Plain-English guide
At the end of car finance you can keep the car, hand it back or part-exchange it, and on HP you own it outright. Which choices you have depends on your agreement type.
Worked example
The balloon is £8,500. If the dealer offers £10,000 in part-exchange, you keep £1,500 as your deposit. If the car is worth only £7,000, hand it back under the GMFV guarantee and you owe nothing; the lender absorbs the £1,500 gap. That's the protection PCP gives you.
At the end of a car finance agreement your options are to keep the car, hand it back or part-exchange it into a new deal, and which ones you have depends on your agreement type (PCP, HP or a lease). HP ends with you owning the car after the final payment. A PCP ends with a choice over the optional final payment (the balloon, set at the GMFV), and a lease ends with the car going back, checked against its mileage limit.
The tables on this page compare the options by agreement type and by situation, so you can see which route costs you least overall.
You also have legal rights that apply before the end (early settlement and voluntary termination), and knowing every option, not just the default, can change what you pay by hundreds or thousands of pounds. The rest of the page covers each agreement type, ending early and the UK rules that protect you.
What are your options at the end of car finance?
At the end of car finance you can keep the car, hand it back or part-exchange it, and on HP you own it outright. Which choices you have depends on your agreement type.
- Keep it: pay the balloon (PCP) or take ownership after the final payment (HP).
- Hand it back: return a PCP or lease car within the mileage and condition terms and walk away.
- Part-exchange: roll any equity above the balloon into your next car.
| Product | Keep the car | Hand it back | Part-exchange the equity |
|---|---|---|---|
| PCP | Pay the balloon (GMFV) | Yes, within mileage and condition | Yes, equity above the balloon |
| HP | Automatic after final payment | Not the usual route | Yes, any equity is yours |
| Lease (PCH) | No, you never own it | Yes, it's the only route | Not applicable |
End of a PCP: keep, hand back or part-exchange
At the end of a PCP you choose to pay the balloon and keep the car, hand it back and walk away, or part-exchange any equity into a new deal. The balloon (GMFV) decides ownership.
Pay the balloon, often with a new loan, and the car is yours. Hand it back, within the mileage and condition limits, and you owe nothing more. Or, if the car is worth more than the balloon, put that equity towards your next car. Run the figures on the PCP calculator, and check the balloon on the balloon calculator.
On a £20,000 car over 48 months at 9.9% APR, the GMFV might be around £8,000 to £9,000. If the car's trade value at the end is £10,000, you have roughly £1,000 to £2,000 of equity you can use as a deposit on the next car. If it's worth only £7,000, handing it back to the lender is the better route: you walk away and the lender takes the £1,000 to £2,000 shortfall, not you.
Worked example: equity vs hand-back
End of an HP agreement: you own the car
At the end of HP you own the car once you've made the final payment and a small option-to-purchase fee, so there's nothing to decide. No balloon, no hand-back.
Because HP finances the whole price, the last instalment and the option fee transfer ownership to you automatically. The car is then yours to keep, sell or part-exchange whenever you like. See the full cost on the HP calculator.
The option-to-purchase fee is usually £1 to £200 and is set out in your agreement. Once it's paid, legal ownership passes to you and the lender's interest in the car ends. From that moment you're free to sell privately, part-exchange, or keep driving.
HP gives you certainty
End of a lease: hand the car back
At the end of a lease you hand the car back, with nothing more to pay if it's within the mileage limit and in fair condition. You never own a leased car.
The provider inspects the car against the agreement's condition standard and your mileage limit. Stay inside both and you simply return it and walk away; go over on mileage or damage and you pay the relevant charge. You can then start a fresh lease on a new car. Our mileage limits guide covers the excess charges.
Leasing has no balloon, no equity and no option to buy: you return the car at the end. Instead you get a lower monthly payment and a new car every two to four years. Damage is usually judged against the BVRLA fair-wear-and-tear standard, which is widely used across UK leasing.
Ending early: settlement
You can settle any car finance agreement early by paying off the outstanding balance, and the lender must give you a rebate on the interest under the Consumer Credit Act 1974. You then own the car outright, whether it's on HP or PCP.
Request a settlement figure from the lender, which must send it within 7 working days under the Consumer Credit Act 1974, section 97. It is usually worked out to a settlement date 28 days after the lender gets your request, and shows the remaining capital plus a calculated interest rebate. Pay it and the agreement closes. Work out the numbers on the settlement calculator.
