What Is Settlement Figure?

What a settlement figure is, in plain English

The settlement figure is the discounted payoff amount that ends your finance today: your remaining capital and fees, minus the interest you save by not going to term.

Think of your finance as a schedule of future payments, most of which are interest you haven't yet been charged for. When you settle early, you're opting out of those future interest charges, so you shouldn't have to pay them. The settlement figure is your outstanding capital plus an adjustment for the interest the lender legitimately retains, minus a statutory rebate for the interest you're saving by paying early.

This is why, on any deal that charges interest, the settlement figure is lower than the sum of your remaining monthly payments. The remaining payments include interest that, if you settle, you never actually owe. The figure also typically includes a small allowance the rules let the lender keep: roughly 58 days' interest at most, because the rebate is worked out from a settlement date 28 days after your notice, pushed back by up to about one more month on deals longer than a year. Even with that allowance, settling early almost always saves you money versus going to term.

How a settlement figure works — the mechanics

The settlement figure is calculated under the Consumer Credit (Early Settlement) Regulations 2004: outstanding capital plus retained interest, minus a statutory rebate, worked out from a settlement date 28 days after your notice that the lender can defer by about one more month on deals longer than a year (roughly 58 days in all).

The lender starts with your outstanding capital, which is what you still owe on the car. It then calculates how much interest is built into your remaining payments. Under the 2004 Regulations, you get a rebate on the unearned interest, calculated using the formula the Regulations set. The settlement date for that calculation is 28 days after the lender receives your notice, and on an agreement longer than a year the lender may defer it by a further month (or 30 days): roughly 58 days' interest in total.

The result is a figure valid for a set period, typically 28 days, and sometimes quoted as a 'daily' figure that accrues a little interest each day beyond the quote date. If you settle within the validity window, that is the amount you pay. If you let it lapse, you request a fresh one. The figure changes over time because each monthly payment reduces the outstanding capital, so a settlement figure requested later in the term is lower in absolute terms (though by less than the sum of the payments made, because of the rebated interest).

The settlement figure is the input to several practical decisions. To sell or part-exchange privately, you need it to know whether you have positive or negative equity. To compare settling early against carrying on, you compare it against the sum of your remaining payments. And to take up a 0% or low-rate refinancing offer elsewhere, you need it to size the new loan. Every early-exit option starts from this number.

Settlement figure vs remaining payments vs balance

Your settlement figure is lower than your remaining payments because of the interest rebate, and it differs from your 'balance' because the balance often excludes the rebate and fee adjustments.

Don't confuse the three when a dealer quotes you a number. The 'settlement figure' is the only one that reflects what you actually pay to clear the finance today. The 'balance' is an internal accounting figure, and the 'remaining payments' is the most flattering of the three to the lender because it bundles in interest you'd never pay if you settled.

Settle early vs carry on to term

Settling early costs you a lump sum now but lowers your total cost, while carrying on keeps your monthly low but pays full scheduled interest, so the choice turns on the APR and your cash.

A worked example

If your remaining payments add up to £10,200 but the interest rebate is £700, your settlement figure is around £9,500. Paying that now ends the agreement and saves the rest of the interest.

The £700 difference is the interest you would have paid over the rest of the term, rebated because you're settling early. Even after the lender's permitted allowance of up to about a month's interest, the figure lands at roughly £9,500, clearly below the £10,200 you'd pay if you simply continued. That £700 is your saving, realised the moment you settle.

This is the figure you'd quote to a dealer in a part-exchange, or to a new lender if you're refinancing. Compare it against the car's value to find your equity: worth more than £9,500 and you have positive equity to roll forward; worth less and you're in negative equity and need to cover the gap. Estimate yours first on the settlement calculator, then request the official figure from your lender.

When and why a settlement figure matters to a UK driver

The settlement figure is the number you need for every early-exit decision: selling, part-exchanging, refinancing, or simply deciding whether to carry on.

It matters most when you're weighing a change. Without the settlement figure, you cannot know whether you have equity to put towards the next car or negative equity to cover, so any deal a dealer offers you is opaque. With it, you can hold your ground: you know exactly what clearing the finance costs, and therefore what the car is genuinely worth to you in a trade.

It also matters for the pure decision of whether to settle early with savings. If you have the cash, comparing the settlement figure against what that cash would earn in savings (after tax) tells you whether paying off the finance or leaving the money invested is the better move. At higher finance APRs, settling early often wins; at very low rates, the maths can flip. The settlement figure is the essential input to that calculation.