Car Finance Settlement Calculator UK
Model: standard amortisation — monthly payment = principal × r ÷ (1 − (1+r)−n), where r is the monthly rate (APR ÷ 12). The balance after m payments is worked out the same way your lender does it. This is an estimate only: the lender’s figure is final, and it may include interest up to the settlement date plus any early settlement fee.
Why the balance falls slowly at first
Car finance is repaid in equal monthly payments, but the split between interest and capital changes every month. In the early months, most of each payment is interest, because the interest is charged on the full outstanding balance. As the balance falls, the interest part shrinks and more of each payment goes towards the capital. That is why, in the example above, paying 24 of 48 instalments — half the payments — only clears £4,508.62 of a £10,000 loan, leaving £5,491.38 still to pay. The same pattern applies to mortgages and personal loans: the first half of any loan is mostly interest.
The practical consequence is that settling early saves the most money when you do it early, because you avoid the interest that would have been charged on the remaining balance. But settling in the first few months saves very little in capital terms, because you have barely dented the balance. The calculator shows you both numbers — the interest you have already paid, and the interest still to come — so you can see whether settling early is worth it.
How settlement works, step by step
- Ask for a settlement figure. Call or write to your lender and ask for a settlement figure, and the date it is valid until (usually 28 days). By law, under the Consumer Credit Act, they must give you one.
- Check what is in it. The figure is the remaining capital, plus interest up to the settlement date, plus any early settlement fee. For agreements under the Consumer Credit Act the fee is capped — generally no more than 58 days’ interest, and often one month’s interest.
- Pay by the valid-until date. If you pay after that date, the figure changes because more interest has accrued. Pay on time and the lender must mark the agreement settled.
- Check your credit file. After settlement, the account should show as settled on your credit file within a few weeks. If it does not, ask the lender to correct it.
HP, PCP and personal loans settle differently
If your agreement is hire purchase (HP), the car is not yours until the final payment, and the settlement figure pays off the remaining balance so the car becomes yours. If it is a PCP, the settlement figure before the end of the term is the remaining balance on the same basis, but the balloon payment (the guaranteed future value) is part of what you owe — settling a PCP early usually means paying the balloon as well, which is why PCP settlement figures can look surprisingly large. A personal loan used to buy a car is simpler: the settlement figure is just the remaining loan balance, and the car was yours from the start.
There is also voluntary termination, which is different from settlement. Under the Consumer Credit Act, once you have paid half of the total amount payable (including the deposit and all interest), you can hand the car back and walk away from an HP or PCP agreement, with nothing more to pay except arrears and damage charges. That is a legal right, not something the lender can refuse. But it is not free — you lose the car and everything you have paid — so compare it with the settlement figure before you choose.
Worked example: £10,000 at 9.9% APR, 48 months
| Amount | |
|---|---|
| Amount borrowed | £10,000.00 |
| Monthly payment | £253.15 |
| Paid after 24 months (24 × £253.15) | £6,075.50 |
| Capital repaid so far | £4,508.62 |
| Interest paid so far | £1,566.88 |
| Remaining balance (settlement estimate) | £5,491.38 |
| Total cost if run to term (48 × £253.15) | £12,151.00 |
| Total interest over the full term | £2,151.00 |
Settling at month 24 would save the remaining interest of about £584 — the difference between the £2,151 total interest and the £1,567 already paid — minus any early settlement fee. Whether that saving is worth it depends on what else you would do with the money: if the cash would otherwise sit in a savings account earning 4%, paying off a 9.9% loan is the better return. But keep an emergency fund first — clearing a loan and then borrowing again at a higher rate is worse than keeping the loan.
Settle it, or keep paying?
The settlement figure tells you what it costs to end the agreement; it does not tell you whether you should. The question to ask is what the money would earn elsewhere. If the loan charges 9.9% APR and your savings pay 4%, every pound used to settle the loan earns you a guaranteed 9.9% return, because that is the interest you no longer pay. That beats any savings account. But there are two catches. First, keep an emergency fund — settling a loan and then borrowing again at a higher rate, or on a credit card at 24.9%, is worse than keeping the loan. Second, check the early settlement fee: on a small remaining balance the fee can eat most of the saving, and if you only have a few months left, the interest you would save may be only a few pounds.
Making overpayments is a middle path worth asking your lender about. Many lenders let you pay extra each month, which cuts the balance faster and reduces the total interest, without the fee or the commitment of a full settlement. Others only allow overpayments in certain amounts or at certain times, so check the agreement. And if you are thinking of selling the car, remember that on HP and PCP the finance company owns the car until the agreement ends — you cannot sell it privately until you have settled the finance, or the buyer settles it for you as part of the sale. Get the settlement figure first, in writing, before you advertise the car.
Related: PCP vs HP Calculator · Fuel Cost Calculator · Credit Card Payoff Calculator
Sources: Consumer Credit Act 1974 (early settlement and voluntary termination rights); Financial Conduct Authority consumer credit rules. The amortisation maths is standard; the APR and term are inputs you change to match your agreement. Checked 13 November 2026.