Returning the vehicle to the creditor under the hire-purchase contract without paying the difference

1. Principles of hire-purchase contracts and vehicle returns

A hire-purchase contract is a separate contract under the Civil and Commercial Code, which is widely used in the automobile hire-purchase business. Its main point is that the hire-purchaser must pay installments according to the agreed-upon terms. If the contract is breached, such as by missing several installment payments, the hire-purchaser has the right to repossess the vehicle and terminate the contract.

In cases where the lessee is no longer able to make the payments and wishes to return the vehicle, voluntary return of the vehicle without any default may result in waiving the responsibility for the difference arising from the auction sale of the vehicle. This shall be considered in accordance with the law and the Supreme Court's guidelines.

2. Considerations regarding relevant laws

Section 573 of the Civil and Commercial Code

  1. The lessee has the right to terminate the contract at any time, even if it is not specified in the contract.
  2. Termination of the contract requires the return of the leased property to the owner (financier), with the lessee paying the delivery costs.
  3. If the lessee only notifies the contract termination but does not return the vehicle, the contract is not considered terminated.

3. In cases where you do not have to be responsible for the difference in cost

If the lessee returns the vehicle before he or she becomes the defaulter, for example:

  • Unable to pay installments and return the car before the due date, 3 installments overdue
  • Return the car without any collection fees
  • Finance accepts return of the car without any conditions regarding the difference in price.

In such cases, if the finance company sells the vehicle at auction for a price lower than the remaining debt, the hire-purchaser is not liable for the difference, as the hire-purchase contract was terminated voluntarily by both parties.

4. Example of Supreme Court decision No. 5239/2018

  • The lessee (Defendant 1) returned the car to the finance company without defaulting on the payment.
  • The Supreme Court ruled that when the hire-purchase contract is terminated without the lessee being the party in breach of the contract, the financier has no right to claim the difference from the auction sale.
  • The guarantor does not have to share responsibility for the difference.

5. How to return the car to the finance company

In the case that the finance company accepts the return of the car

  1. Write a letter to terminate the lease contract and inform the finance company.
  2. Inspect the vehicle before delivery and take photos as evidence.
  3. Negotiate with the finance company to issue proof of vehicle return.
  4. Review the document carefully before signing, avoiding any statements that require liability for the difference.

In the event that the finance company refuses to accept the vehicle back

  1. Record the daily record as evidence.
  2. Take the car to deposit the property at the Department of Enforcement.
  3. Notify the finance company to come and collect the car back from the Department of Enforcement.

6. Precautions

  • You should consult a lawyer before returning the car.
  • If the finance company sues for the difference, you may have to fight the case using evidence.
  • If the documents are incomplete or lost, it may result in losing the case.