# Voluntary Termination of a Finance Agreement on a Smart Car



## Multiprocess (Aug 9, 2004)

Hi all

My GF has a Smart Car and has paid over 50% of the agreement.

She wants to buy an A1 and the Audi dealer told us yesterday, because you have paid over 50% on her Smart she can just hand it back without any penalty!!

She rang Smart this morning to be told she can, but it will affect her credit rating, will it?

I have read the terms of her finance agreement with Smart and it doesn't say it will, but as she is a women she is panicking!!

Cheers Lee


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## kmpowell (May 6, 2002)

Settling (in full) an agreement early will not effect your credit rating.


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## jampott (Sep 6, 2003)

kmpowell said:


> Settling (in full) an agreement early will not effect your credit rating.


He's asking if they can hand the car back having paid +50% of the agreement.

That may not be the same as settling in full.


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## pas_55 (May 9, 2002)

Multiprocess said:


> Hi all
> 
> My GF has a Smart Car and has paid over 50% of the agreement.
> 
> She wants to buy an A1 and the Audi dealer told us yesterday, because you have paid over 50% on her Smart she can just hand it back without any penalty!!


Smart do like charging for such things as stone chips etc


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## mcmoody (Sep 17, 2008)

I'm assuming there is no equity in the car which is why she's simply looking to hand it back?


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## kmpowell (May 6, 2002)

jampott said:


> kmpowell said:
> 
> 
> > Settling (in full) an agreement early will not effect your credit rating.
> ...


It is the same. PCP is designed to allow "handback" early within given time-frames (and conditions) specified in the contract. If you do this within the signed contract agreement you are in effect "settling early". When doing so you get an interest rebate, which is why the dealer is using scare tactics. Double check with the finance company, but my understanding is there are no adverse effects on your credit score.


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## glslang (Dec 5, 2009)

With an HP agreement you have termination rights as soon as half the credit is paid. It doesn't affect your credit score. Why would it? You paid as per the agreement. The finance company should be able to give you a settlement figure as well which you can use to trade in for another car. Don't know about all the details of PCP v. HP so the above may not apply.


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## wja96 (Mar 4, 2010)

I think this has the potential to damage her credit rating indirectly. She is probably in negative equity on the car (otherwise why would she be doing it) and if she just hands it back then she effectively owes Smart Finance money.

That clause is designed to allow people in financial distress to get out of agreements. Smart have basically loaned her too much money and the loan is more than the car is worth. That's Smart's risk. It won't show up as a bad debt on her credit score, but it would show up that she had used that form of exiting from the agreement which could be a flag for other lenders not to lend to her.

It may be worth asking Smart Finance what entry they will make on her credit record if she does this. It's certainly tempting if you are in serious negative equity.


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## glslang (Dec 5, 2009)

One can never know but it could well be noted that the agreement was terminated. This could impact on future HP and/or PCP (higher interest rate or less money available) i but I can't see how would impact in general.
Would it affect the ability of getting a mortgage? Probably not. Most applications done online and instantly approved wouldn't be able to take those special notes in consideration I would have thought. 
Credit score is just a part of the whole risk assessment process. And if people have a steady source of income it could just simply be perceived as a normal change of circumstances.
At the end of the day they have the car and the settlement figure is the value they believe is worth. And is usually based on dealer value rather than the actual value ;-).
I effectively terminated early to acquire my TT and the settlement figure was used as the actual value of the car. Was the same finance company all along (needs to be said) and my credit score/ability to acquire credit wasn't affected at all.
Take all the above with a pinch of salt of course. It's just my own perception of reality...


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