Get your hands on a Carmoola Gift Box Learn More


How Do I Repay My Car Finance Loan Early?

Time goes on, and circumstances change. Maybe you're looking for a new car but you haven’t finished repaying your car finance loan. You’re probably asking yourself can I end my car finance early so I can buy a better car? Good news: it's possible! 👍 Let's find out how. 

There are many reasons why you might want to pay off your car finance early. Depending on your situation, there can be different ways to go about it. So before we dive deeper into how to pay off a car loan early, let’s consider a few important points to think about. 

Should I Pay Off My Car Loan Early?

If paying a car loan early is allowed, the real question is should you pay your car loan off early? Well, the answer is tricky, because there are a few factors to consider first. For example, how much is paying off car finance early going to cost you?

The Cost of Paying off Your Car Loan

In many cases, you’ll need a big amount of money so you can pay everything off. Will you still have enough in savings to cover those unforeseen emergencies? The first steps to take are to find out the amount you would need to pay the lender as settlement,  and whether you can afford to pay it. 

The next thing to consider would be how much money you’ll be able to save in interest by paying off car finance early in the UK. This depends on the car finance interest rate that the lender offered you when you took a loan. You’ll then be able to compare what you'll save in interest payments with what the lender wants by way of settlement. In other words, what is the settlement amount you’ll need to pay to the car finance company so you can finish the contract?

How to End a PCP Early

When you take out a personal contract purchase or PCP, you have two ways to end the contract. The first one is through what’s called “voluntary termination” and the other is by paying the lender early. 

Ending a PCP Early Through Voluntary Termination

Voluntary termination is for people who realise they can no longer keep up with the monthly payments. They have to return the vehicle in order to stop making the monthly repayments. Keep in mind that you’ll only be able to do this if you have already paid off half of the car’s overall cost, including interests and fees. 

Paying Off the PCP Early

The second option is paying off the PCP early if you have the funds to do so. All you have to do is talk to the car finance company so you can ask what the settlement figure is so you can terminate the PCP agreement.

The settlement figure includes the amount you still owe the lender, along with a fee that compensates the interest that you would have paid the lender if the loan went through the agreed loan term. And since this is a PCP agreement, you need to be ready to pay for the final "balloon" payment, which will inevitably be larger. 

Once you’ve paid off everything, you’ll be the car’s sole owner at last. You’ll be free to keep the car or sell it if you feel it doesn’t fit your needs anymore, or to purchase a new car. 

How to Pay Off HP Early

Paying for Hire Purchase or HP is a lot similar to the above process for a PCP. You may also end the contract through voluntary termination (if you’ve already paid half of the car’s overall cost) or pay everything off. 

What’s different here is that since it’s an HP agreement, you don’t have to make a balloon payment. That’s why the monthly repayment amount is higher compared to PCP. Another thing is that with HP, the loan repayment amount is higher than PCP. Therefore, returning the vehicle early will allow you to save more when it comes to interest. 

Again, if you have money to spend to pay off your HP early, once you make the payment, you’ll be the owner of the vehicle. The settlement amount is the outstanding loan amount, plus a penalty interest fee (usually equivalent to 30 days of interest). Usually, your quote is valid for 28 days.

When you pay off HP early, you’ll be the owner of the car. You’re free to keep it or sell it, depending on your needs, financial situation, and goals. 


So if you have been wondering, "can car finance be paid off early?" then the answer is yes, definitely, it is possible to end your car finance early. You might be doing this for different reasons, for example if you simply want to pay the remaining balance of your loan, or if you can’t afford any more repayments. It’s all a question of making the right decision according to your situation. 😊

Here at Carmoola, we’re experts in all things car finance, and we have new blog posts coming out every day. Stay tuned, and feel free to get in touch if you have any questions!

We’d love to hear your thoughts on this article!