How To Calculate Car Finance Early Settlement Amount

There are some fantastic benefits that come with paying off your car finance early. You can switch cars, save money on interest, and reduce your monthly outgoings.

However, before you do, understanding how to calculate car finance early settlement can save you from any surprises.

In this blog, you’ll discover how to calculate your car finance settlement figure. We’ll also explore the pros and cons of paying it off early and how to minimise costs.👍

Understanding Car Finance Settlement Figures

A car settlement figure is the amount you’ll need to pay to complete the finance agreement.

It’s logical to think that you’ll simply need to add up the remaining monthly payments to end up with your settlement amount. However, this doesn’t consider any early settlement fees charged by the lender.

If you settle early, the lender will lose interest. That’s why most types of car finance agreements include early repayment charges. 

How to Calculate Your Car Finance Early Settlement

How much you need to pay to settle your car finance early will depend on your individual circumstances. The type of agreement you took out will impact the overall amount.

The best way to calculate how much you’ll need to pay is to use an early settlement calculator like the one we offer here at Carmoola.

Pros and Cons of Settling Your Car Finance Early

To decide whether settling your car finance early is the right option for you, consider these pros and cons:

Pros of settling car finance early:

• Peace of Mind: You'll be out of debt sooner, with no more monthly repayments.
• Potential Savings: Depending on your finance terms, you could save money by settling early as you won’t have as much interest to pay.
• Flexibility: With no more monthly payments, it can free up your budget for other things.

Cons of settling car finance early:

• Early Settlement Fees: Many lenders charge a hefty lump sum for early settlement.
• Budget Impact: A large one-off payment can put a dent in your savings.

By weighing up these pros and cons, it should give you an idea of whether settling early is the right decision.

Car Finance Settlement Amounts: Various Deals

If you do decide to settle your car finance early, the deals you are offered depend on the type of finance you took out. Here we explore the deals you can expect from PCP, Hire Purchase, and leasing agreements.

Car Finance Settlement Figures on PCP Deals

When you want to end a PCP car finance agreement early, you need to pay a settlement figure.

The settlement figure will include any fees that have yet to be paid. These include the rest of the interest payments and the remainder of your monthly payments, plus extra repayment charges.

If you want to buy the car, you’ll also need to consider the cost of the final payment, otherwise known as the “balloon payment”. 

Car Finance Settlement Figures on Hire Purchase Deals

Monthly payments on Hire Purchase deals are usually much higher than PCP agreements. This is because you don’t need to pay a balloon payment at the end of the agreement.

The monthly repayments you make account for the entire value of the car. That’s why settlement amounts on HP deals are usually a lot lower than PCP.

You will still need to pay an early settlement fee in most cases, but it can still work out cheaper than PCP.

Car Finance Settlement Figures on Lease Deals

Leasing agreements, also known as Personal Contract Hire (PCH), can be more difficult to get out of early.

You’ll need to find out whether you have an early termination clause. In some cases, your only option might be to pay off at least half of the remaining costs other than the loan itself.

Strategies to Minimise Early Settlement Costs

If you're keen on paying off early but want to sidestep hefty costs, here are a few handy tips:

Understand Your Agreement: Go through your contract. See if there are any clauses about early repayment and any associated fees.

Negotiate: Sometimes, just talking to your provider can lead to a better deal. It never hurts to ask!

Partial Payments: Instead of paying off the whole amount, consider making larger monthly payments. This can reduce the loan amount without triggering early settlement fees.

Your best bet is to make sure you know what you’re getting into before you sign for a car finance deal.

If you’re not familiar with some of the terms of the contract, ask the lender for clarification. You can also get your budget to see how affordable the repayments will be.  

Settling car finance early can free up money each month, but it might be more expensive than you think.

Use our handy calculator to get an idea of how much you’ll need to pay to exit your agreement early.

Need a new car finance agreement? Head over to our car finance app, where you can apply and receive the funds you need the same day.😀

Read more about early settlements:

• Early Settlement: Car Finance Jargon Busters
• Can You Get Out of PCP Car Finance?
• Are There Penalties for Early Settlement of Car Finance?