Can you cancel car finance after signing? NZ cooling-off rules

The short answer

New Zealand law gives borrowers a cooling-off period on most consumer credit contracts, including car finance. Consumer Protection and Community Law set out the same basics:

• Five working days to cancel if the disclosure was handed to you
• Seven working days if the documents were sent by email or fax
• Nine working days if they were posted
• Saturdays, Sundays and public holidays do not count
• You must cancel in writing, and no special wording is required

The period starts once the lender has given you all the information the law requires, not simply when you signed. If the lender never gave it, you can cancel at any time.

That is the headline. The bit that catches people out is what cancelling actually means when you already have the car. Read on before you rely on it.

What “cooling-off” does and does not do

Cooling-off cancels the credit contract. It does not always undo the purchase.

If you have not yet taken the car

Community Law says that if you have not received the goods or services, you can cancel the whole contract and do not have to pay for them. If you are still on the yard and having second thoughts, cancelling is simple in principle.

If you already have the car

If you have taken the car, you can cancel only the credit part. Community Law and Consumer Protection both say you still have to pay the cash price, and you have 15 working days after cancelling to do that. In real life, that means you need money or another loan lined up. Consumer Protection puts it plainly: if you are unsure, do not take the car until you have sought independent advice.

If you borrowed cash

For a plain loan where you have already received the money, Community Law says you can cancel the whole contract by returning the money within the cooling-off period.

What cancelling can cost

Cancelling can cost money even if you act in time. Community Law lists three possible costs:

1. The lender’s cancellation expenses, which must be reasonable
2. Interest for the time you had the credit
3. Compensation for any damage to the goods while you had them

Ask the lender for a payout figure in writing before you decide. If the lender asks for a large cancellation fee, you can challenge it, because fees must be reasonable. See your rights with a car loan.

Cooling-off, a dealer’s “return policy” and a faulty car

These three things are separate, and mixing them up leads to expensive mistakes.

• Cooling-off is a right under the CCCFA to cancel the credit contract within the window above.
• A dealer’s own return or swap policy is a promise from that business. It is not a legal cooling-off right, so get it in writing and read the conditions.
• Rejecting a faulty car is a different right again, based on consumer law about the quality of goods. Consumer Protection says that where a dealer sold you a faulty car you may be entitled to a repair, replacement or refund, and that you should keep making repayments while it is sorted out. If you get a refund, you still repay the finance company.

If the problem is the car and not the loan, cancelling the credit contract may not be the right tool. Our page on your rights with a car loan covers the faulty-car route.

Questions to ask before you sign

A cooling-off right is a safety net, not a plan. These questions help you avoid needing it:

1. What is the annual interest rate, and what is the total I will repay over the whole term?
2. What are the establishment fee, any monthly account fee and the early repayment fee?
3. Is any insurance, warranty or repayment waiver included, and is it optional?
4. Is the cash price in the contract the same as the price on the car’s Consumer Information Notice?
5. What happens if I miss a payment, and what are the default fees?
6. Which dispute resolution scheme does the lender belong to?
7. How will the paperwork reach me, and on what date?

Ask for the answers in writing, and take the documents home to read. Consumer Protection says to get advice if you have doubts. If your income is irregular, check the loan against a realistic budget with the repayment calculator.

Exceptions: when you cannot cancel

• Short-term credit. Community Law says there is usually no right to cancel a consumer credit contract where credit is provided for a stated period of less than two months.
• Guarantor disclosure. You cannot cancel simply because disclosure was not made to a guarantor.
• Buy now pay later. The Consumer Protection site says the cooling-off period does not apply to buy now pay later, which can be cancelled at any time by repaying the debt.

Sorted notes the disclosure statement should come before signing or within five working days of signing, so check your own paperwork to see when the clock started.

A step-by-step way to cancel

1. Find your paperwork. Locate the disclosure statement and note the date you got it and how it arrived (handed over, emailed or posted).
2. Count the working days. Do not count weekends or public holidays. Count conservatively, and treat the earliest possible deadline as the real one.
3. Write to the lender. Say clearly that you are cancelling the credit contract. Include your name, the loan or contract number and the date.
4. Send it in a way you can prove. Email with a read receipt, or hand-deliver and ask for a signed copy.
5. Ask about costs. Request a written breakdown of any interest and cancellation expenses.
6. Sort the car. If you have the car, arrange how you will pay the cash price within 15 working days, or return the car if the seller agrees.
7. Check it is done. Get written confirmation that the contract is cancelled and the security over the car is removed. A PPSR check shows whether the lender still has an interest registered.

A worked example (illustrative only)

The figures are made up to show the method.

Say you sign a car deal on a Monday, and the lender emailed the disclosure that morning. Under the seven-working-day rule for email, the window runs until the following Wednesday, if no public holiday falls in between. Then you decide the repayments are too tight.

You cancel in writing on the Friday. The lender says it spent $150 on administration and charges interest for the four days you had the credit. Suppose that is about $12. You owe about $162 on top of what you must still pay for the car. If you had already taken the car home, you would then need to find the $18,000 cash price within 15 working days from some other source.

If instead you had not yet collected the car, you would pay the cancellation costs and walk away from the deal. The same decision costs very different amounts depending on whether you hold the car. That is why it pays to think before you drive away.

When cancelling is not the best answer

For many people, the better move is to avoid the situation:

• Read first. Ask for the paperwork a day before you sign. Consumer Protection says you should take the contract home and get advice if you have doubts.
• Compare the total cost. Our guide on car finance interest rates explained and the repayment calculator show how rate and term change what you pay.
• Check the budget. Use the how much can I borrow page before applying.

If the cooling-off window has gone, you still have options:

• Pay it off early. Lenders must accept a full early repayment, though an early repayment fee may apply. See pay off your car loan early.
• Sell the car. If you sell, the lender usually has security over it and the loan must be settled first. Read selling a car with finance owing.
• Ask for hardship help. If circumstances changed, you can ask to change the contract. See struggling to pay your car loan.
• Voluntary surrender or return. Consumer Protection says you can return the car even without a hardship arrangement, but you still owe money, though not penalty interest or repossession costs.

Red flags around cancellation

• A lender or dealer that talks you out of the cooling-off right. The right comes from the CCCFA, so ask the lender to point to the clause if you are told it does not apply.
• A dealer who says you must keep the car and cannot cancel. The credit contract and the sale are separate pieces, so ask a Community Law Centre.
• Missing or illegible disclosure. That gives you the right to cancel.
• Pressure to sign fast. Take the paperwork home.
• A request to pay a fee to a third party “to cancel for you”. That is a scam pattern. See car finance scams.

How Fair Finance helps

Fair Finance is a referral service, not a lender or a broker. One application and one soft credit check go to a panel of approved NZ lenders, and each lender decides case by case. We are paid by the lender only when a loan settles, which never changes your rate. Reading the paperwork and knowing your cooling-off dates is your best protection, whichever lender you use. You can start with the quick check, and no decision has to be made on the spot.

Checklist

• Disclosure statement received, with date and delivery method noted
• Cooling-off end date calculated, excluding weekends and public holidays
• Rate, fees and total repayment understood before signing
• Plan in place to pay the cash price if cancelling after taking the car
• Cancellation sent in writing, with proof
• Written confirmation received and security removed

General information only, not financial advice or legal advice. Check the official sources below. A Community Law Centre can give free initial advice.

Sources

• Community Law: When you can cancel a credit contract
• Consumer Protection: Credit Contracts and Consumer Finance Act
• Consumer Protection: Loan for your car
• Consumer NZ: Borrowers’ rights
• Sorted: Car loans