Paying Your Car Finance Off Early

Did you know that it is possible to pay off your car finance deal early? We explain exactly how.

Paying off your car finance deal early is possible. However, it can be trickier than it sounds and depends on you being able to meet numerous factors.

If you are financially secure and have money available to you that you can afford to pay off your car finance deal, then it's something you could consider, though we would advise you to do some research and weigh up the pros and cons before doing so.

Do you have a car on finance and want to get into something new? Sign up to Car Credible today to see if you're eligible.

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Paying off your finance now would also save you money in the long run as you would avoid paying the interest on the car. If you have negative equity, it may not be possible to do this, nor be the smartest of ideas right now.

In this article, we take a look at how you can start paying off your finance deal early, including things to look out for along the way. 

Early repayment fees

With paying off your car finance deal early, unfortunately, comes early repayment fees - also known as resettlement fees - which are common in any loan type that you want to pay off before the end of the agreement.

The reason is that even though the finance company will be getting the money back that you initially borrowed, they will miss out on the remaining months of interest you would have repaid to them.

Therefore, they charge early repayment fees to at least make a little bit of money on you making the full repayment. It tends to be a couple of months' interest, so not the end of the world. However, this varies from lender to lender, so it's worth checking your contract before making your decision.

Negative equity

Before you decide on repaying your car finance early, consider if your car is currently in a positive or negative equity position.

If you haven't already, sign up to Car Credible today, and we will inform you whether your car is in a positive or negative equity position in minutes. From there, you can make a more informed decision about what you'd like to do with your deal next. 

Car Credible will show you your whole car finance deal, so you can also see its depreciation value, early settlement figure, how much you've paid to date, how much you'll pay in interest over time, and much more.

If you are in negative equity, you still owe more to the finance company than the car's value. In a situation like this, it's worth waiting until you've made some more of your monthly repayments and find yourself in positive equity.

As previously stated, if you sign up to Car Credible, we can give you your early settlement figure from the comfort of your own home, so you don't have to pick up the phone to your lender to get the figure.


How can I pay off my loan sooner?

Increase your monthly payments

If you can afford it and are desperate to pay off your financial loan as quickly as possible, you could contact your lender and ask if you could make two monthly payments instead of one.

Theoretically, this halves your term so you could pay it off in double time. Doing this would reduce the interest you'd have to pay and get you outright ownership of the car - if you're on a Hire Purchase (HP) deal - or get you into a position to make your balloon payment or hand the vehicle back and get something new if on a Personal Contract Purchase (PCP) deal.

Round up your payments

Again, if you can afford it, it may be worth contacting your lender to see if you can round your monthly repayment up to the nearest £50 or £100. It may only be an extra £20-£30 per month, but it would save you lots in interest over time.

Make a larger-than-normal repayment

This scenario is less likely to be possible, but, for example, if you come into a bit of money, whether that be through inheritance, gambling, or another scenario, you could make a large one-off payment to significantly reduce the amount you have left to pay on the car.

It wouldn't be a regular occurrence, but you'd still find yourself saving money on future interest rates and reducing the time you need to make repayments, though. 


If you're in a good credit position, you could refinance your loan, reduce your APR, and lower your monthly repayments, ultimately saving you money. Car Credible can help you refinance if you're in a position to do so.

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What are pre-computed interest rates?

Pre-computed interest is when you pay the same amount no matter how early you pay off the car. It means that you may not be able to follow the above to help you save money.

It's worth checking your contract before deciding on your car finance as you don't want to be stung with fees.

Also, try to ensure that you make every monthly repayment. If you don't, you may get charged a late payment fee which will also show on your credit history, potentially affecting future loan applications.


Can you sell a car and use the money to pay off your finance?

You will have to settle your finance with the lender before selling the car. The car doesn't belong to you until you have made all of your repayments, so selling it before you have done that would be illegal.

How soon can I pay off my car finance?

As long as your car finance lender has no restrictions, you should be able to pay off your loan whenever you want. You will just need to ask for your early settlement figure first.