What Is An Auto Loan Settlement?

January 27, 2012

An auto loan settlement is the total amount needed to "settle", or completely payoff an existing auto loan. Auto loan settlement is another term for what is commonly referred to as the payoff amount. Auto loan settlements are normally time sensitive quotations and the amount of a settlement can vary day to day.

Auto Loan Settlement Example

Say for example, you are purchasing a new car and are trading in your old car. However, the car you are trading in is not completely paid for yet. If the dealer decides to accept your old car as a trade-in, then they will need to pay off the existing loan on the car - before they can sell or otherwise dispose of the traded-in vehicle.

Payoff Amount

The dealer will call the bank or lender who holds the loan on your old car and ask for an auto loan settlement, or payoff amount. The bank or lender will then inform the dealer how much is needed to settle the loan debt, and inform them by what date payment must be received. If the dealer pays the settlement amount before the deadline the bank or lender has specified, then the loan is considered to be settled or paid off. If the dealer pays even a day or two late, the bank or lender may require additional funds to cover the interest amounts accrued past the agreed to settlement date.

An auto loan settlement is merely the process of paying off your car loan. The amount of the settlement will include the principal amount owed as well as all-interest charges and fees that accrue until the date the loan is actually paid off.

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