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Early Car Finance Settlement Explained


Many people take out car finance to pay for new vehicles because paying all at once is often not viable. But what happens if you want to settle your car finance early?

There are several things to be aware of, so here’s a guide explaining the most important issues.

When Can You End the Agreement?

If you have entered into a car finance agreement, you may be able to end it early. However, it is easier to end the agreement when you have paid back 50 per cent of the finance because this means you can return the car.

Voluntary Termination

One way to end the agreement is through a voluntary termination. If you are struggling to make the payments and you don’t need the car, you can use this to return the car and not pay anything else once you have paid off 50 per cent.

If you have not yet paid off 50 per cent of the total amount, you will usually need to pay off the difference. That means coming up with the money to pay off the amount remaining to bring you up to 50 per cent.

You can start the process by sending your lender a letter stating that you want to return the car. State that you want to go ahead with a voluntary termination, and make it clear that you are not defaulting on the loan.

Pay Off the Settlement Figure

You may also be able to settle early by asking your lender for a settlement figure. This is the money that you will have to pay if you want to terminate the arrangement.

Your lender will provide you with a figure, and you can then pay this off and the car will become yours to do what you want with. You could then sell it to recoup some of the costs.

Remember that you cannot sell your car until it is yours, which means until you have paid off the entire loan or paid the settlement figure.

Credit Score Issues

A voluntary termination will show up on your credit record, but it will not make any difference to your score and it is better to do this than to miss payments.

But it’s still best to avoid using voluntary termination too frequently because it ends up costing the lenders more when they end an agreement early, so it may not look great on your record.

The most important thing of all is to always stick to your payments until you have sorted out the voluntary termination to avoid hurting your credit score. We can help you if you are looking for car finance with bad credit.

Decide on Your Course of Action

If you decide that you want to end your car finance arrangement early, this is often possible, but you have to make sure you go about it in the right way.

So look at all of your options to work out what the best course of action is in your situation if you want to end your agreement early.

Frequently Asked Questions

Can you pay off your car finance early?

Yes, with the agreement of the finance company, you can reach an early settlement. You will be expected to pay the ‘difference’ from the amount you have already paid to 50% of the loan agreement value. However, you’re probably best to wait until you have paid off 50% of the loan so you can return the car.

What is a settlement figure?

If you are attempting to exit the loan agreement early, the term “settlement figure” is the amount of money you will have to pay to clear the loan. The settlement figure will be made up of the money you owe on the car finance and extra charges like admin and early settlement fees.

Marketing Director at Skyemotion Ltd
As marketing director, Paul is largely responsible for Carvine’s online presence and underwriting along FCA compliance.

At Carvine, we pride ourselves as a team of impartial vehicle finance experts that will direct you through the easy application process. As a result, our dedicated team put you in control of one of life’s biggest buying decisions. Consequently, we are all you need to finance your vehicle.

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Paul Thompson

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