A settlement figure in car finance is the exact total amount you must pay to close your agreement early and gain outright legal ownership of the vehicle. It is not simply your remaining monthly payments added together, it includes several components your lender must disclose in writing.
Most borrowers assume they can add up their remaining monthly payments and arrive at the number. They can't. The settlement figure includes outstanding principal, accrued interest, any unpaid instalments, and — for Personal Contract Purchase (PCP) agreements — the balloon paymentif you want to keep the car. Lenders apply an interest rebate under the Consumer Credit Act 1974, which reduces the total, but the final figure still surprises most people.
A settlement figure includes:
- Outstanding loan principal — the amount you originally borrowed, minus what you've already repaid
- Accrued interest — interest that has built up to the settlement date
- Any unpaid instalments — missed or deferred payments still owed
- Statutory interest rebate — a deduction applied under the Consumer Credit Act 1974, which reduces the total because you're repaying early
- Balloon payment (PCP only) — if you hold a Personal Contract Purchase agreement and want to keep the car, the Guaranteed Future Value is included in your settlement figure
The settlement figure is the price of exiting your agreement early. Pay it, and legal ownership transfers to you immediately.
What is the difference between a settlement quote and a settlement figure?
A settlement quote is a time-limited estimate your lender provides when you ask how much it would cost to settle — typically valid for 28 days. A settlement figure is the final, exact amount due on the specific day you make the payment. The difference matters because interest accrues daily: if your quote expires before you settle, you'll need a fresh one.
When and why do you need a settlement figure?
The settlement figure is the key number that unlocks any major change to your car finance arrangement. You'll need it when:
- Selling the car privately — the finance company retains legal ownership until settlement is paid; you cannot transfer title to a buyer until the lender is cleared
- Part-exchanging at a dealership — the dealer uses the figure to pay your lender before applying any remaining equity to your next car
- Paying off early to own outright — to end the agreement before the final payment date and keep the vehicle
- Refinancing to a better rate — switching lenders requires settling the existing agreement first
- Upgrading to a new car — the settlement figure determines whether you have positive or negative equity going into the deal
What is a settlement agreement in car finance?
Your right to settle a car finance agreement early is protected by law, not left to your lender's discretion.
A settlement agreement is the legal contract between you and your lender that governs early repayment of your finance deal, setting out the terms under which you can close it before the scheduled end date and take full legal ownership of the vehicle. The Consumer Credit Act 1974 is the statutory framework that makes this possible for all regulated agreements, whether you're on Hire Purchase (HP) — where monthly payments cover the full cost of the car with no balloon — or Personal Contract Purchase (PCP), where a deferred balloon payment sits at the end.
Under Section 97 of that Act, your lender is legally obligated to provide a settlement figure within 7 working days of a written request, free of charge. The settlement agreement is your formal record of that obligation, evidence the lender must honour the figure they quote.
How is a car finance settlement figure calculated?
A car finance settlement figure is calculated using the actuarial method, as prescribed by the Consumer Credit (Early Settlement) Regulations 2004. This method combines your outstanding principal balance, interest accrued to the settlement date, any unpaid instalments, and applicable early settlement fees — then deducts a statutory interest rebate for the loan portion you'll no longer use. For PCP agreements, the balloon payment is included if you intend to keep the car.
Interest accrues daily on the outstanding balance, so your settlement figure changes every single day. That's why lenders issue time-limited quotes rather than a fixed number.
The validity window depends on your agreement size. For agreements of £9,000 or under, the 28-day rule applies. For agreements over £9,000, or with terms over 10 years, the 58-day rule applies: the lender adds a further 30-day deferment period, building 58 days of interest into the figure from the outset. Most UK car finance falls into this second category. If you don't settle within the quoted window, you'll need a fresh quote.
Why is your settlement figure not the same as your remaining balance?
Your remaining balance — the number on your online account or monthly statement — shows only the unpaid principal. It doesn't include daily interest accrual, the deferment period, or the interest rebate. Your remaining balance is not your settlement figure.
Here's what that looks like in practice. Say your statement shows £5,000 outstanding. Your lender's formal settlement figure might come back at £5,480. That gap exists because the lender has added accrued interest and up to 58 days of deferment interest, then deducted the statutory rebate for months you're cutting short.
Only a formal settlement quote from your lender gives you the true cost of ending the agreement early. Early in a finance agreement, this gap tends to be largest: car finance interest is front-loaded, so the outstanding principal reduces slowly at first.
How does a settlement figure work on a PCP deal?
PCP settlement figures include the balloon payment (also called the Guaranteed Minimum Future Value (GMFV)) and this is why they often look significantly higher than borrowers expect.
The reason comes down to how PCP is structured. Your monthly payments cover only the vehicle's depreciation over the agreement term, not its full purchase price. The remaining value of the car sits as the balloon payment, deferred to the end. When you settle early and want to keep the car, that outstanding amount becomes part of your settlement figure.
Hire Purchase (HP) works differently. HP monthly payments gradually cover the vehicle's full cost, so there is no balloon payment waiting at the end and no balloon to include in a settlement figure.
If your PCP settlement figure looks high, this is why. It is not a hidden charge or a penalty. The balloon payment was disclosed in your original agreement paperwork from day one; settling early simply brings it forward.
Worth knowing: if you return the car rather than buying it, you do not pay the balloon. The settlement figure including the GMFV only applies when you want outright ownership. If returning the car is an option you are considering, voluntary termination may be worth exploring before you commit to settling.
