How to Calculate My Final Settlement Payment For Car Finance

Car financing is a common option for anyone purchasing a car. Individuals can get direct lending from a bank or financial institution, or get into a financial contract with a dealer. These financing agreements come with terms and conditions that dictate the rules of the contract. Once you take up finance for your car, you have to understand how the agreement works. An essential aspect of this is the car finance settlement figure. The early settling figure (ESF) is the amount of money you owe on your loan plus the interest.

This figure represents the cash you would need to pay to end your contract with the lender. A car finance settlement calculator may differ among car financiers. To get the exact amount payable, you should contact your lender to factor in all the costs.

Why Do You Need A Settlement Figure?

Paying off your car finance early can feel a little complicated for a normal person who's not working in car finance. You need to understand the terms and procedures involved, but of course, it's not something you do every day... so you've never needed to understand it before! Let's have a look at some common reasons why people may want to settle the car loan.

You Need To Clear Debts

One may need to settle some outstanding financial obligations as a means to clear their debt. If you're in a position to get enough money to cover your remaining financial obligation, it's best to pay it up. By clearing outstanding payments, you free up cash for other investments.

You Want To Sell Or Change The Car

If you are thinking about your next car purchase, it’s essential to know your car finance settlement figure. Your financing partner should guide you with a car finance settlement calculator to work out exactly how much you owe and need to pay. The repayments will differ depending on your financing plan.

You Are Making Other Purchases

The settlement figure is worth paying attention to if you are planning to make other significant purchases. For instance, if you are getting into a mortgage agreement, you need to pay attention to other financial obligations. Before committing to these types of investments, ask your lender to calculate the car finance settlement figure for you.

How To Get Your Settlement Figure

There are different car finance, early settlement calculators in the UK. Using a generic settlement figure calculator may not include all the additional penalty charges incurred. Therefore, it's best to contact your lender to give you an accurate figure.

Whether you have decided to change your car or settle your outstanding loan early, the lender should know the amount owed based on the contract. Once you request, the lender can share your car finance resettlement figure details via phone or email.

This figure also details how long the settlement figure is valid as this changes over time. If you don't pay up the total amount within the given timeframe, you will need to contact the lender again to get a new figure. After the balance is paid off, they confirm in writing, and you are good to go.

How To Calculate Final Settlement Payment

The settlement figure will differ with every financing company. This calculation's main factors are the original loan amount, length of the agreement, interest rate, first repayment, monthly payment, final payment, and the number of instalments paid.

Your car finance lender will factor in all these figures to get the total payment you need to make. A key thing to note is that online car finance settlement calculators may not give you the accurate amount payable. It’s best to contact your lender to get the exact cash you need to pay.

Car Financing Plans

Your settlement figure will always differ depending on the financing plan you took with your lender. Depending on your credit profile, lenders can either give you a Hire Purchase (HP) plan or a Personal Contract Purchase (PCP). If you wonder how each of these plans operates, here is the car finance settlement figure explained.

Hire Purchase

This finance plan allows you to spread out your monthly car payments over a set period. The monthly payments tend to be higher, but you own the car at the end of the payment.

If you are in an HP agreement, you can pay early by paying the outstanding amount and extra fees listed in the contract. Based on the financial regulations, you do not pay the interest but will be charged an extra fee for the early exit. This figure can be 1% of the amount repaid early.

Personal Contract Purchase

A PCP plan allows you to make specific monthly payments over an agreed period, with a larger payment at the end of the contract. This larger amount is referred to as a balloon payment. Once the contract ends, you have the option to either return the car in good condition, exchange the car for another one or pay the balloon payment to keep the vehicle.

If you decide to settle your PCP agreement early, you need to get the car finance settlement figure from your lender first. This figure will include your final balloon payment and fees for early repayment.


Are Online Settlement Calculators Reliable?

There are several car finance early settlement calculators available online. However, there is no guarantee that they are accurate. Every lender has a different system and offers various products and terms and conditions. To get the most accurate car finance settlement figure, contact your lender.

Will I Incur Early Repayment Charges

When you take a loan from a finance company, the interest charged is the money they make. An early repayment means that you’ll pay less interest which is not in their best interests. Therefore, your lender will charge you extra cash for making an early settlement. All the extra fees should be indicated in your loan agreement.

Do I Save Money By Paying Off My Car Finance Early?

Your car finance settlement figure is calculated to include a rebate of interest for paying early. This plan significantly reduces the total amount you pay in the long run. Therefore, it's critical to contact your lender to get accurate details on the amount you owe.

Car dealers and financial institutions can make your dream of owning a vehicle come true. Once you settle down on your financing plan and sign an agreement, make sure you understand all the terms and conditions. Getting a car finance settlement figure from your lender is a critical step before deciding to pay off the loan early.

It's also important to know how much you owe, especially if you need to sell or replace the vehicle. Calculating the settlement figure is not direct and straightforward due to the extra fees charged by the lenders. Always reach out to your financial provider to discuss your options and get accurate figures.

The great news is that with Carmoola, you can see your settlement figure in the app at any given time, so no need to wait for hours on the phone for a lender to get it. You've got it in your pocket 😉