Compare Car Loan Early Repayment and Settlement Fees

Direct answer: Early repayment and settlement fees vary by lender and loan type. Some lenders charge a flat fee, others a percentage of the remaining balance, and some offer no early repayment fees. To compare offers, look at both the fee structure and the total repayment amount over the loan term.

What Are Car Loan Early Repayment and Settlement Fees?

Early repayment fees, also called early payoff fees or prepayment charges, are charges a lender may impose when you pay off your car loan before the scheduled end date. Settlement fees are similar but often refer specifically to the administrative cost of closing the loan early. These fees can reduce the benefit of paying off your loan ahead of schedule.

Fees may be a flat amount, a percentage of the outstanding loan balance, or a portion of the remaining interest. Always check your loan agreement for the exact terms.

Lender Fee Comparison: Barclays, RACV, Westpac

Here is a comparison of early repayment fees for three lenders mentioned in common queries. Note that fees can change, so always confirm current terms with the lender.

Lender	Early Repayment Fee	Early Settlement Fee	No Early Repayment Fee Option?
Barclays	Varies; often a percentage of remaining balance	Typically included in early repayment charge	Some products may have no fee
RACV	May apply; check current offers	May be separate	Certain loans advertise no early repayment fee
Westpac	Fixed or percentage fee depending on product	Can be included	Some car loans have no early repayment fee

This table is a general guide. Always request an early settlement quote from the lender, which shows the exact outstanding loan balance and any fees due.

How Early Repayment Fees Affect Total Repayment

When you repay early, you save on remaining interest. However, if a fee applies, it reduces those savings. For example, if you owe $5,000 with 12 months left and the remaining interest would be $300, a $150 early repayment fee cuts your savings to $150. In some cases, the fee could exceed the interest saved, making early repayment less attractive.

To compare, calculate the total repayment in each scenario: continue the loan (principal + all future interest) vs. early payoff (outstanding balance + fee). Choose the option that costs less overall, if your goal is to minimize cost.

Differences That Matter When Comparing Offers

Fee type: Flat fee vs. percentage of balance. Percentage fees can be large on high balances.
Fee amount or formula: Check if the fee is fixed (e.g., $150) or variable (e.g., 2% of remaining balance).
Partial overpayments: Some lenders allow extra payments without fees, reducing interest without triggering a full early settlement charge.
No early repayment fee offers: Some car finance has no early repayment fees, which is a significant advantage if you plan to pay off early.
Settlement quote transparency: Lenders should provide a quote showing the exact payoff amount including fees.

How to Build a Clear Shortlist

Follow these steps to compare car loan early repayment options:

Gather loan agreements: Collect the early repayment terms from each lender you are considering.
Request early settlement quotes: Ask each lender for a quote based on your current outstanding balance or a hypothetical early payoff date.
Note the fee structure: Record whether the fee is flat, percentage, or none, and whether partial overpayments are allowed.
Calculate total repayment: For each option, compute the total amount you would pay if you repay early (balance + fee) vs. continuing the loan.
Compare side by side: Use a table to list each lender, fee, total cost, and any conditions.
Add your own information: Include your loan amount, interest rate, and intended early payoff date to personalize the comparison.

Distinguishing Missing Information from Drawbacks

If a lender's fee details are not clearly stated, that is missing information, not necessarily a drawback. However, if a lender has a high fee or disallows partial overpayments, that is a genuine drawback. Always ask for a written early settlement quote before deciding.

Practical Example: Comparing Early Repayment Options

Assume you have a $20,000 car loan at 6% APR with 3 years remaining. You consider paying it off now.

Lender A: No early repayment fee. Payoff amount = $20,000. You save all remaining interest.
Lender B: 2% early repayment fee. Fee = $400. Payoff = $20,400. You still save interest, but the fee reduces savings.
Lender C: Flat $500 settlement fee. Payoff = $20,500. Compare whether saved interest exceeds $500.

In this example, Lender A is cheapest if no other differences exist, but always verify with actual quotes.