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Ending PCP and HP early – how to settle car finance

Settling your car finance and paying off PCP or HP early is the way to go if you don't want to continue with your monthly payments

Car finance

If you want to settle your car finance early and take ownership of the car, 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 will own the car and can either keep it or sell it.

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.

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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. Any extra direct debits you might pay on your finance deal will impact your settlement figure, so keep an eye on your outgoings.

You should take a look at the early settlement section in your agreement, which will outline any associated costs.

Ending Hire Purchase (HP) early

You can end HP early and keep your car if you pay the settlement fee as set out by your finance provider – you can get in touch to request 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 have to have paid 50% of the contract or be able to reach that figure. If you’ve already paid more than half the car’s cost, you won’t receive a refund for the difference. You’ll find the exact figure in your contract agreement.

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

Ending Personal Contract Purchase (PCP) early

If you want to pay off your 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 will be the legal owner of the car and can either keep it or sell it.

If you want to return your car under voluntary termination, you have to have paid 50% of the contract or be able to make that figure, 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 of the difference if you’ve already passed the 50% mark.

Negative equity and ending car finance early

If you request a settlement figure from your car finance provider, there's a chance you could run into negative equity. This means that the value of your car is less than the settlement figure, as the car has depreciated quicker than you can pay off the finance.

If you do have negative equity, you won’t have any extra funds to use as a deposit on your next finance deal. You might also need to make up that difference from your own pocket to settle the finance, so it’s worth chatting with your finance provider to get your options.

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. This sum is usually valid for 14 days from the date you requested it and will change if you make any more payments on your car in the meantime.

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, admin, or that final balloon payment that comes with PCP.

You’ll need to work out if it’s cheaper based on your own circumstances, as all finance arrangements will be different.

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