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Car finance ›
What happens if you don’t pay your car finance?
Updated: Monday, 13 November 2023
If you’re experiencing financial difficulty, you might be worried about what happens if you don’t make your car finance payments.
Failure to make payments on your car finance could potentially have serious consequences, like repossession of your car and a negative impact on your credit score. Our guide will help you understand what happens if you miss payments, and the support available.
What happens if I don't pay my car finance?
As part of your car finance agreement with your finance provider, you must make payments on the set dates agreed upon when you signed the contract.
At the first instance, you will probably receive a payment reminder from your lender. This is to remind you of your late car finance payment. You may also be charged a late payment fee (this depends on your contract).
Following your second missed payment, your lender may send you an arrears notice. The notice will say the amount outstanding. You may receive an arrears notice every six months after this until you have repaid the missed car finance payments, or the finance company has obtained a court order.
Often, a lender will send a default notice before they take further action, such as obtaining a court order. After receiving this notice, you will have 14 days to settle your outstanding car payments.
If you fail to settle your account after 14 days of receiving a default notice, your lender may terminate your car finance agreement. They can also demand that you return the car and that the total outstanding amount on your finance agreement is paid.
Will my car be repossessed if I don't pay my car finance?
Once your car finance agreement has been terminated due to missed payments, you need to pay the outstanding amount in full. If you’re unable to pay, the lender may repossess your vehicle.
What happens if I can't afford my car finance repayments?
If you experience unexpected changes to your finances or personal circumstances, you should contact your lender as soon as possible. They will have a range of options to support you if you’re experiencing financial difficulty.
For example, you could be entitled to some ‘Breathing Space’ – a Government Debt Respite Scheme.
If you’re a Moneybarn customer and finding it difficult to keep up with repayments, you can contact us, and we will be happy to discuss your options.
We are unable to give debt advice, however there are some not for profit organisations who can. These include:
- StepChange, who offer a freephone debt advice service
- MoneyHelper, who have a range of free money tools and information.
If you think you might struggle to afford your car finance in the long term, there are some other options you could consider.
Early settlement of your car finance agreement
A car finance early settlement is the total amount of money you will need to pay the lender to finish the agreement. It is when you fully repay an agreement earlier than the agreed period.
Your early settlement figure depends on several factors, including how much you’ve already paid off. Contact your lender if this is something you are considering.
Refinancing your car
Refinancing means borrowing money from another lender to pay off the remaining amount. Alternatively, you can request an extended finance agreement with your current lender.
Refinancing your car may mean you will pay more in the long run. But, your monthly payments will decrease due to an increased term. Please note that not all lenders allow you to refinance your car. If you are unsure about any of your options, contact your lender and they can help.
Voluntary termination
Another option if you can’t afford your car finance repayments is voluntary termination – this is the process of ending your agreement early. The difference is that you agree to return the vehicle to the lender.
Whether you are eligible for voluntary termination depends on your agreement. If in doubt, check your contract or contact your lender. Generally, you must have repaid half (50%) of the total amount payable before you can voluntarily terminate your agreement.
Voluntary termination, or giving your car back to the finance company, is usually only possible with certain car finance types. Let’s look at which finance types allow you to return the vehicle.
What happens if I can’t make my Conditional Sale (CS) payments?
Conditional Sale agreements state that you must have paid at least half of the total amount payable to return the vehicle under voluntary termination. If you’re looking to voluntarily terminate your agreement, you may have to pay a lump sum to meet this 50% threshold. If you’ve already met or exceeded 50% of the total amount payable, you can hand your car back to the lender.
If you’re a Moneybarn customer and are having trouble making payments, contact us and we’ll be happy to discuss your options. We have also written a guide for customers experiencing financial difficulty that lists some of your options.
What happens if I can’t make my Personal Contract Purchase (PCP) payments?
One option is to make an early settlement of your PCP car finance. You will need to request the ‘early settlement’ figure from your finance provider.
Alternatively, you can voluntarily end your contract if you have paid half (or more) of the total amount payable.
What happens if I can’t make my Hire Purchase (HP) payments?
Hire Purchase has similar options to Conditional Sale: you can either voluntarily terminate your agreement, or request an early settlement figure.
Check your contract, or if in any doubt contact your lender and they can explain your options.
What happens if I can’t make my Personal Contract Hire (PCH) payments?
Depending on the terms and conditions in your lease agreement, you may still be liable for the total amount of the monthly payments. You might also have to pay a fee for returning the vehicle earlier than initially agreed. This depends on the terms of your agreement.
Will late car finance payments affect my credit score?
Having a car on finance can improve your credit score, if you make your payments in full every month.
Late or missing payments can harm your credit score. This depends on the number of missed payments and your credit history. It’s important to note that missed payments and debt can remain on your credit report for up to six years.
If you need more information about how your credit score works, check out our guides:
What happens if I refuse to pay my car finance?
If you refuse to settle your car finance payments, you may risk having your car repossessed. Your credit score may also be affected, which may make it difficult to take out another car finance agreement or obtain credit in the future.
