How the rebate is calculated
The lender discounts the payments you still have to make back to today at the loan rate. The difference between that present value and the total of the remaining payments is the rebate.
On a regulated agreement the calculation follows the Consumer Credit Act rules, with a permitted charge of up to 28 or 58 days' interest depending on the size of the loan.
Worked example
A loan with £320 a month and 30 payments left at 11.9% has £9,600 of remaining payments. Discounted at the loan rate, the settlement figure is £8,479.09, so the rebate is £1,120.91.
The 58-day settlement charge is £84.79, making the total to settle £8,563.88. The net saving against making every remaining payment is £1,036.12.
When the rebate is small
Near the end of the term most of the remaining payments are principal, so there is little interest left to rebate. The charge can then cancel most of the saving.
Ask for a written settlement quote valid for a stated period, and check that the rebate and charge are shown separately.
Inputs for the car loan rebate calculator
Monthly repayment
Your regular monthly repayment, from your agreement or statement.
Repayments left
How many monthly repayments are still to come.
Interest rate (APR)
The rate on your agreement.
Settlement period
The permitted charge period: 28 days for smaller loans, 58 days for larger ones.
Is the interest rate fixed?
Choose yes for a fixed-rate agreement.
CALCULATOR QUESTIONS
Car loan calculator with rebate questions
How much rebate will I get?
In the example, £1,120.91 on 30 remaining payments of £320 at 11.9%.
Does the settlement charge reduce the rebate?
Yes. The charge is added to the settlement figure, so the net saving is the rebate minus the charge.
Is the rebate the same on flat-rate finance?
No. Flat-rate agreements often rebate less generously. Check the terms before settling.
Should I settle early?
Compare the net saving with what the money could otherwise do. Near the end of the term the saving is usually small.