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What to do if you Can't Afford the Finance Repayments

By: Tracy Wilkinson - Updated: 10 Jun 2017 | comments*Discuss
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Millions of people every year stretch their budget to take out personal car loans and finance deals so that they can purchase a new car. This can be an excellent idea if drivers have the time to shop around and make sure that they are getting the best deal around - with a good competitive interest rate (preferably 0%) and a reasonable deposit and monthly payment structure.

However, all too often motorists take out a loan then find that they cannot afford the loan repayments - sometimes because they borrowed more than they could afford to repay, and sometimes because their circumstances have changed beyond their control - and it's just not realistic for them to manage their monthly payments anymore.

So what can you do if this happens to you? This is a question faced by many people and it can be a very scary thing to think about – no-one wants to think about the prospect of losing their car.

Should I Stop Making my Monthly Payment?

While it can be a very tempting option, it's not a smart one - it will affect your credit rating and more importantly - it doesn't affect your obligation to pay one little bit. It ends up with you owing more money - with late and missed payment charges, big interest hikes, charges for reminder letters, and if the bank ends up repossessing the car they'll charge you for collection, admin costs and auction costs. Even if they sell it and put the funds against the debt they'll probably sell it way below its worth at auction - and you'll still owe them the difference at the end of the day so they'll keep chasing you until you speak to them. You don't want bailiffs turning up, so speak to them and let them know what's going on.

Work out your Figures

What you need to do first is sit down and work out exactly what you owe on the car. Ring the company you borrowed the money from and ask them for a settlement figure. When you know what this is, you can start to do something about it.

Trading Down

You might want to think about trading your car in for one that costs less. The dealer who sells you your replacement car will set you up with a loan that covers the full amount owed on your initial loan and whatever you need for the new (to you) car.

By doing this you can bring your payments down and/or spread them out over a longer period of time, reducing the immediate pressure on your finances - but do remember, you're paying considerably more for a car with less value - so you really need to consider whether or not that is something you want to do.

Selling Up

You may have decided that you don't want to have a car anymore or that you can't afford to run one. If this is the case, then have a look at cars of a similar make/model/condition to yours and see how much the going rate for them is. Also check Parkers and Glass's guides to see what the current list price is.

If you do decide to sell the car and you can't raise enough funds to clear the whole settlement you may be better off getting a small personal loan to make up the difference and clear the finance.

If you're only borrowing a small amount you should be able to get a favourable interest rate and you can bring your monthly payments down quite a lot doing this. Of course you do need to make sure that you can afford the second loan payment!

Also make sure that you inform your finance company before you make any moves to sell the car as it is legally their property and may show up on searches that potential buyers pay to have carried out.

Handing the Car Back

If you have a car finance arrangement then you also have another option that isn’t available to people with a personal loan. In most car finance deals there is a clause that states that after a certain amount has been paid (usually around 2/3 of the total price) or after a certain amount of time has passed with the loan account being managed in good order – with payments made on time, etc, then the borrower has the right to return the car to the financier.

The lender will do a number of checks on the car, arrange the admin, and then take the car and resell it – leaving you arrangement free without any further commitment. If for any reason your car isn’t worth as much as the remaining loan amount then the lender may take the car back and leave you with a small balance to pay – which is frustrating because you’re paying for something you don’t have any more – but it is a legal way of getting out of finance deal that you know you’re not going to be able to manage with.


Most importantly, communicate with your lender. If you’re in financial trouble then they are there to help you. Write to them and explain your circumstances – some lenders will reduce payments for a few months to allow you time to get back on your feet. If you have no joy with them, then visit your local CAB and get some specialist advice.

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[Add a Comment]
Armo - Your Question:
HiBought a car on finance but due to bad credit they had to search for a finance company to take me and they did everything going fine then missed a few payments and them los the car and left with a massive bill is there anyway I can get it reduced as I will be paying for a car forever and not have one Thanks

Our Response:
It might be easier to seek debt counselling advice, the Citizens' Advice can help with this. They may be able to contact the creditor on your behalf and arrange a mutually acceptable monthly repayment that you can afford.
MotoringOnABudget - 13-Jun-17 @ 9:57 AM
Hi Bought a car on finance but due to bad credit they had to search for a finance company to take me and they did everything going fine then missed a few payments and them los the car and left with a massive bill is there anyway I can get it reduced as I will be paying for a car forever and not have one Thanks
Armo - 10-Jun-17 @ 5:10 AM
Hi my cars is finance i have outstanding balance new finance taking my cars
Raju - 22-Apr-17 @ 12:59 AM
We got a car and voluntarily returned it. We went to court over the payments needed to the finance company but made an agreement with their lawyer before court to pay so much a month to pay it off. Well this month I can't pay it. What will happen? I can't have them garnish put wages and that's what they are threatening. But have no way to make a payment this month.
Alijat - 24-Mar-17 @ 4:19 PM
Tiger - Your Question:
Can I get out off my finance got a car 3 years ago and ca t afford it any more

Our Response:
It's not easy to get out of a finance agreement. Check the terms and conditions. You might be able to cancel with a fee payable or reduce your monthly payment amount. It's always advisable to contact the finance company before making any decision. If you've only got one year left for example, they may agreement to reduced payments for a longer period of time or you perhaps you could ask a relative/friend to help out until you're in a position to pay them back as you'll soon own the car and have no monthly payments thereafter (i.e you could make some monthly payments to repay your relative etc).
MotoringOnABudget - 9-Mar-17 @ 12:57 PM
got finance for a family member they were involved in crash insurance didn't pay out as they breached there policy I am left with wrecked car the family member is out of work and cannot make paymentsI have no option but to pay finance as in my name. if I approach lender to try negotiate lower payments over a longer period, I know this will involve more interest. My question is is the lender obliged to offer me the reduction ? they'll still get their money but it will take longer I'm not trying get out of saying it's been an expensive lesson for all involved
Jinty - 8-Mar-17 @ 11:29 AM
Can i get out off my finance got a car 3 years ago and ca t afford it any more
Tiger - 8-Mar-17 @ 10:33 AM
Pnut - Your Question:
Hi I have had a van for my partners buisness on finance since 2014,we have been struggling to pay it as he works outdoors so winter months r always a struggle but we have missed 1payment and he had a phonecall saying our finance has been terminated and they want the van back.what does this mean and where does it leave me?

