Hire purchase early repayment

koneil1992

Hi,
So I am looking to settle a HP agreement I have on a van. I am 12 months into a 60 month term, the finance company allow early repayments and have given me a settlement figure. 
The current agreement is 60 months with 8%APR, credit £14,000 and repayable £17,000 (roughly). 
I have paid £3,394 (12 months) to date and the company offered me a settlement of £11,820. 
This is where I have the issue, the company is creating this settlement figure based on recent payments of £3,394 deducted from the repayable balance of £17,000, which doesn't seem correct as I do not owe them £17,000, I owe them £14,000 plus interest added. I was under the impression that the settlement figure would be based on the repayments made (minus interest) deducted from the original £14,000 credit given?
Essentially they want to charge me 24 months interest, when I intend to only have the agreement for 12 months!

Could someone please help shine some light on the matter for me:)

Thanks,
Kieran. 

DrEskimo

I'm afraid your maths is a bit off...

If they were taking your current payments to date (£3,394) away from the total amount payable (~£17,000) then the settlement figure would be £13,606.

It isn't. It's £11,820. Which added to your payments so far of £3,394 would be £15,214. So the original £14,000 plus 12months worth of interest (along with potentially a couple of months interest as part of the early settlement fee).

Petriix

I believe that you can overpay as much as you like at any point without penalty, but do check your specific agreement. This means that you should overpay by £11000 and then request the settlement figure so that you only pay the two additional months' interest on the tiny outstanding balance.