What Happens if you Can't Afford your Car Finance?

If you have a car on finance and you can no longer afford it, there are several options available to you.

When you first get yourself into any financial agreement, you can never predict what may happen in the future. Some car finance deals can run for as long as seven years and anything could happen in that time.

Circumstances can change at the drop of a hat and you may find your situation is very different two years into your car finance agreement than it was when you first took it out.

For example, you may, unfortunately, lose your job and can't keep up with the payments, or other big life choices could come along such as falling pregnant or wanting to get married.

Do you want to refinance your car and save money on your monthly repayments? Sign up today and see how Car Credible can help you.

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In an instance like the above, you may just find what you could previously afford is no longer obtainable for you and you will want to look at ways you can reduce your monthly outgoings on certain things.

Rather than try to juggle all of your payments and not seek help and advice, you should reach out to your lender to see what options are available to you to help you avoid spiralling into debt or missing payments.

If you have a Personal Contract Purchase (PCP) or Hire Purchase (HP) agreement, it should be easier for you to find some flexibility in your repayments due to you dealing directly with a lender that owns the car.

It may be slightly more tricky if you have taken out a personal loan, as you will own the car outright yourself and be making your monthly repayments to your bank or building society. However, there are still things you can do to help yourself.


How do I refinance my car?

One option if you're on a PCP or HP is to refinance your car by increasing the length of the contract to pay less over a longer period of time or reduce your interest rate. However, be wary of the former option as you will end up paying more in interest over time.

To refinance, you can request a settlement figure from your lender to buy the car and end your finance agreement. A lender will then be able to give you a refinance quote based on the settlement fee.

Alternatively, and the easier option available, is to sign up to Car Credible, and we will assess your finance deal and help you to refinance into a better deal.

We will take care of all the important stuff, you just need to provide us with your financial information and then sit back and relax while we do all the hard work.

How do I part-exchange my car?

You may be able to get yourself into a different car and save money at the same time. Like the refinancing, this will require you to get your early settlement figure from your lender, and then depending on your equity position will depend on the options available.

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If your car is worth more than your settlement figure then you are in positive equity and you'll be able to sell the car for profit and use that as a deposit on your next car. You can then find a cheaper car than the one you have just part-exchanged to save money on future repayments.

If your car is worth less than your settlement figure then you are in negative equity and you will have to make up the difference in price between your settlement figure and how much the car is actually worth.

This could be a small amount but could also be large and therefore not worth the cost if you are already struggling to make repayments and trying to save money.

Sell your car

If you feel that you don't necessarily need a car and took out a personal loan to pay for it in the first place then you can sell the car and hand the money straight to your finance provider.

If you took out a PCP, you may still be able to sell the car with the lender's permission, with all of the funds you make going back to the company, as it belongs to them. If the car does not sell for as much as you still owe, you'd need to make up that money yourself.


Voluntary termination

Once you've paid off over half of what you owe on the car, you are legally allowed to hand the car back and walk away with no further fees involved, providing the car was in a good condition.

If you haven't quite managed to hit the 50% mark, you can make additional payments to get yourself there and then voluntarily terminate via that process.

Providing you have made all the repayments up to the point of wishing to terminate, there should be no negative actions placed upon your credit score.


Can you take a payment holiday on your car finance?

If you are struggling to make your monthly repayments, you should first speak to your lender to see if there is anything they can do to help. It's up to them whether you can take a payment holiday or any other actions that may come from you being unable to make a payment.

Can you swap car finance from one vehicle to another?

It is not possible to swap your car finance from one vehicle to another. That is because all car's have different values at any given time, therefore you take finance out on one particular car that is not transferable to others.