Our Response:
You should contact the finance company immediately and offer to re-pay the missed payment plus an arrangement to pay any other overdue amounts. Check the terms and conditions of the agreement. Note that until you have paid for the vehicle in full, it does still belong to the finance company. Note, they will probably need a court order to simply come and take the vehicle.
MotoringOnABudget - 22-Feb-17 @ 11:31 AM
Hi I have had a van for my partners buisness on finance since 2014,we have been struggling to pay it as he works outdoors so winter months r always a struggle but we have missed 1payment and he had a phonecall saying our finance has been terminated and they want the van back...what does this mean and where does it leave me?
Pnut - 19-Feb-17 @ 9:24 AM
Hi guys, iv had a car on finance now for 12 months. Few weeks ago it broke down going to work, i had to be towed to a garage where i was told the cars repair costs would be greater than the value of the car. The finance company said they would take it away and sell it at auction but id have to pay the remaining finance. I had car insurance and gap insurance incase of an incident like this but they are refusing to pay out? Is there anything i can do?
Tay - 23-Dec-16 @ 9:24 PM
Hi have car on finance found problems with car spoke to warranty but they say take to back Street garage but nobody wants to deal with warranties so I have stopped payments can the take car back off me if I phone and try arrange to pay arrears monthly on top of monthly dd as I need the car but just had all problems fixed out my own pocket or will they just take car I paid 17000 for it and paid 3000 so far on finance where do I stand
Davie - 22-Apr-16 @ 7:19 PM
I handed my car back to auction as requested by finance company as terminated agreement after half payments been made . Drove car there , they signed my paperwork and said everything was fine that was that. Now finance saying car is unauctionable as there is engine problems . And I am liable for this. I said I drove the car 8 miles to the auction without problems ,I have a video and pics on the day car was handed back of car running fine . Can they make me pay for this , even though they signed my paperwork and I have video evidence of the car running on that day
Spuddy - 22-Mar-16 @ 3:36 PM
I have a disability car on black horse finance 250 a month. I no longer need this car and can't afford it can somebody give advice
Cath - 15-Feb-16 @ 12:14 PM
Hi there I've had car finance since Jan 2015 I've been self employed and needed a vehicle to go and do my work . I have a daughter who is severely disabled and because of this my partner can no longer care for our daughter by herself so I have decided to close my business down and help my partner out with our child . I no longer need the vehicle and won't be able to pay the monthly sum of £280 any more . the finance was over 4years could I voluntary surrender the vehicle ? Only other problem is how am I going to afford the balance after the sale cheers .
In trouble - 11-Dec-15 @ 4:55 PM
Did you get any help with this has I'm in the same situation
Cath - 28-Oct-15 @ 10:59 AM
@Gillain75. Firstly is there anything you can do about the car? Did you purchase from a dealer? Is there any outstanding warranty etc? If it was new or relatively new when you purchased it, you should not be expecting to be scrapping it at this stage (the Sale of Goods Act will help you here). If there is nothing that can be done there, then of course the finance company will expect you to continue making the payments. Contact them and ask them for a settlement figure for ending the agreement early. It may be easier or cheaper to do this (you may have to ask family/friends to help out) than to continue paying for a car that no longer exists.
MotoringOnABudget - 29-Jul-15 @ 11:20 AM
My car needs scrapped as the ECU has fallen out of it and can't be repaired. I still have two years to pay it, can anyone advise on my options? (If any) thank you
Gillian75 - 27-Jul-15 @ 9:05 PM
STEPCHANGE They are a debt charity that will help you fill out a income expenditure form which will show the fianance companies how much you can afford. If you can only afford £10 a month then they are legally obliged to accept
Smith - 17-Jun-15 @ 10:56 PM
@Miktop54. Send them the bank statements and payslips as they request. Also include a list of your outgoings and any other household income. If the situation is as bad as you say, this will give you the evidence you need to convince the finance company too.
MotoringOnABudget - 10-Jun-15 @ 11:10 AM
I have contacted my finance company saying I can't afford the repayments and could they come and pick up and auction/sell it. I told them I realise I will be liable for the balance after the sale but was more or less told I just couldn't be bothered with the loan and wanted the car gone!! I can't afford to feed myself or my daughter because of the monthly payments so I found this offensive, and threatened to cancel the dd, they say they want 3 months payslips and bank statements then they'll decide. I can't afford this car at current monthly payments I can't afford to live? Please advise on this? Thank you
Milktop54 - 6-Jun-15 @ 12:38 PM
@track - you'll need to check your contract with the finance company t see whether this is available. You usually have to have already paid a substantial sum before this is possible. Unfortunately, only a discussion with the finance company themselves will help you.
MotoringOnABudget - 21-Jan-15 @ 12:44 PM
I want to hand my car back the finance company have told me I could be liable for full amount still owed I told them I understand this and would make arrangements of 100 month payments but they have says this is unacceptable sure they can't tell me what is when I am telling them I can't afford car and know I still have debt with them advice please
Track - 19-Jan-15 @ 9:53 AM
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