Early Termination Fee
Fact Sheet
Summary
An early termination fee is charged when you pay o your car loan before the agreed end date.
This is a standard part of a contract that compensates the lender for not receiving the interest
payments they expected from you. The good news is that our clear, carefully designed fee structure
oers you maximum exibility to deal with changed circumstances. You can decide whether early
repayment is best for you and whether it will leave you better or worse o.
Early Termination Fee Frequently Asked Questions
We appreciate there are many reasons
you might wish to pay o your car loan
before the agreed end date. Things
happen in life and circumstances can
change. Remember though, that your
loan was calculated based on interest
repayments over a set period of time.
An early termination fee is a standard
part of a loan contract that protects
the lender and compensates them
for not receiving expected interest
payments – while also ensuring
maximum exibility for you.
No, the early termination fee payable
is dierent, depending on whether
you have taken out a consumer
or commercial loan with us (that
is, whether your vehicle is for an
individual or business purpose).
Read on for more on how this works.
Will I be better or worse o if I repay
early?
We’ve designed a transparent fee
structure that ensures the closer you
pay o your loan to the agreed end
date, the lower your fee will be.
(See below for examples, although
note that it depends on your
individual loan details).
The important thing is that at any
given time, you can gure out
whether you are better o repaying
your loan early or sticking to the
original loan term.
Is the fee the same for consumer and
commercial loans?
Why am I being charged an early
termination fee?
The maximum fee you will pay is $850 for terminating a loan
early. At the start of the loan period, we add this $850 to the
total amount you owe us. This maximum fee of $850 is set for
a period of time, then gradually reduces to $200 as you make
more monthly repayments. The fee is waived to zero if full loan
repayment occurs within 2 months of the originally agreed end
date (see graph to right).
The early termination fee remains at $850 for either 12 or 24 months (known as the start period), depending on how long the
loan has been taken for:
• If your loan with us is for more than 5 years, your early
termination fee will be $850 if you repay the loan within
the rst 2 years (start period = 24 months).
• If your loan with us is for less than 5 years, your early
termination fee will be $850 if you repay the loan within
the rst year (start period = 12 months).
>5
$850 in
24mo
<5
$850 in
12mo
Once the start period is over, the early termination fee
goes down by an even amount every month (the “monthly
reduction”) as you make each monthly repayment, until it
eventually reaches $200.
We calculate the size of each monthly reduction using the
following formula:
Once the early termination fee has been reduced to $200,
it will remain at $200 until 2 months before the agreed
end date. The fee is waived entirely to zero if you pay o
the loan within the nal 2 months.
=
2mo
$200$200
$0
How is the early termination fee calculated for a consumer loan?
How long does the early termination fee remain at $850?
How does the fee gradually reduce from $850 to $200? When does the fee reach zero?
Consumer Loans
However, if 12 months passes and Emily
is still making monthly repayments, the
fee amount will reduce every month by:
Alternatively, if she does so
within 24 months, her early
termination fee will be:
So if Emily repays the loan
within 13 months, her early
termination fee will be:
Example: Emily takes out a 36-month loan. If she repays the loan within 12 months, she owes an early termination fee of $850.
$850
=
36-12
$35.42
$850 - $35.42
=
$814.58
$850 - ($35.42 x 12)
=
$424.96
Figures shown are guide only and should not be used as a nal payout gure – Refer to Volkswagen Financial Services Australia for an accurate amount.
Commercial Loans
To nalise a commercial loan with us before the agreed end date, you must pay out the rest of the amount owing in a
lump sum. This payout gure will vary, depending on how many monthly repayments you have made so far and how
many are still left to make. Naturally, the payout you owe us will be reduced each month that your loan is active.
How do I nalise a commercial loan early?
The size of your payout is calculated using a discounted cash ow
method. Essentially, when you take out a loan for a car with us,
we quote you the cost of “buying back” your entire investment
by making regular monthly payments through the agreed term
of the loan. This is your total repayment bill which is inclusive of
the total amount of interest payable over the loan term.
Now, as you make regular payments each month, you have an
option at every stage to change your mind and nalise the loan
agreement immediately by paying out your remaining obligations
in a lump sum. The cost of repaying all in one go will be the
“present value” of all future instalments which aren’t yet due.
How is the early termination payout calculated?
We calculate this present value using a formula
that adds up your string of expected future
instalments. The good news is that, at any given
time, we reduce or discount the interest portion
of your remaining instalments by a certain
percentage each successive monthly installment
that would normally be due in the future. The
earlier we receive a future expected installment
from you, the more we discount it (in other words,
the less you pay). The receipt of this money from
you is more valuable to us earlier because we have
more time to invest it and grow it ourselves.
To speak to one of our Customer Service representatives about your specic circumstances
or if you have any further queries, please contact us via the below details.
Additional assistance
Please email queries to:
Phone us on: 1300 734 567
Monday to Friday
Visit our website at:
www.vwfs.com.au
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