Under the CCA 1974 (early repayment), the rebate is worked out using a statutory formula so you're not charged all the interest that would have fallen due. On a £20,000 HP at 9.9% APR settled after 24 of 48 months, the interest saved comes to roughly £1,000 to £1,100 compared with simply paying the monthly to the end.
Your right to settle early
Ending early: voluntary termination
Voluntary termination lets you hand a PCP or HP car back and owe nothing more once you've paid 50% of the total amount payable under the Consumer Credit Act 1974, sections 99 and 100. It's a legal right, not a favour.
The 50% threshold includes all monthly payments paid so far, the balloon (on a PCP), and any fees set out in your agreement. On a PCP many borrowers hit 50% before they expect, because the balloon counts towards the total even though it's paid last. Once you've crossed the line, you can return the car in reasonable condition and walk away.
Voluntary termination doesn't apply to leasing (PCH), because you're contracted to the lease for its full term. It also doesn't damage your credit file on its own, though any missed payments leading up to it will. Full detail on how it works is in our guide to voluntary termination.
Condition matters for VT
Which end-of-agreement option is cheapest?
The cheapest option depends on the car's value against what you owe, so compare the figures before you decide. Equity points you towards part-exchange; negative equity changes the maths.
If the car is worth more than the balloon or settlement figure, keeping or part-exchanging captures that equity. If it's worth less, handing it back under the GMFV guarantee or via voluntary termination can cost you less overall. Check where you stand on the negative equity calculator, then compare the total amount payable on the main calculator.
| Your situation | Cheapest route | Why |
|---|---|---|
| Car worth more than balloon | Part-exchange the equity | Captures the surplus as your next deposit |
| Car worth less than balloon | Hand it back (GMFV) | Lender absorbs the shortfall |
| Paid 50% and want out early | Voluntary termination | Walk away, owe nothing more |
| Want to own outright, lower total | Settle early | Statutory interest rebate |
Worked comparison: £20,000 car at 48 months / 9.9%
Running the same £20,000 car through PCP, HP and lease shows how the end-of-deal choice changes the total cost. The table below sets each route side by side.
On a £20,000 PCP over 48 months at 9.9% APR with a £2,000 deposit, the balloon might be around £8,500. If the car is worth £10,000 at hand-back, part-exchanging captures about £1,500 of equity. If you'd taken HP on the same car, you'd have paid more each month but own a £10,000 asset outright at the end. A lower PCP monthly payment isn't always cheaper overall.
| Route | End-of-deal position | Approx. total paid | You own the car? |
|---|---|---|---|
| PCP: part-exchange with equity | £1,500 equity as next deposit | Deposit + 48 monthlys | No, rolls into new deal |
| PCP: pay balloon to keep | Pay £8,500, own outright | Deposit + 48 monthlys + £8,500 | Yes |
| HP | Own automatically | Deposit + 48 higher monthlys | Yes |
| Lease (PCH) | Hand back, walk away | Deposit + 48 monthlys | No |
Compare the total, not the monthly
Common mistakes at the end of a deal
Most end-of-deal mistakes come from not knowing your options, or defaulting to whatever the dealer suggests. Avoid the ones below.
Auto-signing a new deal without checking equity
Paying the balloon without shopping it
Forgetting voluntary termination
Ignoring a shortfall
UK rules that protect you at the end
The Consumer Credit Act 1974 and FCA rules give you settlement rights, voluntary termination, and fair treatment at the end of any regulated car finance agreement. Leasing sits outside some of these, so check your contract.
The Consumer Credit Act 1974, sections 99 and 100 (specifically sections 99 and 100) sets out your right to end a regulated HP or PCP early by giving notice once you've paid 50% of the total amount payable. The FCA's CONC rules add that lenders must treat customers fairly, handle complaints promptly, and support customers in financial difficulty. That covers how end-of-deal charges and inspections are run.
If you feel you were mis-sold, or your end-of-deal charges weren't properly explained, you can complain to the lender first and then to the Financial Ombudsman Service free of charge. See the wider picture in our guide to car finance claims.
Frequently asked
What are your options at the end of car finance?
What happens at the end of a PCP agreement?
What happens at the end of an HP agreement?
Can you end a car finance agreement early?
What is voluntary termination and who qualifies?
Is it better to pay the balloon or hand the car back?
Do I own the car at the end of a PCP?
What is the option-to-purchase fee on HP?
Can I settle my car finance early without a penalty?
What happens if my car is worth less than the balloon at the end?
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