How the balance is calculated
The balance follows the standard amortisation identity: the amount financed grows at the monthly rate for the number of payments made, and the payments are subtracted with their own accumulated interest. With no interest, it reduces to the amount financed minus the payments made.
For 20,000 financed at 9.9 per cent over 48 months with payments of 506.20, the balance after 24 payments is 10,985.18. A quote of 11,500 is 514.82 above that figure.
Worked example
After 24 payments of 506.20 the borrower has paid 12,148.80. The calculated balance is 10,985.18, and the lender's quote of 11,500 is 514.82 higher. If the agreement continued, the remaining 24 payments would total another 12,148.80.
These figures are illustrative. Use the terms on your own agreement and the quote your lender provides.
Why the lender's figure can differ
A settlement figure is not just the outstanding balance. Under the Consumer Credit Act the lender must rebate part of the future interest and charges when an agreement is settled early, and some agreements add an early settlement charge.
The rebate is calculated by a statutory method, not by the simple amortisation above. That is why a quote can sit below the arithmetic balance, and why this page reports the difference rather than declaring the quote wrong.
Limits of this calculator
It assumes a fixed rate and equal monthly payments with no balloon, deposit or optional final payment, and no missed or late payments. A PCP with a balloon payment has a different profile and a different settlement figure.
It does not calculate a statutory rebate, and it does not value the car. If the settlement figure exceeds the vehicle's value you are in negative equity, which this page cannot assess.
To estimate what the car is worth against the settlement figure, use the UK car value calculator.
Inputs for the PCP early settlement calculator
Amount financed
The credit amount after any deposit or part exchange, before interest.
Interest rate (nominal, not APR)
The annual rate used to build the payment, divided by twelve each month.
Agreement term
Total monthly payments in the agreement, as a whole number of months.
Payments made so far
How many monthly payments have cleared before the settlement date.
Monthly payment
The fixed monthly amount, excluding any optional final balloon payment.
Settlement figure quoted by the lender
The amount the lender will accept to end the agreement now.
CALCULATOR QUESTIONS
PCP early settlement calculator UK questions
Is this the figure I will be asked to pay?
No. The lender's settlement figure is authoritative. This page shows the arithmetic balance so you can see how the quote compares.
Why is the quote lower than the balance?
An early settlement usually includes a statutory rebate of future interest and charges, which the simple balance does not apply.
Does this work for a PCP with a balloon payment?
Not directly. A balloon payment changes the payment profile and the settlement calculation.
What is negative equity?
When the settlement figure is more than the car is worth. This page does not value the car, so it cannot tell you.