Ending PCP and HP early – how to settle car finance

Settle your PCP or HP car finance early if you want to change car before the agreement ends or can't afford the monthly payments

If you want to settle your car finance early and take ownership of the car, or swap it for a new one, your finance provider will provide you with a settlement figure that includes the remaining payments and any extra charges.

If you pay that figure, you’ll own the car and can either keep it or sell it. There’s also the option to part exchange.

You can also have a car retailer, like cinch, settle your car finance for you so you don’t have to pay the cash amount upfront. This can be helpful if you want to swap your car and part exchange.

If you want to return the car to the finance company, you can opt for voluntary termination. This involves paying 50% of the contract, and after this, you’ll give the car back.

Learn more about settling car finance in our guide. We cover:

Settle your car finance early - how does it work?
Ending Personal Contract Purchase early
Ending Hire Purchase early
Settling car finance and part exchange
Positive equity and ending car finance early
Negative equity when settling car finance
How long does it take?
Is it cheaper to settle finance early?

How to settle car finance early

To end Personal Contract Purchase (PCP) or Hire Purchase (HP) finance agreements early, you’ll need to get in touch with your lender and ask for a settlement fee.

If you’re planning on selling your finance car, you need to pay this settlement fee before you can go through with the sale. This is because you don’t officially own the car until you’re all paid up.

Once your finance company has given you the settlement amount, you’ll need to pay this within a certain timeframe for the figure to be valid.

Some car retailers, like cinch, can settle your car finance for you so you can part exchange.

Any monthly payments you make between getting your settlement figure and paying it will make a difference to how much you need to pay, so make sure to cancel your direct debit if you need to.

Take a look at the early settlement section in your agreement to double-check any associated costs.

The first step to settling car finance early on a cinch car is to reach out to your lender for a settlement letter - then we can take you through what happens next.

Ending Personal Contract Purchase car finance early

If you want to pay off your Personal Contract Purchase (PCP) agreement early and keep your car, contact your lender and ask for a settlement figure, which will include the final balloon payment.

Once you’ve paid this, you’ll be the legal owner of the car and can choose to keep it or sell it.

If you want to return your car under voluntary termination, you need to have paid 50% of the contract or should speak to your lender about reaching that amount, which will be specified in the terms of your agreement.

After you’ve done this, the finance company will take back the car.

It’s important to note that you won’t get a refund for the difference if you’ve already passed the 50% mark.

Ending Hire Purchase early

You can end Hire Purchase (HP) early and keep your car if you pay the settlement fee – get in touch with your lender to find the exact figure. You’ll then be the legal owner of the car and can sell it if you don’t want to keep it.

If you want to return the car early to the finance company under ‘voluntary termination’, you need to have paid 50% of the contract or speak to your lender about reaching that amount.

If you’ve already paid more than half the car’s cost, you won’t get a refund for the difference. You’ll find the exact figure you’re due to pay in your contract agreement.

You need to let the finance company know in writing if you plan to return your car, and it can let you know of the next steps.

Settling car finance and part exchange

If you want to settle your car finance early because you’ve got a new model in mind, part exchange might be a good option.

This way, you get to end your current finance deal and can still get a new car.

Car retailers can often settle your car finance deal for you, arrange the part exchange, and let you know if you’re in positive or negative equity.

Positive equity can be put towards the deposit on your next car, but you might need to make up the difference if you’re in negative equity.

If you want to settle car finance and part exchange with cinch, you’ll need to contact your lender for a settlement figure and then carry out a part exchange valuation on our site.

You can then browse our range of cars to see what suits your budget, considering whether you’re in positive or negative equity.

You can learn more about part exchanging a financed car in our guide.

Positive equity and ending car finance early

When you’re in positive equity on your car finance, it means the value of your car is higher than the amount you owe on finance.

Car finance providers calculate how much they estimate a car will be worth at the end of your finance agreement, but there’s no exact way of knowing.

As they typically plan for the worst case where maximum value is lost, positive equity is quite common.

This can be a good thing because you’ll be able to use your positive equity towards the cost of your next car.

Here at cinch, you can settle your car finance early and use your positive equity towards the deposit for your next model.

Negative equity and ending car finance early

If you request a settlement figure from your car finance provider, there's a chance you could be in negative equity.

This means that the value of your car is less than the settlement figure, as the car has depreciated faster than you're making repayments across your finance term.

If you are in negative equity, you won't get any money back to put towards the deposit of your next finance car.

You might also need to make up that difference from your own pocket to settle the finance, so it’s worth chatting with the car retailer or your finance provider to get your options.

If you want to end your car finance early and part exchange for a new model with cinch, you can pay the negative equity at the checkout.

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How long does it take to settle a car on finance?

It can be a quick turnaround to settle your car finance if you want it to be.

After asking for the settlement figure from your car finance company, it’ll get back to you and let you know what you’ll need to pay.

Settlement figures are usually valid for 14 days from the date you request them and will change if you make any more payments on your car in the meantime or wait too long to pay them.

Is it cheaper to settle car finance early?

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 and admin, and the PCP balloon payment may be included in the settlement amount.

All finance agreements are different, so it’s best to look into the arrangement you made with your lender.