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Will a car dealer settle my finance?

You are ready to take the plunge and get a new car, but you still have outstanding finance on your current car. What options do you have? We are here to help!

Outstanding finance refers to the amount you still owe on your current car. Whilst car dealerships may be able to settle your outstanding finance, it can be complicated. Our comprehensive guide breaks down everything you need to know about your car finance deals.

In This Guide:

  • Your contract
  • Car dealerships
  • Settling your car finance
Your contract

Before you approach the car dealerships, it is important that you understand your contract. Make sure you are fully aware of any clauses and fees which you may incur when trying to settle your car finance. Also, this will help you to decide whether settling with a car dealership is the best option for you.

Returning your car to the finance company you have loaned from

Firstly, check if you are able to return your car to who you originally purchased it from. This is usually an option when you have paid off less than half of your agreed credit. If you have paid more than half it is unlikely that you will be able to return it.

Voluntary termination

If your contract has a voluntary termination clause this means you are able to hand your car back, without having to make any additional payments. However, for this to happen you would have to have paid off more than 50% of the total cost. It is very unlikely you will be able to if you have paid less than the 50%.

Early exit fee

When you settle your car finance early you usually don't have to pay off the interest. However, you may be hit with an early exit fee. In most situations, it is the cheapest of the following:

  • 1% of the outstanding loan amount
  • 0.5% of the whole amount if there are less than 12 months to be paid

It is important to note that in most cases, if the fee is less than £8,000, you will not be liable to pay the early exit fee. Despite this you would still have to pay the outstanding interest.


The final option you have is settling your finance. Firstly, you need to write to the finance company and ask them to provide you with a settlement figure. Once you know how much it is going to cost you to settle, it puts you in the perfect position to ask car dealerships to pay off your remaining car finance.

Car dealerships

You have got your settlement figure and you are ready to head to the car dealerships and ask them to settle your finance. However, there is one more thing you need to know before you get there, and that is about negative equity.

Negative Equity

After you purchase a vehicle, the value of it naturally decreases in most cases. When the value of the loan is more than your car it is known as negative equity. For example, your car is worth £9,000 but your loan is still £11,000, resulting in £2,000 negative equity. In this case a car dealership may choose to pay off the worth of the car, e.g. the £9,000. This would leave you needing to find the extra £2,000 to pay off the rest of the loan. If you are unable to find this then the car dealership is unlikely to settle your outstanding finance.

Settling your car finance

Car dealerships can cover your car finance. However, it is a complicated matter and you need to ensure that you are honest with them, providing accurate figures and following protocols. Going there prepared with your settlement fee is the first step to providing you with a smooth transition into your new motor.

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