Car finance
If you rely on your car, falling behind is stressful. Here’s what you could do.
What car finance arrears are
Car finance, such as hire purchase or a personal contract plan, is secured on the car. It may not fully belong to you until it’s paid off, so if you fall behind the lender may have the right to take it back.
If you need the car for work or caring, it may count as a priority debt. If not, it’s often non-priority. An adviser can help you work out which applies.
What can happen
What a lender can do depends on your agreement and how much you’ve already paid.
Reminders and a default notice
A lender usually sends reminders first, then a default notice. It gives you a date to put things right by.
Repossession
On many regulated agreements, once you’ve paid about a third of what is due, the lender usually needs a court order to take the car. Before that point they may be able to act without one.
Handing the car back
On many regulated agreements you may have the right to end the agreement and hand the car back once you’ve paid about half the total. Check what you’d still owe.
Shortfall debt
If the car is taken and sold for less than you owe, you may still be asked to pay the difference.
What you can do now
Check your agreement
Find out which type you have, how much you’ve paid, how much is left, and what the paperwork says about missed payments.
Contact the lender early
Explain what you can afford and ask about a lower payment, a longer term or a short pause. They don’t have to agree.
Never ignore a default notice
It has a deadline. Acting before it runs out may keep more options open.
Think about whether you need the car
If you do, tell the lender. If you could manage without it, ending the agreement may be an option, but ask what you’d still owe.
Complain if you were sold the wrong product
If you think the finance was mis-sold, you could complain to the lender and, if you’re not satisfied, to the Financial Ombudsman Service.
When to get help
Speak to an adviser as soon as you get a default notice, or if you’re unsure whether the lender can take the car without a court order.
Signs it may be time to talk to someone
- You have a default notice or a notice of termination.
- The lender has said they will collect the car.
- You rely on the car for work or caring.
- You owe more than the car is worth.
Free, impartial advice is available from MoneyHelper, StepChange and National Debtline. MoneyHelper
General information, not advice. Rules can differ in Scotland and Northern Ireland.
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