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PCP Early Settlement Calculator: Work Out What You'd Pay to Exit Today
If you want to end your PCP agreement before the final payment date, you have the right to do so by paying a settlement figure — the amount your lender calculates as the outstanding balance, adjusted for interest you haven't yet used. This is called early settlement, and it's a statutory right under Section 94 of the Consumer Credit Act 1974.
This page explains how that figure is calculated, walks through a worked example with real numbers, and shows you how to decide whether settling early makes financial sense for your situation.
To get an estimate of your current figure, use the free PCP calculator — no account needed.
How the calculation works
The settlement figure for a PCP agreement is not simply "what you've borrowed minus what you've paid." It uses a method set out in the Consumer Credit (Early Settlement) Regulations 2004 (SI 2004/1483), which requires lenders to apply the actuarial method to calculate the interest rebate you're owed for the portion of the loan you won't be using.
The formula in plain terms:
Settlement figure = remaining monthly payments + balloon payment (GMFV) − interest rebate
The rebate is the key variable. The actuarial method front-loads interest — which means in the early months of your agreement you are paying proportionally more interest than capital. This is a consequence of the way compound interest works on an instalment loan: the outstanding balance is highest at the start, so interest accrues fastest then. As you progress through the term, more of each payment goes toward capital and less toward interest.
What this means in practice:
- Settling in the first half of your contract gives you a relatively large interest rebate — because a lot of future interest charges are still outstanding
- Settling in the second half gives a smaller rebate — most of the interest has already been paid
- The balloon payment (GMFV) is included in the settlement figure in full at any point — it doesn't reduce over time the way interest does
This is why settlement figures can feel high even 30 or 36 months into a 48-month deal: the balloon is still entirely outstanding, and the interest rebate shrinks as you approach the end.
Worked example
The following is a realistic illustration using the actuarial method. These figures are representative — your actual settlement figure must come from your lender.
Contract details:
| Original amount financed | £14,000 |
| APR | 9.9% |
| Monthly payment | £195 |
| Balloon payment (GMFV) | £7,500 |
| Contract length | 48 months |
| Payments made | 24 (halfway through) |
| Remaining payments | 24 |
Step 1 — total of remaining payments
24 remaining monthly payments × £195 = £4,680
Step 2 — add the balloon
£4,680 + £7,500 balloon = £12,180 (gross outstanding)
Step 3 — calculate the interest rebate
Under the actuarial method (Regulation 4, SI 2004/1483), the rebate is the difference between the gross outstanding amount and the discounted present value of all future payments at the agreement's periodic interest rate.
At 9.9% APR with 24 monthly payments of £195 remaining plus a £7,500 balloon at month 48, the actuarial rebate is approximately £890.
(A calculator applies the exact formula; this illustration rounds for clarity.)
Step 4 — settlement figure before lender's interest window
£12,180 − £890 rebate = £11,290
Step 5 — lender's interest window (up to 58 days)
Most lenders add interest for the period between your settlement request and expected payment — typically 28 to 30 days, costing roughly £70–£100 at this balance and rate.
Estimated settlement figure: approximately £11,360–£11,390
This is the amount you'd need to pay today to close the agreement and own the car outright. Whether that makes sense depends on what the car is worth — see how to check your PCP equity.
The 28-day and 58-day rules
Two statutory timeframes affect your settlement figure. Both are set by the Consumer Credit (Early Settlement) Regulations 2004.
The 28-day settlement date (Regulation 5)
When you give notice to your lender that you intend to settle, the Regulations define your settlement date as 28 days after the lender receives your notice. Your lender calculates the settlement figure to that date, which means interest accrues for those 28 days on top of today's balance.
The 30-day deferment (Regulation 6)
For agreements longer than one year, your lender may also defer settlement by one additional month (or 30 days if elected). Combined with the 28-day notice period, this can mean up to 58 days of additional interest is added to your settlement figure. This is entirely lawful and is why formal settlement quotes are always slightly higher than calculator estimates.
Your formal written quote from the lender is valid for at least 28 days from the date they provide it. Full detail on requesting your formal settlement figure is in our dedicated guide: PCP Settlement Figure: How It's Calculated.
Should you settle early?
