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

By: Tracy Wilkinson - Updated: 25 Nov 2018 | comments*Discuss
 
Finance Finances Loan Car Loan Loan

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.

Communicate

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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Hi I have an HP deal and I have been made redundant.I have been paying the deal since June last year and in order to come out of the agreement I would need to continue paying for another 2 years help!!!
Lima - 25-Nov-18 @ 9:12 PM
Hi I have a car on finance for 17k and I’m thinking of giving it back as I’m struggling to pay back the repayments I’ve only had it 2 month so I’m just wondering what would happen if I did an if id after pay anything.
Gaz - 1-Nov-18 @ 11:14 AM
Hi got car on finance over 5 yrs for friend. I already have car on fiance from same dealer. 5 months on and they can'tafford it and I'm stuck with it. Got settlement figure, can't afford it even if sold car. What do i do.....
Pat - 24-Oct-18 @ 2:43 AM
I have a finance with you for £13,532 as a settlement figure but my van is only worth £9,500 I’ve only had the van for 5 months but I have just lost my licence and can no longer afford the payment as I have lost my job for not being able to drive is there anything I can do ?
Jason - 19-Sep-18 @ 2:06 PM
Bought car on finance ( beyond my means, stupid) 5 years agoI’ve never missed a payment. I was confused at sale and went back again for explanation on amount. I am due to retire soon and cannot afford payments on state pension but need a car. Have paid back 4/5 of amount what are my options?
Ibiza - 18-Sep-18 @ 3:10 PM
Hi iam going in to hospital I have a rare illness I will be off work for a while iam not even sure if I will be driving again how do I stand on HP on the car I have not had the car a year yet .
Archie - 11-Sep-18 @ 9:06 PM
Put deposit down on a car at a dealership and signed for finance but decided a day later i dont want it. I havent actually got the car or brought it yet hust agreed with the finance. How do i get out of it as i dont want it anymore.
Clo - 16-Aug-18 @ 7:24 PM
Hi I need some advice please.I'm in arears on my car finance due to change in circumstances.But recently situation is getting better and improved and I've been in contact and communicating with my finance company,I've asked for a payment plan that works for me to clear the arears but they refused.What more can I do please?
Gbdg - 30-Jul-18 @ 7:57 PM
Advice needed please I have a van on finance was taken over 3 yrs and ends in Jan of next yr unfortunately the desle van is no good mow and a cilinder has gone I've had it checked out by 3 gauges and all said we'll cost far to much to fix and with nothing I've contacted my fiance company and explain this to them asking to have permission to scrap but stated no I've had to get another car on finance because of my job and now stuck with two finance and need to stop payment on the van or get them to take it away We're do I stand as a customer on this please as struggling with a van I cannot use Thankyou
Elaine - 12-Jul-18 @ 6:39 AM
my retired fathers name is on a huge car finance deal for my brother. My brother has Been paying for 12 months, now brother has lost his job, no one to pay finance. What do I do? Car will need returning to dealer, finance outstanding will bankrupt my elderly father. Any help/ suggestions urgently needed?
Ts - 28-Jun-18 @ 4:08 AM
I have a car on finance to pay over 5 years. I’ve payed 1 year off but my circumstances have changed and I’m currently not working. I can’t afford the monthly payments anymore , I’ve rang my finance provider and they can’t reduce my monthly payment. Any help is appreciated. Thanks.
Carlz - 23-Jun-18 @ 7:35 PM
My partner can not afford to pay his car finance now as lost his job, contacted with *car brand* finance specialist - he told him to miss his payment and then contact with them. That sound a little bit strange as that kind of payment missing is against him. He send email to them as well but not getting any answer on this, and not sure what to do now.
Anna - 15-Jun-18 @ 10:30 AM
My grandad got a car on finance. Then three months ago he had a triple heart bypass . Then got phumonia and is still in hospital and can't walk is there anything we can do so he can get out of his agreement as he won't be able to drive anymore it's paid upto date but it's a lot of money for nothing
Tambo - 7-May-18 @ 10:43 PM
L1 - Your Question:
Hi Need some advice please In Nov 2017 I took on a conditional loan agreement my circumstances have changed and I cannot afford the paymentsI rang the finance company to ask about options which wereTerminate early and pay £9,500 on an agreed payment planSell the car and settle the finance which is £12,700 I have been offered £9,500 so I have a shortfall I looked into purchasing a cheaper car and adding the shortfall to the new finance agrement but I have a bad credit history due to a marital breadown and was refused I need a car for my job been without is not an option Any advice would be welcome

Our Response:
Sorry we can't give individual financial advice like this. The best thing to do would be to go to your nearest Citizens' Advice for help.
MotoringOnABudget - 2-May-18 @ 2:29 PM
Hi Need some advice please In Nov 2017 I took on a conditional loan agreement my circumstances have changed and I cannot afford the payments I rang the finance company to ask about options which were Terminate early and pay £9,500 on an agreed payment plan Sell the car and settle the finance which is £12,700 I have been offered £9,500 so I have a shortfall I looked into purchasing a cheaper car and adding the shortfall to the new finance agrement but I have a bad credit history due to a marital breadown and was refused I need a car for my job been without is not an option Any advice would be welcome
L1 - 29-Apr-18 @ 9:04 PM
mollie - Your Question:
I need to get out of my car finance as I am leaving my job, how can I do this?

