back Back

Pre-application Support

What is a car finance settlement figure?

Buying a car can be complicated at the best of times, especially when trying to decide between various car finance plans and repayment methods.

If you do find yourself with the finances to repay your car loan in full, or are simply looking to upgrade your car to a new model, you might be wondering how to go about doing so without breaking the terms of your credit agreement.

Fortunately, seeking a car finance early settlement is much more common than you might think, and, while somewhat complex, is a quick and easy way to pay back the remaining cost of any car finance you may have.

To help you better understand what a car finance settlement is, and how to find your car finance settlement figure, we’ve broken down what the various terminology means and the steps you’ll need to know for how to calculate a full settlement for a car loan.

What is a settlement figure for car finance?

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.

Each lender calculates their settlement figures differently so its worth getting in touch with your lender if you’re looking to settle your car finance agreement early.

What are the benefits of a car finance early settlement?

The one primary advantage of pursuing an early settlement figure for car finance is that you have the potential of paying less than you would if you carried out the contract to its natural end, as an early financial settlement doesn’t account for full interest repayment.

It’s also worth bearing in mind that the further into your agreement you are, the less this settlement figure will be, making it easy to pay off closer to the end.

However, that’s not to say there are no downsides to an early settlement. First and foremost, there is a high chance you’ll need to pay early settlement fees in recompense for missed interest.

These won’t necessarily amount to the same as the interest you wouldn’t pay for the early settlement, but it is something to bear in mind when calculating your settlement total and should be something you’re aware of when initially signing your car finance agreement.

Other settlement figures, such as those involved in Zuto PCP finance, will likely also include what’s known as a ‘balloon payment’, which is a lump sum you’re required to pay if you want to own your car after your PCP agreement is complete.

How does a car finance settlement work?

Following the steps for how to find out a settlement figure on car finance is relatively simple. All you have to do is get in touch with your lender.

Don’t be surprised if your lender asks why you’re seeking a finance settlement figure. This is likely because, if you’re planning to upgrade your car rather than sell it, they may be able to assist you with a better financing alternative.

Your lender will then take the time to calculate your total repayment balance based on your remaining monthly instalments until the end of your agreement, while excluding any interest you would owe for each individual payment.

Any missing payments will then be added to this total, along with any early repayment fees, plus interest, before the final figure is sent to you in writing. This value is then valid until your next monthly payment, at which point you’ll need to ask for a new financial settlement figure calculation.

Bear in mind that not all lenders carry out early finance settlements, so be sure to double-check the details of your finance agreement before signing if you think you might opt for an early car finance settlement in the future.

Is there a car finance settlement calculator?

While it might seem tempting to use a car finance settlement calculator you find online, unlike a car finance calculator, there is actually no official way to calculate car finance settlements.

Every lender operates differently, with different finance options, interest rates, and terms and conditions, making each settlement unique to the person in question, so you should always get in touch with your lender if you want a precise finance settlement figure.

If you’re interested in looking at car finance with the potential for an early settlement, get in touch with the Zuto team today. We offer a variety of car finance options, including Zuto HP car finance and used car finance, as well as help and advice if you have any questions along the way. You can also check out our blog for even more helpful articles like this one.

Recommended articles