Use this framework to decide. You need two numbers: your settlement figure (estimated from the calculator or formally from your lender) and your car's current market value (from We Buy Any Car for the floor, Motorway or Auto Trader for a private sale ceiling).
| Your situation | What to consider |
|---|---|
| Car worth more than settlement figure (positive equity) | Settlement may make financial sense. You pay off the finance, own the car, and either keep it or sell it — capturing the equity difference. Compare the cost of settling against the equity you'd release. |
| Car worth less than settlement figure (negative equity) | Settling means paying more than the car is worth. Unless you have a specific reason (e.g. changing circumstances, reducing monthly outgoings), consider whether Voluntary Termination is a better route — it caps your liability at 50% of the total amount payable. |
| You've paid 50% or more of the total amount payable | You can hand the car back for free under Section 99 of the Consumer Credit Act 1974. This is almost always better than settling when you're in negative equity and past the 50% threshold. |
| You want to part-exchange for a new car | The dealer will request your settlement figure and handle the payoff — you don't need to settle separately. You get credit for any positive equity as a deposit. See your early exit options compared. |
| You're struggling with payments | Contact your lender first — they're required by FCA rules to treat customers in financial difficulty fairly and must consider options like payment deferrals before enforcing the agreement. Settlement is a permanent action; deferral may be more appropriate. |
How to get your official figure
A calculator gives you an estimate useful for planning. When you're ready to act, you need the formal written settlement figure from your lender. Under the Consumer Credit Act 2006 (Section 97A), your lender must:
- Provide the settlement figure in writing
- Deliver it within a reasonable timeframe (in practice, most lenders provide it within 7 working days)
- Hold it valid for at least 28 days
- Provide it free of charge — they cannot charge you for a settlement statement
You can request it by calling your lender or through their online portal. When requesting, confirm:
- Your agreement number
- That you want a formal written settlement figure (not just an indicative balance)
- The date you intend to pay (this affects the calculation if it falls beyond the 28-day notice window)
If your lender fails to provide the settlement figure, they lose their right to enforce the agreement while in default — this is set out in Section 97 of the Consumer Credit Act 1974.
Full lender contact details for the most common UK finance companies are listed in our PCP Settlement Figure guide and our equity check guide.
FAQs
Is an early settlement calculator accurate?
A calculator provides a close estimate based on the actuarial method, but it cannot replicate the exact figure your lender will quote. Lenders apply the same actuarial formula but may vary in how they round figures, when they define the settlement date, and whether they apply the full 58-day interest window. Use a calculator for planning and decision-making; always get the formal written quote before acting.
Can my lender refuse an early settlement?
No. The right to early settlement is a statutory right under Section 94 of the Consumer Credit Act 1974. Your lender cannot refuse it. If they do, the Financial Ombudsman Service handles complaints about this free of charge.
Will settling early save me money?
It depends on your interest rate and how early you settle. Because of the actuarial (front-loaded) interest structure, settling in the first half of the contract generates a meaningful rebate. Settling in the final 6 months saves relatively little on interest — the rebate is small by then — so the main benefit is simply closing the agreement rather than a financial saving on interest costs.
Does early settlement affect my credit score?
Settling a finance agreement early is recorded as a closed/settled account on your credit file. This is a neutral-to-positive outcome — it does not damage your credit score. The payment history up to the point of settlement remains on your file. There is no early settlement penalty recorded.
What's the difference between early settlement and Voluntary Termination?
Early settlement means you pay off the remaining balance (including the balloon) and own the car. Voluntary Termination means you hand the car back without owning it. Settlement is better if the car is worth more than the settlement figure. VT is better if you're in negative equity and want a clean exit without owing the full remaining balance. Our VT guide and early exit options comparison cover both in detail.
Can I settle part of the agreement early?
Yes. Under Section 94(3) of the Consumer Credit Act 1974, you can make early partial payments — paying a lump sum to reduce the outstanding balance without closing the agreement entirely. Your lender must apply this to the outstanding debt. This can reduce your monthly payment (if they recalculate the schedule) or shorten the term, depending on your lender's process.
How long does an early settlement take?
Once you have the formal settlement figure, most lenders process payment within 3–5 working days. Allow a week from payment to confirmation that the agreement is closed. You should receive written confirmation and notification to the credit reference agencies that the account is settled.
Sources
- Consumer Credit Act 1974, Section 94 — right to early settlement
- Consumer Credit Act 1974, Section 97 — duty to provide settlement information
- Consumer Credit (Early Settlement) Regulations 2004 (SI 2004/1483) — actuarial method, settlement date, rebate calculation
- Consumer Credit Act 2006, Section 97A — written settlement figures within 7 working days
- Financial Ombudsman Service — free dispute resolution for consumers