Our Response:
Check the terms and conditions of the finance agreement. See what the penalties are etc. The best thing to do is to call the finance company and ask them about it, they may agree a temporary reduction in payments until you find a new job etc.
MotoringOnABudget - 17-Apr-18 @ 10:06 AM
I need to get out of my car finance as I am leaving my job, how can I do this?
mollie - 16-Apr-18 @ 12:03 PM
if I do not pay the rates that I can pay for?
Nick - 22-Mar-18 @ 10:06 PM
Hello . I bought a car in Finance and a week ago I hit her badly in the Netherlands. the insurance does not give me any £. if they only pay for Finance?
Nick - 22-Mar-18 @ 10:04 PM
Troubled- Your Question:
Hi. I live in Northern Ireland. My ex has a finance car in my name. I tried to get the car back and sought legal advice and tried to get the police to take it back as well, but because he is the log keeper, I couldn't get it back. I had to take out an IVA to maintain the payments at a lower rate, but it's still expensive. The finance is with Black Horse but they won't let me out of it and said attachments would be placed on wages to get the money if I stopped paying it. I'm not allowed to take the car back myself either. They wouldn't transfer the finance over to my ex either. It ends in September 2019, but I think it's so unfair to be paying a finance on something I have no control over and can't take it back for myself. Black Horse said they tried to locate the car but I know they were lying. My ex has never paid one penny towards this and it is costing thousands. He still has the car. Please can someone help because this cannot be legal. I desperately tried to get legal help but was told there was nothing I could do. It's put me in debt and I've already paid two thirds of it. I'm on my own second hand car and have endless problems with it but can't afford a new one and I need it for work. I didn't want to go down the route of bankruptcy as that would affect me for a long time. I find it so hard to manage financially and it really causes a lot of anxiety. Please can someone help because this cannot be right.

Our Response:
The V5 is not proof of ownership. Is the car referred to in the finance agreement or was it a private loan? If the former and the finance is in your name, it's your car. Report it as a stolen vehicle? Take your boyfriend to the small claims court? It doesn't sound like the legal advice you've had has been very effective.
MotoringOnABudget - 21-Mar-18 @ 11:07 AM
Hi. I live in Northern Ireland. My ex has a finance car in my name. I tried to get the car back and sought legal advice and tried to get the police to take it back as well, but because he is the log keeper, I couldn't get it back. I had to take out an IVA to maintain the payments at a lower rate, but it's still expensive. The finance is with Black Horse but they won't let me out of it and said attachments would be placed on wages to get the money if I stopped paying it. I'm not allowed to take the car back myself either. They wouldn't transfer the finance over to my ex either. It ends in September 2019, but I think it's so unfair to be paying a finance on something I have no control over and can't take it back for myself. Black Horse said they tried to locate the car but I know they were lying. My ex has never paid one penny towards this and it is costing thousands. He still has the car. Please can someone help because this cannot be legal. I desperately tried to get legal help but was told there was nothing I could do. It's put me in debt and I've already paid two thirds of it. I'm on my own second hand car and have endless problems with it but can't afford a new one and I need it for work. I didn't want to go down the route of bankruptcy as that would affect me for a long time. I find it so hard to manage financially and it really causes a lot of anxiety. Please can someone help because this cannot be right.
Troubled - 19-Mar-18 @ 3:09 PM
andersbrand - Your Question:
Hi New to the site and would be grateful for anyones help here.Myself and my brother both have an Audi lease agreement.Both business PCP deals.Term ended on both cars 30th December 2017 (yesterday)I have just found out earlier in week after contacting Audi Finance that the balloon payment of £24.95k plus admin x 2 will be leaving our account on the 30.12.2017circa 50k.We handed the cars back on the 29.12.2017 (Friday) as agreed and taken out a new deal / car each.New cars / deal do not start until March 2018.Unfortunately the Audi garage we deal with had not informed us that we had to contact the finance company and clarify that we would be returning the vehicles, and stop the balance payment due. The guy at Audi who got us the deal says Audi finance should have contacted myself detailing what we had to do with regards to the current deals.Audi could not stop the payments due to leave our account on the 30th, too close to DD date.I do not have 50K in my account to cover the payment.I have also been told that they if payment cannot be made on the 30.12.2017 they will try take the payment again in 10 days time and if not paid it will default. I was also told by the same gentlemen at Audi finance that there is nothing else I can do. After default it will affect our credit rating.I did cancel the 2 direct debits albeit too late for the first attempt. (cancelled 29.12.2017) No idea if this will help or not, never been in this situation before.Has anyone any experience in this sort of situation? Does anyone know what Audi do after default?Im not concerned with losing the next car /deal agreed. (deposit paid and likely gone)My concern is the procedure of what Audi may do after default.Regards

