What is an early settlement figure?
If you want to end a car finance agreement before the last payment, you ask the lender for a settlement figure. That is the single amount that clears the whole debt, including the final balloon payment on a PCP.
It is not simply the payments you have left. Those payments include interest for months you will no longer have the loan, so the law gives you a rebate of that future interest. Section 94 of the Consumer Credit Act 1974 gives you the right to settle early at any time, and the Consumer Credit (Early Settlement) Regulations 2004 set out how the rebate is worked out.
Why the figure is higher than you expect: the 58-day rule
The regulations let the lender calculate the rebate as though you settled a little later than you actually do:
- 28 days after it receives your notice (regulation 5), and
- for an agreement lasting more than a year, a further month, or 30 days if the lender chooses (regulation 6).
Added together that is up to 58 days of extra interest in the settlement figure. It is legal, every lender does it, and it is the usual reason a quote comes back higher than people expect. This calculator includes it, which is why the figure you see here should be close to a real quote rather than flatteringly low.
Settling early versus voluntary termination
Settling early is not your only option. Under section 99 of the same Act you can hand the car back once you have paid at least half of the total amount payable. That is voluntary termination, and it is a different thing:
| Early settlement | Voluntary termination | |
|---|---|---|
| What happens to the car | You keep it and own it | You hand it back |
| What you pay | The settlement figure | Nothing more, once you have paid half |
| When you can do it | Any time | Only after half the total is paid |
| Condition and mileage | Does not matter | Charges apply for damage beyond fair wear and tear |
If the car is worth more than the settlement figure, settling and selling it usually leaves you better off. If it is worth less, voluntary termination is often the cheaper exit. Our guide to PCP, HP and leasing compares the three in full, and the PCP calculator works out the monthly payment on a new deal.
How to actually settle
- Ask the lender, not the dealer. The finance company holds the agreement. Ask in writing for a settlement figure and the date it is valid until.
- Check the expiry date. A quote is usually valid for a set period. After that the figure changes and you have to ask again.
- Pay before it expires. Once it is paid, ask for written confirmation that the agreement is closed.
- Check the V5C. On hire purchase and PCP the lender owns the car until settlement. Make sure your records show the finance is cleared before you sell it. Our V5C guide explains what the logbook does and does not prove.
How accurate is this estimate?
This calculator uses the actuarial method in the 2004 Regulations: it works out the balance still outstanding from your payment, APR and the months left, then adds the permitted 58 days of interest. Real agreements vary. Lenders apply the rules slightly differently, some add an option-to-purchase fee, and arrears or payment holidays change the balance. Only the lender's own quote is binding. Use this to know roughly what to expect and to sense-check a figure that looks wrong.
VehicleFile is not a financial adviser and this is not financial advice. If you are struggling with car finance payments, free help is available from Citizens Advice.
Sources
- Consumer Credit Act 1974, section 94 (early settlement)
- Consumer Credit (Early Settlement) Regulations 2004
- Consumer Credit Act 1974, section 99 (voluntary termination)
Rates and rules last checked 22 October 2026. These figures are a guide. For a decision that matters, confirm with the official source.