The Financial Conduct Authority has introduced new measures for car finance agreements. If you’re struggling to make payments, you can now apply for a three month payment break.
Car finance companies have also been told to act fairly. This means not starting the process of repossessing, ending agreements, or changing contracts if customers are currently in financial difficulties due to coronavirus.
If you’re currently in a car finance deal and need to apply for the payment break, contact the lender or dealer as soon as possible. It will not happen automatically.
Will I still pay interest?
If approved for a payment break, interest will still be added to the car finance loan.
At the end of the payment holiday, the lender may increase the remaining payments to cover what was missed. Or, the car finance agreement may be extended.
Make sure you find out what will happen after the payment break before you make an agreement with the lender.
Will the car finance payment break affect my credit score?
If you have an agreed payment break with your car finance lender, it should not appear as a missed payment on your credit score.
If you miss a payment without an agreement in place, it will be treated as a missed payment and could harm your score.
You can see if your payment break has been recorded correctly by checking your free credit report. If it shows a missed payment, you can raise a dispute on your report to get it sorted. You should also double-check with your car finance provider, to make sure it doesn’t happen again next month.
It’s best to check your report on a regular basis, as it may take a while to update.Check my credit report now
If you make sure everything is as it should be now, it'll make it easier when things go back to normal. With a good credit score, you could get the credit you need when you need it, improve your financial footing, and move on up to a better future.
What is voluntary termination?
If you're in a car finance agreement but no longer want or need your car, you can give it up. This is called voluntary termination and means you can end your car finance agreement early.
If you want to do this, there are two main conditions. Firstly, the car must not be damaged in any way. Secondly, you need to have paid half the total amount you agreed to pay.
If you haven’t yet paid half, this might not be a good option right now unless you can cover the rest of the costs.
If you want to start voluntary termination you should contact your dealer in writing. It’s best to do this by email in the current situation.