Our Response:
Check all the paper work you go at the time you took out the lease. What does it say about the end of the term? If the company has not complied with all aspects of this (i.e contacting you in time etc) then you can say they have breached the terms of the contract and no furthe action should be taken. It might be worth speaking to a solicitor.
MotoringOnABudget - 2-Jan-18 @ 3:41 PM
Hi New to the site and would be grateful for anyones help here. Myself and my brother both have an Audi lease agreement. Both business PCP deals. Term ended on both cars 30th December 2017 (yesterday) I have just found out earlier in week after contacting Audi Finance that the balloon payment of £24.95k plus adminx 2 will be leaving our account on the 30.12.2017 circa 50k. We handed the cars back on the 29.12.2017 (Friday) as agreed and taken out a new deal / car each. New cars / deal do not start until March 2018. Unfortunately the Audi garage we deal with had not informed us that we had to contact the finance company and clarify that we would be returning the vehicles, and stop the balance payment due. The guy at Audi who got us the deal says Audi finance should have contacted myself detailing what we had to do with regards to the current deals. Audi could not stop the payments due to leave our account on the 30th, too close to DD date. I do not have 50K in my account to cover the payment. I have also been told that they if payment cannot be made on the 30.12.2017 they will try take the payment again in 10 days time and if not paid it will default. I was also told by the same gentlemen at Audi finance that there is nothing else I can do. After default it will affect our credit rating. I did cancel the 2 direct debits albeit too late for the first attempt. (cancelled 29.12.2017) No idea if this will help or not, never been in this situation before. Has anyone any experience in this sort of situation? Does anyone know what Audi do after default? Im not concerned with losing the next car /deal agreed. (deposit paid and likely gone) My concern is the procedure of what Audi may do after default. Regards
andersbrand - 31-Dec-17 @ 5:17 PM
Hi I took my car on finance I had it for about 3months but I lost my job And I can't afford to pay for it what should I do?
misiek - 28-Dec-17 @ 6:01 PM
Ryan- Your Question:
Hi I have a car finance I only have a year left on the car never missed a payment just found out my partner is pregnant and change in income just a worried about the hole thing what Can I do I feel stuck

Our Response:
If your partner has only just become pregnant her income should not change for some months. If you feel you might struggle with the payments, the best thing to do is to contact the finance company - they may offer to reduce the payments but offer a longer term for paying it off (you will need to work out the extra interest payments etc).
MotoringOnABudget - 20-Dec-17 @ 12:50 PM
Hi I have a car finance I only have a year left on the car never missed a payment just found out my partner is pregnant and change in income just a worried about the hole thing what Can I do I feel stuck
Ryan - 19-Dec-17 @ 5:12 PM
Hi i buy a car on finance and the dealer give mee a car with meny problems...i take the car bak...but steel they dont fix it and in september the engine break down...i dont drive the car enimore and steel pey every month what shoul i do thank you ...
Mihai - 6-Dec-17 @ 9:05 PM
worriedmum - Your Question:
Hi, my son traded in his car that was completely paid for and got a leased car as soon as he turned 18. He did not and still doesn't have a job and hasn't applied for any benefits. He simply can't afford the finance. His girlfriend paid the first payment but the second payment is due next week. Is it legal to give someone credit who is not in employment? The garage he got it from is a Ford main dealer and the lease is through Ford. Any advice would be appreciated!

Our Response:
Finance providers should do relevant checks before offering any loans, leases, HP etc. What checks were made? Was he asked for a guarantor? Why did he think he could take on a lease in the first place? Lots of questions here...so we can't really give any good advice. Try contacting the Financial Conduct Authority if you think this hasn't been done correctly.
MotoringOnABudget - 10-Nov-17 @ 9:33 AM
Hi, my son traded in his car that was completely paid for and got a leased car as soon as he turned 18.He did not and still doesn't have a job and hasn't applied for any benefits.He simply can't afford the finance.His girlfriend paid the first payment but the second payment is due next week.Is it legal to give someone credit who is not in employment?The garage he got it from is a Ford main dealer and the lease is through Ford.Any advice would be appreciated!
worriedmum - 7-Nov-17 @ 9:42 PM
Hsn - Your Question:
Hi. I took out a car on finance when living at home with parents now I've moved out im struggling to make enough to pay for it I've only had it a year, is it legal to give tthe car to my brother, he gives the monthly payment to me so I can carry on paying the finance in my name? But he is the insurer driver and v5 holder? Any help would be appreciated!

Our Response:
No you're not the (official) legal owner until the loan is paid off. If you're struggling to meet the payments, you should speak with the finance company.
MotoringOnABudget - 30-Oct-17 @ 3:01 PM
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