What is a car finance settlement figure?

A settlement figure is the total amount you need to pay to clear your car finance agreement in one go. If you want to settle your loan before the agreed end date, you'll need this figure from your lender. It includes all outstanding costs: the remaining balance on your original loan, any accrued interest, and potentially additional fees or charges.

You can request a settlement figure for most types of car finance agreements, including Hire Purchase (HP) and Personal Contract Purchase (PCP). In an HP agreement, you make payments until you own the car outright. With a PCP, you have lower monthly payments with the option to buy the car at the end. Knowing your settlement figure helps you decide if paying off your finance early is the right choice for you.

Why do you need a settlement figure?

If you plan to pay off your car loan early, you'll need a settlement figure. This early settlement figure (ESF) is the total amount you must pay to clear your car finance agreement ahead of schedule.

Many people settle their car finance early because they want to sell their car or upgrade to a new one. The amount you need to repay isn't always simple and depends on your loan type. For example, in a Personal Contract Purchase (PCP) deal, your final or 'balloon' payment isn't the only cost to consider. The settlement figure includes this final payment plus any early repayment charges.

Simply adding up your remaining monthly payments won't give you the correct settlement amount. The settlement figure accounts for outstanding balances, accrued interest, and any additional fees. Knowing this figure helps you decide if settling your finance early is the right choice for you.

How do I request a settlement figure?

To get your settlement figure, simply contact your lender and ask how much you have left to pay on your car finance. Whether you plan to change your car or pay off your loan early, you'll need this information.

Your lender can provide the settlement figure over the phone, by email (which may take 2-3 days), or by post (which can take up to seven days). After you pay the full amount, they will confirm receipt and send you a signed letter stating that your debt is settled. Keep this letter safe—you might need it in the future.

How are settlement figures calculated?

Your lender calculates your settlement figure by adding up all your remaining monthly payments. They then subtract any interest charges you won't have to pay because you're settling early. If you have any arrears (unpaid amounts from previous payments), they'll add those in as well. You'll receive this calculation in writing, so you'll know exactly how much you owe.

The further you are into your agreement, the lower your settlement figure will be. Make sure to read your contract carefully to understand all the details.

Car finance settlement figures on PCP deals

To settle your Personal Contract Purchase (PCP) agreement early and keep your car, you'll need a settlement figure. This figure includes any outstanding finance and charges for ending the agreement before its scheduled end.

Include your final payment, called the balloon payment, when calculating your total settlement figure. This is the amount you'll pay if you decide to buy the car at the end of your PCP agreement.

In PCP deals, your monthly payments cover only the difference between the car's initial price and its expected value at the end of the agreement. This means the car retains much of its value during the contract. Knowing your settlement figure helps you decide if paying off your finance early is the right choice for you.

Car finance settlement figures on hire purchase deals

Settling your Hire Purchase (HP) agreement early is quicker than settling a Personal Contract Purchase (PCP) deal. With HP, you make larger monthly payments, so you pay off the outstanding balance faster. HP contracts are easier to manage because there's no final balloon payment at the end. This makes settlement figures for HP agreements more manageable, especially in the last few months of the contract term.

Can you avoid a car finance settlement figure?

If you plan to replace your car with the same lender, they may waive the settlement figure, depending on their policy and your circumstances. However, this isn't always guaranteed.

Can I settle my car finance early?

Yes, settling your car finance early can save you money on interest, as the sooner you repay, the less interest you'll pay overall. If you want to sell your car, contact your finance company to request a settlement figure. This estimate is often valid for a limited time, so make sure any payments due during this period won’t affect the final amount.

Alternatives to paying a final settlement figure

If you're considering selling your car and paying the settlement amount, there are other options you might explore.

Paying a final settlement figure with voluntary termination

You have the right to end your car finance deal early through a process called "Voluntary Termination," granted by the Consumer Credit Act 1974. This option is available for both Personal Contract Purchase (PCP) and Hire Purchase (HP) agreements.

To use Voluntary Termination, you need to have paid at least 50% of the total amount owed under your finance agreement. This includes all charges, such as interest and any optional extras. Once you've paid this amount, you can terminate the contract. However, you won't keep the car since you haven't paid the full purchase price.

Paying a final settlement figure with voluntary surrender

If you're unable to meet your monthly payments, you might consider Voluntary Surrender. This involves returning the car to the lender and still owing the remaining balance of your finance agreement. The lender will sell the car, often at an auction, to recover some of the funds. If the car sells for less than what you owe, you'll be responsible for paying the difference.

When choosing between Voluntary Surrender and Voluntary Termination, it's usually better to opt for Voluntary Termination if possible. If you're struggling with payments, contact your finance company. They might help by adjusting your payment plan or extending the contract to make it more affordable.

Find the right broker for a faster offer

An expert car finance broker like Carplus helps you find and apply for the perfect finance deal. Our specialists will get you started and save you time in the process. We're here to guide you through every step—just give us a call if you need any assistance.