What is a settlement figure? Paying off PCP car finance early (2024)

FAQs

What is a settlement figure? Paying off PCP car finance early? ›

The settlement figure is the amount you'll have to pay in order to end the agreement early and that includes returning the vehicle to the dealership. Penalty fees may be added to the amount you owe on PCP as well.

Paying off PCP car finance early. If you have a car finance arrangement, the settlement figure will be the amount that you still owe. As you'll be paying off your car finance through monthly bills, you'll always owe some money on your finance until you reach the end of your contract.

Ending Personal Contract Purchase (PCP) early

Be aware you won't get anything back if you paid more than half the cost of the car. Returning the car might make sense if, for example, it had depreciated in value to the extent your remaining payments would add up to more than its current value.

An early settlement figure is the amount still owed, plus interest and charges if you want to pay off your car finance early. Our settlement figure calculator does not include any additional penalty charges that may be incurred.

There is usually a charge to settle a personal contract purchase early, but it is not normally large. Some finance companies also allow you to pay in additional lump sums during the term, to either reduce your monthly payments or bring the end-date forward.

You can end a PCP agreement early so long as you've paid 50% of the total finance amount back to the company. The total finance amount includes any interest and fees that you have to pay.

Changing PCP Early by Paying 50% of the Finance Costs

The second way in which you can change your car on PCP early is via the Consumer Credit Act of 1974. This act gives you the right to terminate a PCP deal if you've paid at least 50% of the total finance costs. This includes fees, interest, and balloon payment.

If you choose to settle your finance early, you'll be skipping out on the interest you'd have to pay if you stuck to your finance agreement. This doesn't mean it will automatically be cheaper, as you may need to pay extra fees for early termination, admin, or that final balloon payment that comes with PCP.

Under the Consumer Credit Act 1974 you have the right by law to terminate your PCP finance agreement early if you've paid 50% of the total finance. Importantly, this includes the final balloon payment, plus any additional fees.

Typically it is a good idea to pay off your car loan early if you have solid personal finances or if you are looking at making a significant purchase in the near future. However, this is not always the case and lenders may have barriers for doing so.

What would my settlement figure be? ›

In simple terms, a car finance settlement, also known as an early settlement figure, is the total amount of money you still need to pay to your lender in order to fulfil the financial commitment of your loan. This figure will be given to you by your lender should you wish to repay the remainder of your loan in one go.

All you have to do is get in touch with your finance company and ask them for a “settlement figure”. By law your lender has to post a settlement figure to you within 12 days – usually it will arrive straight away via email or in the post. It must be a letter headed official document.

To determine a potential settlement value, they first combine the total of medical expenses to date, projected future medical expenses, lost wages to date and projected future lost income. The resulting sum is then multiplied by the pain and suffering multiplier value to produce a projected settlement amount.

If you have a car on PCP finance and you're looking to reduce your current car finance monthly payments, or want to keep your car beyond the end of the contract but can't afford the optional final balloon payment to buy it, then refinancing may help.

To calculate the optional final payment for your PCP car finance contract, the car finance provider will take a look at the market and base an estimate on how the value of other cars has fallen. The optional final payment will be a fixed cost, no matter how the value of your car actually depreciates.

If your car is worth more than the balloon payment at the end of the contract, then paying this could leave you better-off in the long run, even if you don't want to keep the car. You could sell the car immediately, leaving you with a surplus amount.

To determine a potential settlement value, they first combine the total of medical expenses to date, projected future medical expenses, lost wages to date and projected future lost income. The resulting sum is then multiplied by the pain and suffering multiplier value to produce a projected settlement amount.

With PCP the amount you'll borrow is decided by the finance company's prediction of how much the value of the car will drop over the term of the deal (usually 24 or 36 months), they also subtract the deposit from this to give them the total amount you'll owe. You'll then make monthly payments including interest.