Half Rule Car Finance

What is The Half Rule?

When it comes to buying a car in Ireland, understanding the financial aspects can be daunting. One particular concept that often arises in car financing discussions is the “Half and Third Rule.” So, what exactly is this rule and how does it affect your car purchase?

The Half and Third Rule, also known as the “Half Rule,” is a guideline set by the Central Bank of Ireland. It essentially dictates your statutory rights relating to 1) your right to terminate your Hire Purchase finance agreement, once certain conditions have been met, and 2) restrictions on Lender’s right to repossess the vehicle.

Every Hire Purchase agreement will display a ‘Hire Purchase Price’ figure.  This figures comprises the total cost of the vehicle plus total cost of the finance (applicable charges).  Using this figure, the Half and Third can be explained as follows:

1. The Half Rule

2. Provides for you to terminate your finance agreement, hand the car back to the lender and have no further obligation under the agreement and no negative impact on your credit score, once the following conditions have been met:
   1. You have paid at least half of the Hire Purchase Price stated on your agreement. If you haven’t paid this amount, you will need to pay any shortfall to the lender.
   2. You are not in arrears. If you are in arrears, you will need to bring your repayments up to date (and if still short, any additional monies to make up half the Hire Purchase Price)
   3. You have taken reasonable care of the vehicle
   4. You give notice of your intent, in writing, to the lender.

1. The Third Rule: Provides for restrictions on the Lender’s right to recover the vehicle, under certain conditions:
   1. Typically, when you fall behind in your repayments, your loan account goes into Arrears. The lender will attempt to collect these arrears from you (with interest) by issuing you with a default notice but failing that, as legal owner of the vehicle, will repossess it, which they can do without taking legal action against you.
   2. However, should you have paid a minimum of one third of the Hire Purchase Price stated in your finance agreement, the Lender will need to obtain a court order in order to repossess the vehicle – i.e. take legal action.
   3. If this rule is breached by the Lender, you are entitled to end the agreement and can ask for a refund of all payments made.
   4. Your car cannot be repossessed from your home, regardless of how much money you have paid back.

In summary, the Half and Third Rule in Irish car finance serves as a protective measure for consumers, ensuring that car buyers enter into financing agreements responsibly but equally, provides options and protections for those times when life happens and circumstances change.

By understanding and adhering to these guidelines, you can make informed decisions and safeguard your financial well-being when purchasing a car.  For more information on Hire Purchase agreements and how they can be ended, go to Citizens Information by clicking here for lots of useful information and links.

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