Coronavirus: car finance advice

Could you potentially face a change of circumstance due to the impact of the Coronavirus pandemic? We take a look at some of the implications and your options if you think you may be affected.

What happens if I can’t pay?

#1- speak to your finance company

If you think you may have genuine trouble paying your monthly car finance payments, speak to your funder as soon as you can. Lenders understand the pressures that many customers may face and we anticipate that many will be lenient, but we recommend that you only ask for a payment holiday if you really need it…

Lenders may offer to re-arrange your finance to enable you to pay in a way that better suits your circumstances and some may even offer a payment holiday or to extend your agreement to reduce your monthly payments. These arrangements will show on your credit file, but given the extraordinary circumstances, lenders for any future credit applications should be able to interpret these appropriately.

We cannot assist you with these arrangements, so you should contact your lender directly. Have a copy of your finance agreement with you to speed up the process. Some finance companies are experiencing high call volumes at a time when their workforce has been reduced or are working from home, so we would suggest emailing them with your query if you cannot get through by phone.

Don’t cancel any Direct Debit on a car finance agreement without first checking with your finance company that it is OK to do so.

If you default on your payments, this will affect your credit score & your ability to get credit in the future so it is far better to be honest and discuss your options with the funder.

How will this affect my credit rating?

Under normal circumstances, an arrangement of this type would go down as a note on your credit file that may affect your ability to borrow or the terms you are offered on any future finance agreement.

We understand that some lenders are considering classifying arrangements made during the COVID-19 pandemic as U – Unclassified or even applying a specific COVID-19 note. This would presumably indicate that financial distress was a consequence of the Coronavirus outbreak rather than any other reason.

Can I hand the car back?

This will depend on a number of factors. If you have paid more than 50% of the Total Amount Payable then you may be able to do so, but you will not receive any rebate of payments or interest. You can find out more about ending an agreement early here.

Can I get car finance during the Coronavirus epidemic?

Currently, people are still interested in buying cars and financing them and we are still receiving enquiries. Typically customers are interested in taking advantage of the drop in interest rates triggered by the Bank of England emergency measures and also in the expectation that they might be able to pick up a bargain.

At this point in time, finance companies are still willing to lend. Proving affordability will be more crucial than ever and the situation may change. Finance companies are also making more rigorous checks to ensure that cars are being delivered to customers rather than languishing at the dealer. We will continue to update this page if there are any changes.

The UK government has asked car showrooms to remain closed in response to the COVID-19 epidemic so you will not be able to take delivery of a car until it lifts these restrictions.

We are still able to organise your finance in advance of the future collection and get the payment ready to remit ONLY when you are comfortable arranging delivery or collection – we will not pay out a deal in advance as this protects you as our client and our funding partners.

I had a deal in place but my lender withdrew it

We are aware that customers have been left stranded by finance companies who have refused to pay out on deals that have already been approved and the paperwork completed, meaning that some car buyers have been unable to pick up their cars.

We still have a panel of lenders who are willing to finance cars, so please get in touch if you have been affected by this and wish to re-arrange finance in order to pick up your car.

My balloon payment is due – what should I do?

If you have a PCP, then you have the option to hand the car back to the finance company at the end of the agreement (subject to certain conditions) and this currently looks like the easiest option.

If you have a lease purchase or hire purchase with a non-guaranteed balloon, you could simply refinance or extend this on a facility that allows you to exit with a limited penalty, so when the time is right you can review and complete a new deal.

Can I refinance?

We regularly refinance cars for customers who can potentially benefit from a better interest rate. We would not recommend that you refinance your car under a new agreement over a longer term to reduce the monthly payments if you are in financial distress, and a new lender may not wish to do so anyway.