The rule which entitles you to return the car is based on half the payments and not half the term of the contract.
If you have a copy of your agreement, there will be a section headed "Termination: Your Rights". This will give you the exact figure you need to have paid in order to be able to hand the car back.
If you haven't paid that much yet, you can still hand the car back if you make a payment to bring you up to that amount.
If you've already paid that much, you aren't entitled to the excess back.
That figure does not include arrears, however. Even if you have already paid half the total amount payable, you still have to clear any arrears in full before you can hand the car back. That may be where the �400 figure has come from.
Do you know how much the car would be worth if you were to sell it privately rather than trading it in? You are able to sell the vehicle and use the proceeds to settle the finance, so if your settlement figure is �2000ish and you can find a buyer willing to pay that amount, you may be able to go down that route to upgrade. If you can get more, you could put the extra cash towards a deposit on the next vehicle, to help lower the monthly repayments.