Exit fee loophole on car finance deals

MOTORISTS on car finance deals may be able to avoid penalties for going over their mileage limit if they cancel early.

Almost nine in ten cars in the UK are bought through personal contract purchases (PCPs).

Customers pay a chunk of the car’s value for up to five years, and a lump sum at the end if they decide to keep the car. Under consumer law they can also hand back the car early.

Most contracts state a penalty must be paid for exceeding a set mileage — often up to 40,000 for the contract or up to 10,000 a year. Penalties can be 5p a mile.

But legal experts say that finance firms are not allowed to do this. They say the Consumer Credit Act 1974 states that as long as half of payments have been made and the car is handed back in good condition there should be nothing more to pay.

But those who refuse to pay the mileage levy risk black marks on their credit files.