What Happens If You Miss a Car Finance Payment?

Car Owl

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Summary

• Contact your lender immediately: Don't ignore the problem.
• One missed payment: Late fees and credit score impact.
• Multiple missed payments: Risk of car repossession.

Life happens. If you're struggling to make a car finance payment, here's what happens and what you can do about it.

Immediate Consequences

When you miss a payment:

1. Day 1: Payment bounces or fails
2. Days 1-14: Grace period (some lenders)
3. After grace period: Late fee charged (typically £15-25)
4. Reported to credit agencies: Usually after 30 days late

Impact on Your Credit Score

Missed payments damage your credit file:

• 30 days late: Recorded on credit file
• 60+ days late: More serious mark
• Default: Stays on file for 6 years

This affects your ability to get credit in the future, including mortgages.

Risk of Repossession

With HP and PCP finance, the car is security for the loan. The lender can repossess it.

Before One-Third Paid

If you've paid less than one-third of the total amount:

• The lender can repossess without a court order
• They only need to give you notice

After One-Third Paid

If you've paid more than one-third:

• The lender needs a court order to repossess
• This gives you more protection and time

What to Do If You Can't Pay

1. Contact Your Lender Immediately

Don't wait. Call them before the payment is due if possible. They may offer:

• Payment holiday
• Reduced payments temporarily
• Extended term to lower payments
• Changed payment date

2. Check Your Rights

Under FCA rules, lenders must treat customers fairly if they're in financial difficulty.

3. Get Free Debt Advice

Contact free services like:

• Citizens Advice
• StepChange
• National Debtline
• Money Helper

Options If You're Struggling

Payment Holiday

Pause payments temporarily. Interest still accrues, so you'll pay more overall.

Reduced Payments

Pay less for a period. The shortfall is added to your agreement.

Voluntary Termination

If you've paid at least 50% of the total amount payable, you can return the car and end the agreement. Read more about voluntary termination.

Voluntary Surrender

Return the car before 50%. You may still owe money if the car sells for less than the debt.

What the Lender Cannot Do

Lenders must follow rules:

• Cannot harass you
• Cannot repossess without proper notice
• Cannot take goods from your home without a court order
• Must consider your circumstances
• Must provide clear information about arrears

Preventing Problems

1. Set up a direct debit: Avoid forgetting payments
2. Budget carefully: Don't overstretch on car finance
3. Build an emergency fund: Cover unexpected gaps
4. Review insurance: Payment protection may help

What About GAP Insurance?

GAP insurance doesn't cover missed payments. It covers the shortfall if your car is written off. Different thing entirely.

For more on car finance, see our guides on selling a car on finance and negative equity.

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