder sells it and you owe the difference between the sale proceeds and the balance. That is usually a large number, because a trade sale raises less than the settlement figure. It is recorded on your credit file as the agreement ending badly rather than as a termination, and it is the route to avoid if voluntary termination is available.
Settle car finance instead, where you can
Settling early is a statutory right with a rebate of some future interest, and it is the cleanest outcome for your credit file: the account closes as satisfied. Ask the funder for a settlement figure in writing. Where the car is worth more than the figure, selling it and settling leaves you with the difference, which handing the car back never does.
Changing car on finance is a fourth thing, and it is a settlement too
Part exchanging or swapping mid-term is not a hand-back: the old agreement is settled and a new one written, with any equity becoming the deposit and any shortfall added to what you finance next. Work out which of the four you actually want before you telephone the funder, because the words you use will decide which process it starts.
Questions people ask about can i give my car back to the finance company
Will voluntary termination hurt my credit file?
It is recorded as the agreement being terminated early, which is better than arrears or a surrender and worse than completing the term. Lenders can see it and some ask about it. It is the honest price of exercising the right.
What counts as reasonable condition on a hand-back?
Fair wear and tear for the age and mileage. Damage beyond that can be charged for, so photograph the car before it goes and keep the collection report. Servicing to schedule normally matters here too.
Can the funder refuse a voluntary termination?
No, where the statutory conditions are met: the agreement is hire purchase or conditional sale, you have paid or pay up to half the total amount payable, and the car is in reasonable condition. It is a right, not a request.
Does it apply to a PCP?
Yes, a PCP is a conditional sale or hire purchase agreement for this purpose, and the half-way figure includes the optional final payment, which pushes the half-way point late in the term. Work out the number before assuming you have reached it.