I can't afford my monthly car finance payments due to coronavirus - what are my rights?

If your circumstances have changed, some forms of finance allow you to return your car early, but there are implications to consider. Here's what you need to know...

Calculator

The coronavirus (Covid-19) pandemic is causing all sorts of stresses, and while the primary concern is health, financial wellbeing is also an issue.

So, where do you stand if you've bought a car on finance but can no longer afford it because you've been made redundant or seen a significant drop in your income?

Here's what you need to know if you find yourself in this situation.

What should I do if I can’t afford to pay for my car due to coronavirus?

If you pay for your car monthly, the first thing you should do is speak to your finance provider; it is far better to be honest with them than to just default on payments, because this will affect your credit score and make it harder to get finance in future.

True, some lenders will be happier to assist than others, but you might well be offered some solutions to make the payments more manageable and allow you to keep the car. For example, they could allow you to defer the payments for a short period of time, or they might be willing to extend the period of the loan to reduce the cost of the monthly payments.

What if I just want to hand the car back? 

It depends on the type of finance you have and where you are in the contract. 

If your car is financed by personal contract purchase (PCP) or hire purchase (HP), you’re allowed to hand it back to the finance company if you have already paid off 50% of the loan, including any interest and fees. However, if you’ve yet to pay off 50% of the loan, you’ll have to make up the difference. And, if you've paid off more than 50%, you won’t get that extra money back if you cancel the contract. 

If you lease your car through a personal contract hire (PCH) scheme,  it’s a lot more difficult to hand it back. You can return it, but you’ll probably have to pay back any remaining money you owe on the contract. So, if you still have a year left, then the lender will expect a year’s worth of fees up front. In this instance, it’s better to contact the finance company and see what else you can arrange. 

If you used a bank loan or credit card to buy your car and can’t afford the repayments, then you’ll likely have to sell the car to cover the money you owe. 

For all the latest reviews, advice and new car deals, sign up to the What Car? newsletter here

Read more: all the latest coronavirus advice for drivers >>