How do I request a settlement figure, and how long does my lender have to respond?
You can request a settlement figure from your lender through 3 channels, each with a different turnaround time.
- Online via your lender's app or customer portal — typically instant; most major lenders offer this through their self-service dashboard
- By phone — usually processed the same day; call the customer services number on your agreement or statement
- In writing by letter or email — takes longer, but this is the recommended route because a written request formally triggers your legal rights under Section 97 of the Consumer Credit Act 1974, which requires your lender to provide a written settlement figure within 7 working days, free of charge
A written request also creates a paper trail, useful if there's any dispute about the figure later.
Important: always ask specifically for a "full early settlement figure". Do not ask for a "voluntary termination figure" — these are 2 different products. A settlement figure ends the agreement and transfers legal ownership of the car to you. A voluntary termination figure ends the agreement and returns the car to the lender.
Once you receive your settlement figure, you typically have 28 days to decide whether to proceed before the quote expires. Requesting a figure creates no obligation to pay.
One final step many borrowers miss: once you have paid the settlement figure in full, ask your lender for written confirmation that the agreement is closed and you hold clear legal title to the vehicle. Until you receive that document, the lender's legal interest in the car remains technically active.
Am I legally obligated to pay a settlement figure once I've requested one?
Requesting a settlement figure creates no legal obligation to pay it. Under the Consumer Credit Act 1974 and the Consumer Credit (Early Settlement) Regulations 2004, a settlement figure is a free, non-binding information request, you're simply finding out what early repayment would cost, not committing to it.
You can review the number, weigh up the costs, and walk away without penalty. There's no fee for requesting, no impact on your credit file from the request alone, and no pressure to act.
If the 28-day window passes before you decide, the figure expires, but requesting a fresh one is just as free and straightforward. The quote is yours to use or ignore.
How long is a car finance settlement figure valid?
A car finance settlement figure is valid for 28 days from the date your lender issues it, though some lenders use shorter windows of as little as 10 days, so check your quote carefully.
The reason figures expire is straightforward: interest accrues on your outstanding balance every single day. Your early settlement figure is a snapshot tied to a specific date and a specific set of assumptions about when you'll pay. It is not a locked-in rate.
2 things can make your quote inaccurate before these days are up:
- First, if the window simply expires, the accrued interest will have moved on.
- Second, if you make a monthly instalment payment after the quote is issued, your outstanding balance drops so the figure your lender calculated no longer reflects what you actually owe.
In either case, request a fresh quote. Expiry is not a trap; it just means the number needs refreshing before you act.
With the validity window and daily accrual in mind, the next question is whether settling early is actually worth it financially.
Is settling your car finance early worth it?
Early settlement on car finance is worth it when the interest you'll save over the remaining term outweighs the settlement figure you pay today. That comparison is the whole decision.
Your settlement figure already includes a statutory interest rebate, the lender deducts future interest you'd otherwise owe, so you're not charged twice. What you're actually paying is the outstanding principal, accrued daily interest up to the settlement date, and, for PCP agreements, the balloon payment if you want to keep the car. Compare that total against the sum of your remaining monthly payments. If the settlement figure is lower, you save money.
Under the Consumer Credit Act 1974 and the Consumer Credit (Early Settlement) Regulations 2004, lenders cannot charge penalty fees for settling a regulated agreement early. A small number of older agreements carry a nominal admin fee of £5 to £10, but on any modern regulated deal, the settlement figure is the only cost.
Settlement isn't the only path forward. The right choice depends on what you actually want to achieve: own the car, return it, or reduce your monthly payments.
What are the alternatives to paying a settlement figure?
Your 3 main options are full early settlement, voluntary termination (VT), and refinancing. Each produces a different outcome, and eligibility varies.
| Option | What it is | Eligibility | Outcome |
|---|
| Full early settlement | Pay the settlement figure to close the agreement immediately | Available at any point | You own the car outright; no further payments |
| Voluntary termination | Return the car and end the agreement under the Consumer Credit Act 1974 | You must have paid at least 50% of the total amount payable — this includes your deposit, monthly payments, and fees, but the balloon payment on a PCP also counts toward the threshold | Car returns to the lender; no ownership transfer; no further payments if the threshold is met |
| Refinancing | Replace your current agreement with a new one, typically at a lower rate | Requires lender approval; your settlement figure clears the existing balance | Agreement continues under new terms; monthly payments or total interest may reduce |
The 50% threshold is the key gate for VT. If you haven't reached it, voluntary termination isn't available, your choice is between settlement and refinancing.
If you want to own the car immediately, settlement is the only route. If you want to return the car and walk away, VT is the right path (provided you've hit the 50% mark). If your goal is lower monthly payments without ending the agreement, refinancing gives you that without requiring the full settlement figure upfront.
Contact your lender to explore whichever option fits your situation. They're required to provide a settlement figure within 7 working days of a written request, free of charge so you can get the number you need before committing to anything.
Final words
You now have everything you need to make a confident decision about your car finance settlement figure. Contact your lender through their online account portal for an instant figure, by phone for a same-day response, or in writing if you want a formal record, the legal timeframe for a written reply is covered in the how-to section above. Once you have the figure, you can weigh early settlement against voluntary termination, refinancing, or continuing your payments, knowing exactly what each option costs.
