If you can’t afford your car payments

If you’re struggling to meet your car payments or any other household bills, get free, confidential advice from a debt advice organisation or charity. 

• Find out about reducing the cost of your credit cards and personal loans. 
• Get help with the cost of living. 
• Use our Debt advice locator tool to find free and confidential debt advice. 

It’s important to talk to your car finance company if you’re finding it difficult to keep up with your monthly payments. 

They might be able to:  

• extend your contract, which can lower your monthly payments, or  
• come to another arrangement, such as exchanging the car for a cheaper model. 

They could also offer you a payment holiday, giving you a few months off. This is added to your credit file and will affect your credit score. You’ll still need to pay back the amount you owe later. 

Learn more about payment holidays on ExperianOpens in a new window

You can return a car and end the contract if you’ve paid at least half its value. This is called ‘voluntary termination’ and is one of your legal rights under the Consumer Credit Act. 

You’ll need to have paid at least half of the whole value of the contract. This includes: 

• the monthly payments, and 
• the balloon payment. 

Because the balloon payment is included, it’s likely that you’ll only have paid half the contract’s value towards the end of the deal, if at all. 

If you have the cash available, you could make an extra payment that brings you up to half of the contract’s value. You can then end the deal early, but you’ll have to hand the car back when you do this, so think about whether this is worth it. 

You’ll need to have paid at least half of the contract value, so if you’re halfway through your contract you should have reached this point. If not, you can pay the remaining cost up to 50% of the contract’s value. 

You’ll also hand the car back to the dealer. 

You can use this letter template on National Debtline to apply for voluntary termination.

Your dealer will lose out, so they might try to make this difficult and drag out the process. Just remember that you’re acting within your rights according to the Consumer Credit Act. 

The car will need to be returned in an acceptable condition. Some companies might try to charge you for damage, so check your contract for any terms around acceptable wear and tear. 

There’s a useful guide on fair wear and tear from the BVRLAOpens in a new window 

No. It’s not possible to end a lease with voluntary termination, but we have advice on what to do if you’re struggling with payments. 

It's difficult to end a lease early, as you have less rights than with car finance. 

Your lease agreement might include information about early termination. If it does, it’ll usually tell you what kind of penalty you’d be expected to pay, and any other conditions.  

It’s best to contact your dealer to discuss options and negotiate a termination fee. Once you know what you’ll need to pay, you can decide if this is the right move. 

It’s always best to contact your lender first if you’re struggling and likely to miss a payment. 

The first time you miss a payment, your lender will get in touch with you. They’ll discuss your money situation, and if there’s anything that can be done to help you make payments. 

Missing a payment will hurt your credit score. It’s best to try and avoid this by talking to your lender ahead of time, as they might be able to work something out with you.

If you keep missing payments without speaking to your dealer, they can:  

• give you an arrears notice telling you how much you owe 
• take back (repossess) your car 
• issue a default notice to collect the debt 
• take court action against you. 

These are all outcomes that will usually damage your credit score, so it’s best to talk to your dealer about coming to an arrangement before you miss any payments. 

The best thing to do is to speak to your dealer. They might be able to suggest a new repayment plan with lower monthly costs or agree to a payment holidayOpens in a new window

Our Budget planner can help you understand the full picture of your finances. This can give you an idea of what you can afford to pay monthly when speaking to your dealer. 

If you think you’ve been charged too much or treated unfairly, you can complain to your provider and ask for a refund.  

Our guidance on How to complain if you’ve been mis-sold gives you the steps to take if you want to use this option. 

If you agreed a PCP or Hire Purchase before 28 January 2021, you might have been mis-sold car finance. 

The Financial Conduct Authority is investigating whether dealers have done anything wrong, and if complaints are being handled fairly. 

You might be entitled to compensation. Read more in our blog How to complain about mis-sold car finance.