Ending Car Finance Early: Settle, Sell or Hand Back

How can you end car finance early?

There are four ways to end car finance before the term is up — and which one is cheapest comes down to your settlement figure versus the car's value.

Whatever route you take, the first step is the same: ask your lender for a settlement figure, or work one out with the settlement calculator. That tells you exactly what it costs to clear the agreement today.

• Settle in full: pay the outstanding balance now and save the remaining interest.
• Sell or part-exchange: settle the finance from the sale and keep any equity.
• Voluntary termination: hand a PCP or HP car back once you've paid 50% of the total amount payable.
• Hand back at the end: return a PCP car when the agreement finishes, within its mileage and condition terms.

Settling your finance in full

Settling means paying the outstanding balance in one go to clear the agreement early. You save the interest you'd have paid over the remaining term, minus a small charge the lender can add.

Under the Consumer Credit Act 1974, you get a statutory interest rebate when you settle early, though the lender may add up to about one month's interest. Work out the figure on the settlement calculator before you commit.

Selling or part-exchanging the car

You can sell or part-exchange a financed car, but you must settle the finance first because the lender still legally owns it. If the car is worth more than you owe, the difference is yours to keep.

Sell privately and you'll clear the settlement figure from the sale, then pocket any equity. Part-exchange and the dealer handles the settlement for you. See the full process in selling a car on finance.

Voluntary termination: handing the car back

Voluntary termination lets you hand a PCP or HP car back once you've paid 50% of the total amount payable, and owe nothing more. It's a legal right under the Consumer Credit Act 1974.

This is useful when the car is worth less than you owe, so selling would leave you out of pocket. Read how it works and check your 50% point on voluntary termination.

Which option works out cheapest?

The cheapest option depends on whether you're in positive or negative equity. If the car is worth more than you owe, sell. If it's worth less, voluntary termination usually wins.

If you owe more than the car is worth, you're in negative equity — check how much with the negative equity calculator before you decide.