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Car finance can make vehicle ownership more affordable by spreading the cost over time. But if your circumstances change and payments become difficult, car finance debt can quickly feel overwhelming. Unlike credit cards or personal loans, car finance is usually secured against the vehicle itself, which means missing payments can put your car at risk.
If you’re struggling to keep up with repayments, it’s important to understand your rights and your options. This guide explains what happens if you miss car finance payments, whether you can sell or return the vehicle, and what steps you can take to regain control.
Before making any decisions, it’s important to understand the type of car finance agreement you’re on. Your rights and options depend on this.
Common types of car finance include:
If you’re unsure, check your original agreement or contact the finance company. Knowing the type of loan you have will determine whether you can return the car, sell it, or renegotiate payments.
There isn’t a fixed number of days before action is taken. However, missing even one payment can trigger contact from your lender.
Typically:
With Hire Purchase or PCP agreements, lenders usually need a court order to repossess the car if you’ve paid more than one-third of the total agreement. If you’ve paid less than one-third, they may have the right to repossess without court action, depending on the terms.
The earlier you speak to your finance provider, the more options you’re likely to have.
Yes, with most car finance agreements, the vehicle can be repossessed if you fall significantly behind.
Whether your car can be taken depends on:
If you’ve paid more than one-third of a Hire Purchase agreement, the lender usually needs a court order before repossession. If less than one-third has been paid, repossession may happen more quickly.
If repossession occurs, you may still owe money if the sale of the vehicle doesn’t cover the outstanding balance.
This is why seeking advice early is crucial.
In most cases, you cannot legally sell a car that is still under Hire Purchase or PCP without first settling the finance.
This is because:
Your options may include:
If the car is worth less than the outstanding finance (negative equity), selling it may not clear the debt entirely.
Always check with your lender before attempting to sell.
Yes, in certain circumstances, you may be able to use a process called voluntary termination.
Under Hire Purchase and PCP agreements, you typically have the right to return the car once you’ve paid at least 50% of the total amount payable under the agreement.
This can allow you to:
However:
Voluntary termination can significantly reduce long-term debt if you can no longer afford the agreement.
If car finance payments are becoming unaffordable, you do have options.
You could:
If car finance debt is part of wider financial difficulties, you may need to consider broader solutions such as:
The right option depends on your income, assets, and other debts.
If your vehicle is repossessed:
This means you could still owe money even after the car is gone.
In some cases, repossession may be avoidable if you act early and communicate with your lender.
If you’re currently managing but worried about falling behind, proactive steps can help.
You can:
Early action is always better than reacting after enforcement has begun.
Car finance is usually considered a secured debt because it’s tied to the vehicle.
If you rely on your car for:
losing it could affect your income and daily life.
When reviewing your budget, it’s important to weigh up whether keeping the car is realistic long-term.
What Should I Do Now?
If you’re struggling with car finance debt or worried about losing your vehicle, don’t ignore the problem. The earlier you seek advice, the more options you’re likely to have.
My Debt Plan offers clear, impartial advice to help you understand your situation and explore the best way forward.
You can get debt help online or speak to our friendly team for a confidential, no-obligation conversation. Call us today on 0161 464 0870 and start taking back control of your finances.
An Individual Voluntary Arrangement (IVA) is a formal agreement with creditors to repay a portion of your debts over time, but it does have an impact on your credit score and it will be difficult to obtain further credit whilst on an IVA. Once an IVA is approved, it is recorded on your credit report and will typically remain there for six years from the date it starts.
However, it’s important to note this is the case for most debt solutions and your credit score will likely already have been affected by being in debt in the first place.
Once your IVA is complete you will get a fresh start to begin rebuilding your credit rating.
IVA costs are charged for the preparation of your proposal and the administration of the arrangement for the full term (usually 5 years) these costs are charged from the monthly contributions you make into the IVA and are not in addition. Costs will only be recovered on approval of your arrangement and once you commence making payments to it. The fees for preparation of the proposal to creditors and calling the meeting for creditors to vote on its approval are called nominees fees, the fees for running the arrangement once approved are called supervisors fees. There are also some expenses incurred in the running of the arrangement such as the registration fee and the statutory insurance that needs to be taken by law, these are called disbursements. For our arrangements, the total of all of these is £3,650 although this may be adjusted by creditors when they vote on whether to accept. No matter what the end total of costs come to, you can be rest assured that these will be taken from the monthly payment we agree with you.
