What is a car finance settlement figure?

Roman Danaev

13 April 2022

Car finance is a complicated subject. You might have come across the term “car finance settlement figure” while browsing for car loans. It's an important number that helps determine how much you'll pay in interest when combining monthly payments with financing costs over time.

But what does it mean? And why should you care? Let us break it down here, so all of your questions about this confusingly-named topic get answered! Here, we'll explore the ins and outs of settling your car finance with early payments.

What does my settlement figure mean?

A settlement figure is the total amount of money that you owe to your creditors. This includes any interest and that have accrued on your debt. You may need to know the settlement figure if you're planning on selling or replacing your car before the end of your agreement.

Why do you need a settlement figure?

The amount of money required to settle your car loan is called an ‘early settle figure,’ or ESF. This represents the final payoff for ending the agreement. So, if you want to pay off your finance, it’ll be obvious why you’ll need to know this figure.

The most common reasons many people have for paying off their car finance early are either that they would like to sell their vehicle or they want a new one.

The amount required to pay off your debts is often not clear-cut and can depend on the type of loan you have. Your final, or ‘balloon’ payment, is not the only charge to consider when determining your PCP deal. Your final payment, plus any early redemption charges, will be included in the settlement figure. So simply adding up your monthly payments won't give you an accurate number.

How do I request a settlement figure?

The best way to get a settlement figure on your car loan is to contact the lender and ask them how much you have left to pay. This can be done whether you're thinking of changing cars or repaying early, as both situations will require contact between the parties involved, with detailed information about your loan and its terms.

Your lender can provide you with the settlement figure over the phone, by email (which can take 2-3 days), or on paper, which takes up to 7. Once you make payment in full, they'll confirm receipt and send you a signed letter stating that your debts were settled! Keep this document safe as you may need it again further down the line.

How are settlement figures calculated?

Your lender will calculate your settlement figure by adding up all your remaining monthly payments, subtracting any interest charges which will no longer be incurred. They’ll also add in any arrears if applicable! You should receive this confirmation in writing, so there can be no mistake about how much money is due.

The further you are into your agreement, the lower the settlement figure is likely to be. Read over your contract carefully and find out what they are!

Car finance settlement figures on PCP deals

Paying off your PCP agreement early is always a tough decision, but if you want to keep the car and settle your car finance earlier than planned, this will be necessary. The settlement figure covers any outstanding on finance as well as other charges that are added onto each monthly repayment amount for early termination with a lender.

The final payment, also known as the balloon payment, is an additional cost that you will need to take into consideration when purchasing your car (to the overall settlement figure).

The car's value often remains high throughout the contract term because monthly payments with PCP deals only cover the difference in prices between what is paid on the initial purchase and how much the car will be worth when you end your agreement.

Car finance settlement figures on hire purchase deals

Paying off a car with HP is much quicker than that of an equivalent PCP deal because you’re making larger monthly payments.

HP contracts are easier to manage because there's no optional final payment at the end of the deal. You'll still have to pay off, but this makes settlement figures for HP Deals more manageable - especially towards the last few months of the contract term.

Can you avoid a car finance settlement figure?

If you plan on replacing your car with the same lender, they might be willing to waive any settlement figures as long as it's within their policy. However, this isn't guaranteed and will depend on individual circumstances.

Can I settle my car finance early?

You can save money on interest by paying off your car loan early. The sooner you repay the contract, the less interest you will be charged.

The first thing you should do if you want to sell your car is to contact the finance company and ask them for an estimate on how much it will cost. This settlement figure may be valid in specific time frames, but make sure that any payments due during this period won't affect what they offer.

Alternatives to paying a final settlement figure

There are several other options you may want to consider before deciding to sell your car and paying the settlement amount.

Paying a final settlement figure with voluntary termination

The right to end your car finance deal early is covered by the Consumer Credit Act 1974. You have this power for both Personal Contract Purchase (PCP) or Hire Purchase agreements, which is known as"Voluntary Termination."

It is possible to end your car finance deal before the contract expires, but you’ll have to pay at least 50% of what's due. You won't be able to keep it after termination as there isn't enough money paid upfront for that final payment. Be aware this includes any optional adds-on like interest rates - so if those were included in addition to the purchase price, then they'll also need to be repaid as well.

You have the option of paying whichever amount is left to take you up past 50%. Once at this point, Voluntary Termination becomes available

Paying a final settlement figure with voluntary surrender

The last resort option is to return the car and still owe the full outstanding amount. If you're lucky, your lender will recover some or most of the funds by selling it at auction for a reasonable price.

But what if the car sells at auction for less than you owe? You will still be responsible for making up any losses, and your lender might chase you for this money.

When it comes down to choosing between voluntary surrender and termination, opt for the latter. If you can't afford your monthly payments, explain that to the finance company, and they might be able to help cut down on costs. They may even offer an extended contract or an allowance for mileage ratio adjustments in order to make things easier while keeping you in budget.

Find the right broker for a faster offer

An expert car loan broker helps you find and apply for the perfect finance deal for you. Let our specialists help you get started and save time in the process! We're here to walk through every step with ease - just give us a call if there's anything else we may be able to assist with.

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