If you’re experiencing financial difficulty, you might be worried about what happens if you don’t make your car finance payments.
Failure to make payments on your car finance could potentially have serious consequences, like repossession of your car and a negative impact on your credit score. Our guide will help you understand what happens if you miss payments, and the support available.
What happens if I don't pay my car finance?
As part of your car finance agreement with your finance provider, you must make payments on the set dates agreed upon when you signed the contract.
At the first instance, you will probably receive a payment reminder from your lender. This is to remind you of your late car finance payment. You may also be charged a late payment fee (this depends on your contract).
Following your second missed payment, your lender may send you an arrears notice. The notice will say the amount outstanding. You may receive an arrears notice every six months after this until you have repaid the missed car finance payments, or the finance company has obtained a court order.
Often, a lender will send a default notice before they take further action, such as obtaining a court order. After receiving this notice, you will have 14 days to settle your outstanding car payments.
If you fail to settle your account after 14 days of receiving a default notice, your lender may terminate your car finance agreement. They can also demand that you return the car and that the total outstanding amount on your finance agreement is paid.
Will my car be repossessed if I don't pay my car finance?
Once your car finance agreement has been terminated due to missed payments, you need to pay the outstanding amount in full. If you’re unable to pay, the lender may repossess your vehicle.
What happens if I can't afford my car finance repayments?
If you experience unexpected changes to your finances or personal circumstances, you should contact your lender as soon as possible. They will have a range of options to support you if you’re experiencing financial difficulty.
For example, you could be entitled to some ‘Breathing Space’ – a Government Debt Respite Scheme.
If you’re a Moneybarn customer and finding it difficult to keep up with repayments, you can contact us, and we will be happy to discuss your options.
We are unable to give debt advice, however there are some not for profit organisations who can. These include:
- StepChange, who offer a freephone debt advice service
- MoneyHelper, who have a range of free money tools and information.
If you think you might struggle to afford your car finance in the long term, there are some other options you could consider.
Early settlement of your car finance agreement
A car finance early settlement is the total amount of money you will need to pay the lender to finish the agreement. It is when you fully repay an agreement earlier than the agreed period.
Your early settlement figure depends on several factors, including how much you’ve already paid off. Contact your lender if this is something you are considering.
Refinancing your car
Refinancing means borrowing money from another lender to pay off the remaining amount. Alternatively, you can request an extended finance agreement with your current lender.
Refinancing your car may mean you will pay more in the long run. But, your monthly payments will decrease due to an increased term. Please note that not all lenders allow you to refinance your car. If you are unsure about any of your options, contact your lender and they can help.
Voluntary termination
Another option if you can’t afford your car finance repayments is voluntary termination – this is the process of ending your agreement early. The difference is that you agree to return the vehicle to the lender.
Whether you are eligible for voluntary termination depends on your agreement. If in doubt, check your contract or contact your lender. Generally, you must have repaid half (50%) of the total amount payable before you can voluntarily terminate your agreement.
Voluntary termination, or giving your car back to the finance company, is usually only possible with certain car finance types. Let’s look at which finance types allow you to return the vehicle.
What happens if I can’t make my Conditional Sale (CS) payments?
Conditional Sale agreements state that you must have paid at least half of the total amount payable to return the vehicle under voluntary termination. If you’re looking to voluntarily terminate your agreement, you may have to pay a lump sum to meet this 50% threshold. If you’ve already met or exceeded 50% of the total amount payable, you can hand your car back to the lender.
If you’re a Moneybarn customer and are having trouble making payments, contact us and we’ll be happy to discuss your options. We have also written a guide for customers experiencing financial difficulty that lists some of your options.
What happens if I can’t make my Personal Contract Purchase (PCP) payments?
One option is to make an early settlement of your PCP car finance. You will need to request the ‘early settlement’ figure from your finance provider.
Alternatively, you can voluntarily end your contract if you have paid half (or more) of the total amount payable.
What happens if I can’t make my Hire Purchase (HP) payments?
Hire Purchase has similar options to Conditional Sale: you can either voluntarily terminate your agreement, or request an early settlement figure.
Check your contract, or if in any doubt contact your lender and they can explain your options.
What happens if I can’t make my Personal Contract Hire (PCH) payments?
Depending on the terms and conditions in your lease agreement, you may still be liable for the total amount of the monthly payments. You might also have to pay a fee for returning the vehicle earlier than initially agreed. This depends on the terms of your agreement.
Will late car finance payments affect my credit score?
Having a car on finance can improve your credit score, if you make your payments in full every month.
Late or missing payments can harm your credit score. This depends on the number of missed payments and your credit history. It’s important to note that missed payments and debt can remain on your credit report for up to six years.
If you need more information about how your credit score works, check out our guides:
What happens if I refuse to pay my car finance?
If you refuse to settle your car finance payments, you may risk having your car repossessed. Your credit score may also be affected, which may make it difficult to take out another car finance agreement or obtain credit in the future.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
