If you want to bring your car finance agreement to an end early, you’ll usually need to pay the settlement figure. This is usually the amount left to pay on the loan, minus any future interest that you won’t need to pay. Keep in mind that early repayment charges might apply, but you can request the settlement figure from your lender at any time.
Why might you want to end your car finance agreement early?
Car finance is a big commitment – and it’s one that can last up to six years! Life happens and your circumstances can change a lot over that time. A loan that was once perfect for you can become a bad fit over time.
Maybe you’ve started a family and you need a safer set of wheels? Or you’ve been made redundant and need to swap your premium pride and joy for a cheaper model?
There are many reasons why you might need to bring your car finance agreement to a premature end.
Can I settle a PCP agreement?
With PCP, it’s important to keep in mind that your settlement figure will include the balloon payment. This is the lump sum you usually need to pay at the end of your agreement to become the car’s legal owner.
If you’re struggling to pay the full settlement figure, you could apply for a refinance loan to spread the cost over time.
Are car finance settlement calculators accurate?
While a car loan settlement calculator might give you a good estimate of what your settlement figure might look like, only your lender can give you the accurate figure. There are simply too many variables for the calculators to get it right every time.
How can you find out your settlement figure?
You can contact your lender and request a settlement figure at any time. Give them a call, send an email, or write a letter. Once you’re given the figure, it’ll usually be valid for 28 days.
Is a PCP balloon payment the same as a settlement figure?
The balloon payment in a PCP is the amount you’ll need to pay to buy the car when your agreement comes to an end but it’s not the same as a settlement figure. In fact, if you reach the end of your loan term naturally, you don’t necessarily have to pay the balloon payment. Instead, you can simply hand the car back to the lender and walk away.
What are early settlement fees?
Many lenders charge a fee for ending your car finance early. This is to make up for the interest they’ll lose now that you’re bringing your agreement to an end. Depending on the terms and conditions of your agreement, you might need to pay the equivalent to one- or two-months interest. The exact details should be listed on your agreement – check the small print!
What are the benefits of ending a car finance agreement early?
If you can afford to pay the settlement figure in one, then the big advantage you’ll get is that you won’t have to pay the interest that would be due if you waited for your loan to come to its natural end. However, early settlement charges might cancel these savings out. Typically, the further you are into your agreement, the cheaper your settlement figure will be.