I’ve been made redundant and can no longer afford my car finance payments. What can I do?
If you have lost your job, and are unable to afford your monthly finance repayments, please speak to the finance provider in the first instance to discuss your requirements. Unfortunately, this is not something that we are able to assist with at The Motor Ombudsman, but the following organisations may also be able to help:
- Money Advice Service: www.moneyadviceservice.org.uk
- Step Change Debt Charity: www.stepchange.org
- Citizens Advice Bureau: www.citizensadvice.org.uk/debt-and-money
- National Debt Line: www.nationaldebtline.org
- Money Advice Scotland: www.moneyadvicescotland.org.uk
Consumer credit guidance
The Consumer Credit Act 1974 provides that a consumer that has purchased a car through a finance agreement has the right to cancel the agreement at any time. Provided monthly payments have been made on time a consumer’s credit rating should not be affected in the event that a consumer decides to exercise this right of voluntary termination.
In the case of voluntary termination the car must be handed back (in a reasonable condition) and 50% of the amount payable under the finance agreement must be repaid.
It important to remember that the amount that needs to be repaid may be higher than is first thought. This is because a consumer is required to repay 50% of all amounts payable under the finance agreement and not just 50% of the monthly payments that would have become due. In particular the finance agreement may be structured in such a way that monthly payments are kept relatively low and an additional and substantial balloon payment becomes due at the end of the agreed period before the consumer owns the car. This additional payment will be added to the monthly payments when calculating the 50% that is payable on a voluntary termination.