how long for dealer to settle finance

So you are in the midst of a car finance plan, let’s say that you have got around two years of a five-year plan remaining, but for a number of reasons, you have decided that you want to change course and buy a new car. Only issue is, you have still got outstanding finance off of the original (or current) motor. You may be able to speak to different car dealers, but at the end of the day, you still have that finance to settle, and it is often asked as to whether the car dealer will be able to settle the finance on your behalf. The answer is yes, but it’s not as simple as that.

Indeed, because you still have outstanding finance, the dealer will ask how much you still have to pay. So, in our example of two years to go on a five-year plan, let’s say that the remaining amount still to be paid is £7,000, with the plan being £3,500 per year. From there, you have to find out what the settlement figure is; what percentage of that amount you would have to pay in order to leave early. The later in the plan that this happens, the better, because having paid more than half of the plan, the settlement will be much lower as a result. From there, the dealer will give you their offer for your existing vehicle, and work out the difference between their offer and your settlement.

At that point, assuming all parties are happy, the car dealer will pay the difference, thus settling your previous finance agreement. As a result, they now own your previous car, because the figure that they offered for the purchase has been offset by the differential that paid off your settlement. Therefore, your settlement has been paid, you have gotten rid of the vehicle, and you have a clean slate to move on and buy a brand new car. It makes sense, because in reality they are actually paying off the full settlement, but they are doing so with the money that you would normally make by selling the motor.

This process can be complicated if you are in negative equity, though. In that scenario, you would most likely require a cash deposit to cover what would be the difference, thus putting you in credit so to speak, as opposed to being indebted based on the value of the car compared to what you still owe. If you cannot make up that difference, then the dealer is unlikely to be able to settle your outstanding finance.

Nevertheless, as we have outlined, a car dealer can and will settle existing finance, so long as you follow protocol and as long as you are clear and honest about the figures involved. 

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