What is a settlement figure?
A settlement figure is the total amount you need to pay to fully pay off your car finance agreement before its originally agreed end date. It includes several components:
- Remaining Loan Balance: The outstanding amount of the original loan, which may have been reduced by any previous payments you’ve made.
- Accrued Interest: Any interest charges that have built up on the loan until the settlement date.
- Additional Fees/Charges: Any extra costs, such as early repayment fees or other charges imposed by the lender for settling the loan early.
You can request a settlement figure from your lender, which is applicable to different types of car finance agreements, such as Hire Purchase (HP) and Personal Contract Purchase (PCP) plans. This figure helps you understand the total amount required to clear your debt and end the finance agreement early.
How does vehicle settlement work?
Vehicle settlement refers to paying off the remaining balance of your car finance agreement in one lump sum, rather than continuing with monthly repayments until the end of the term. By settling early, you fully own the car, eliminating future payments and any ongoing interest. This option can be appealing if you want greater financial flexibility or are considering upgrading to a new vehicle sooner.
How is the settlement figure calculated?
Your settlement figure is calculated based on several factors, including the remaining balance of the loan, the current interest rate, and the time left until the end of the finance term. It also considers any additional charges or fees, such as early repayment penalties, which are factored in when determining the final settlement amount.
How do I find my settlement figure?
The simplest way to obtain your settlement figure is to contact your car finance lender directly. They can quickly calculate the exact amount you need to pay to settle your loan, including any interest and fees. Some lenders also provide an online portal where you can log in to view the remaining balance on your agreement. However, this may not reflect the full settlement figure, so it’s always advisable to confirm the exact amount with your lender before making any financial decisions.
Can I settle my car finance early?
In most cases, it is possible to settle your car finance agreement early, depending on the terms and conditions of your contract. However, it’s important to review your agreement carefully, as there may be early repayment penalties or fees. To get a clear answer, it’s often best to contact your lender or finance broker directly, as they can quickly explain the financial implications of settling your car finance early.
Is a settlement figure cheaper?
Opting to pay the settlement figure early could save you money in the long term, as it prevents interest from continuing to accumulate by ending the loan sooner than originally planned. This means you’ll pay less overall due to reduced interest. However, it’s important to consider any early repayment fees or charges, as these could diminish the savings depending on their size. Not all finance agreements have such fees, so it’s essential to check with your lender or review your agreement to see if there are any terms related to early settlement.
Will a car dealer settle my finance?
It is possible. Some car dealerships may offer to settle your existing finance as part of a new purchase, particularly if they have incentives to sell you a new vehicle. This can simplify the process, as the remaining balance on your current car will be included in the new finance deal. However, it’s important to carefully review the terms and conditions of such arrangements to ensure they won’t lead to financial difficulties later. For instance, settling your current finance through a new agreement could result in higher monthly payments than what you’re currently paying.
Do I own the car if I pay the settlement figure?
Yes, once you pay the settlement figure, you will own the car outright, and the finance agreement will be considered settled. The official ownership of the vehicle will be transferred to your name, and you’ll be free to do as you wish with the car from that point forward.