What is a settlement figure and how do I get one?
What a settlement figure includes, why it is not simply the payments you have left, how long it stays valid, and what to do with the answer once you have it.
- Difficulty
- beginner
- Time
- 12 min
- Read
- 5 min
Short answer
A settlement figure is the amount required to close a finance agreement today, and every regulated lender must provide one on request. It is not the sum of your remaining payments: because you are paying early, regulations require a rebate of some of the interest you would otherwise have paid, so the figure is lower than the payments remaining — though usually higher than people expect. It is quoted with an expiry date, commonly around 28 days.
The settlement figure is the number that unlocks almost every decision in the middle of a car finance agreement. Whether you can sell the car, whether a part-exchange makes sense, whether you have equity or negative equity, and whether voluntary termination is worth considering all depend on it. It is also free, quick and available as of right, which makes it one of the more useful pieces of information in personal finance and one of the least often requested. Getting one commits you to nothing.
Step by step
- Ask the lender directly.Not the dealer, and not the manufacturer — the finance company named on the agreement. Most provide it through an online account, an app, or a phone call, and many will send it in writing within a few days. You are entitled to it under consumer credit regulations.
- Understand what it includes.The outstanding capital balance, plus interest accrued to the settlement date, plus any arrears or fees, less the statutory rebate of future interest calculated under the Consumer Credit (Early Settlement) Regulations. On a PCP, it includes the deferred balloon payment, which is why the figure is often much larger than people anticipate.
- Note the expiry date.A settlement figure is quoted to a specific date, commonly around 28 days ahead, because interest continues to accrue. If you go past it you need a fresh one. Ask for the figure timed to when you actually expect to complete.
- Compare it against what the car is worth.This single comparison answers the question you are really asking. Get an independent valuation — dealer part-exchange figures, online buying service quotes and live comparable advertisements — and set it against the settlement figure. The catalogue's guide on valuing a car covers how.
- Interpret the result.If the car is worth more than the settlement, you have equity, which can go towards another car. If it is worth less, that is negative equity and you would need to fund the difference. Both are normal at different points in an agreement and neither is a moral judgement.
- Know how a settlement actually happens on a sale.Typically the buyer, or a dealer, pays the settlement figure directly to the finance company and the balance to you, and the lender then releases its interest and updates the vehicle databases. Private buyers are often nervous about this arrangement, which is why cars with finance frequently go to dealers or online buying services instead.
- Get written confirmation afterwards.When the agreement is settled, ask for written confirmation of discharge, and check that a vehicle history check no longer shows an outstanding interest a few weeks later. Keep both.
- Consider the alternatives before settling.Voluntary termination may be available on hire purchase or PCP once you have paid half the total amount payable, and it works quite differently. Re-profiling the agreement is sometimes possible. Ask about all of them in the same conversation.
Common mistakes
- Assuming the settlement figure is the sum of remaining payments — Regulations require a rebate of future interest when a regulated agreement is settled early, so it is lower than that. On a PCP it also includes the balloon, so it is usually far higher than the remaining monthly payments alone.
- Not asking for one because you assume the answer — It is free, it commits you to nothing, and it is the number every other decision depends on. People spend months uncertain about something a five-minute phone call would settle.
If it doesn't work
Settlement figure is much higher than expected
Cause: On a PCP it includes the deferred balloon payment — Fix: Expected and structural. The monthly payments were only covering depreciation, so most of the car's value is still outstanding until the very end of the term.
Figure is higher than the car is worth
Cause: Negative equity, common in the earlier part of an agreement — Fix: Normal rather than alarming. The negative equity guide in this catalogue covers the options. Doing nothing and running the agreement to term is usually one of them.
Lender is slow to provide it
Cause: Administrative delay — Fix: Ask again in writing, referring to your right to a settlement figure under the consumer credit regulations. If they still do not respond, use their complaints process and then the Financial Ombudsman Service.
Settlement quote expired mid-transaction
Cause: Interest continued to accrue — Fix: Request a fresh figure timed to the expected completion date. Lenders do this routinely and it is not a problem, only a delay.
Private buyer nervous about paying the finance company
Cause: It is an unfamiliar arrangement — Fix: Offer to complete the settlement at the buyer's bank or with a solicitor, or accept that a dealer or an online buying service may be the more practical route for a financed car.
Settled but a history check still shows finance
Cause: Databases not yet updated — Fix: Send the discharge confirmation to the lender and ask them to update. Keep the confirmation — it is the document that resolves this for any future buyer.
Questions people ask
Does asking for a settlement figure affect my credit file?
No. It is a request for information about an existing agreement, not an application for credit, and it does not create a search. It also does not commit you to anything.
Why does early settlement not save more interest?
The rebate is calculated under prescribed regulations rather than simply cancelling all future interest, and lenders are permitted to add a short period of deferment to the calculation. So settling early does save money, but usually less than a simple sum of remaining interest would suggest.
Can I settle part of the agreement?
Partial early settlement is permitted on regulated agreements and reduces the balance, though the effect on the monthly payment or the term varies by lender. Ask them specifically what a lump sum would do — whether it shortens the term or reduces the payments.