How to Settle Car Finance Early

If you have a car on finance and have thought about paying your finance off early to either own the car outright or get into a new finance agreement, we may have the answers for you.

You may have come into some money and have more disposable income available to buy your car out of the remainder of the agreement, so you don't have to worry about your monthly repayments coming out of your budget moving forward.

Alternatively, you may decide that you want to get into a new car on a new finance agreement, so like to pay your early settlement figure and use any profit you have in your current vehicle as a deposit on something different.

Do you have a car on finance and would like to reduce your monthly repayments? Sign up with Car Credible today; we could help you save money on your deal.

Either way, Car Credible could help you identify your early settlement figure and find a new loan, all from the comfort of your own home, without you having to call your current finance lender for the information.

If you want to give back the vehicle to the finance company without getting into a new loan, voluntary termination is an option. If you've paid off 50% of your finance agreement, you could be entitled to give it back with no additional fees.

How do I settle my car finance early?

Get started by ensuring you have signed up with Car Credible via our deal checker. Here, we will assess your car finance deal in full and provide you with the information you need to know about your deal.

That includes your equity position, outstanding balance, the amount of interest left to pay and more. But most importantly, it will give you your early settlement figure. It's important to track this regularly, so you know your position if you want to get out of your deal early.

It's best to wait until you are in a positive equity position - when your car is worth more than what you still owe the finance company - as this means you have equity to use towards your new vehicle.

When you are in a positive position, if you want to own the car outright, you should call your finance lender to tell them that's what you want to do. If you want to use your equity to get into a new finance deal and a newer car, you can get your free, no-obligation quote via your personalised dashboard and discover the best offers for you.

Once you have gotten your early settlement figure from your finance company, this will only be valid for a few weeks as new payments and interest will likely be made and paid. If you miss the deadline, request a new settlement figure, as this would have changed.

How to settle PCP early?

If you are on a Personal Contract Purchase (PCP) agreement, you will have an optional final balloon payment to pay at the end of your term. If you want to settle your PCP early to own the car outright, you will also need to pay off the balloon payment.

If you prefer to hand your car back to the lender, you should have paid off 50% of the finance under the voluntary termination rule. If you have paid off more than 50%, you will not get refunded the profit in your car.

If you wish to part-exchange your car and use any profit on a new vehicle under a new finance agreement, you can. However, if you have not paid off more than 50% of your finance, you'll need to make the money up yourself.

How to settle HP early?

A Hire Purchase (HP) agreement can be settled by getting your early settlement figure and paying off the outstanding balance. Unlike PCP, there's no optional final balloon payment involved, meaning you own the car outright when you make your final monthly repayment.

If you want to give back the car, you will follow the same procedure as you would with a PCP, and the same if you wish to part-exchange and get into a new finance agreement. The only difference is there's no balloon payment for you to settle.

How to settle early if I have negative equity?

If your car is currently in a negative equity position, it's worth less than the amount you still owe to the finance lender across the remaining months of your deal.

If you wish to settle your finance with negative equity, you will have no profit to help towards any new finance deal, meaning you'd have to pay for a deposit out of your own money.

Likely, you'll also need to make up the difference in the finance to get your equity position into a positive position, so it's worth researching and speaking to your lender for your best options if unsure.

How long does it take to settle car finance?

Once you request your settlement figure from your lender, they should be able to get it to you relatively quickly, and from then, you'll have a fixed deadline by which you need to make your decision - typically two weeks.

If you miss the deadline, you will have to start the process again because your settlement figure would have changed due to interest rates and potential new outgoing payments.

Can I save money if I settle car finance early?

If you know you want to own the car outright and have some disposable income to pay it all off now, you will save money in future interest rates that you'd have to pay each month.

However, you may need to pay an early termination fee, and if you're in a PCP, your final balloon payment. 

You should take time to understand your deal in full before making a decision, particularly if it means that paying it all off now will leave you financially vulnerable until you rebuild your savings.