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Can't Make Your Car Payment? Your Guide On What To Do

Finance | 05/27/2023 19:27
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The economy is in a rough spot right now, which means many of us are behind on payments. Mortgage, rent, insurance, groceries, electric bills–it seems like we can never get a break or catch up. Car loan debt is at an all time high right now due to high car prices and high car loan interest rates. In fact 2 in every 13 Americans is paying over $1000 on their monthly car payment. It’s not hard to imagine these numbers getting the best of us and resulting in a missed car payment. But what exactly happens when we actually can’t afford to make our monthly car payment?

Here’s what you should do if you can’t make your car payment.

What happens if you miss a car payment?


The exact consequences of missing a car payment will vary depending on your contract and your lender. But missing a car payment will definitely affect your credit score, which will have lasting implications for your financial future. A bad credit score can mean the following:

  • You will have a harder time getting approved for loans and will have fewer options.

  • You will have higher interest rates.

  • You will have higher insurance premiums.

  • You may have to pay a deposit for utilities.

  • You may have a tougher time renting an apartment.


A hit to your credit score can take years to recover from and could affect several areas of your life.


It is unlikely that your car will be repossessed if you miss one car payment, but some companies will repossess your car if you miss two payments. Most companies will repossess your car by the third missed payment. 


If your car is repossessed you may think that is the end of it, but the lender may actually come after you with legal action to incur any fees that you haven't paid. So not only will you be out of a car (and without the down payment and payments that you have already made), but you may owe the lender even more money, and your credit score will be seriously compromised. A repossession will show up on your credit report as well, which will be a major red flag for future lenders.


All of this is to say: you do not want to miss a car loan payment if you can help it. The repercussions are long lasting and will take a long time to recover from.


If you are struggling to make one payment, chances are you will struggle again. It’s better to be proactive and address your financial situation before you miss a payment and certainly before you miss several payments.

How many days late can you be on a car payment?


This varies from loan to loan but most lenders will give you a 10 or 15 day grace period if you miss a payment. As long as you pay your bill within a few days of the due date there will not be consequences. Some lenders will give a greater grace period on your first payment with a 60-day no payment option. This means that you will have 60 days after signing to make your first payment. This can be very helpful if you made a large down payment and could use a month to catch up.


Your contract will list if you are responsible for any late fees. The amount will vary from lender to lender but will typically be between 2-5% of your monthly payment. 

Can you defer a car payment? How many times can you defer a car payment?

This is another thing that will vary from lender to lender. Some lenders will allow you to defer once, while others may allow you to defer payments three or four times. The timespan of these deferrals may be per year or per the life of the car loan. Read your contract carefully to determine what the implications are.

Can I make a partial payment on a car loan?

You may think that if you make a partial payment it will help to mitigate the damage. While making a partial payment will apply towards your loan and reduce the amount you owe, if you do not make the payment in full it will still be marked as late. This means that it will still negatively impact your credit score and may put you in jeopardy of losing your car depending on how your car loan contract is worded.

Should you defer a car payment?


Deferring a car payment is a good option if you are starting to struggle financially but feel that a small break can help you catch up. There are several advantages to deferring a car payment:

  • You can avoid late fees.

  • You can avoid the risk of repossession.

  • You can use the extra time to decide what to do to fix your financial situation.


But deferring a car payment comes with some disadvantages as well. After all you will still be responsible for making the payment and for the interest accrued during that time. If money is truly tight, deferring the payment may just mean deferring the problem.

What options do you have if you can't make your car payment?


Talk to your lender.

A great first step to take is to contact your lender directly. They may suggest deferment or they may be able to enroll you in a program to help you make your payments. If you have a good history of on time payments they may be more willing to work with you. Remember, your lender doesn’t want to repossess your car–that’s a lot of work on their end to recoup your payment. They ultimately want you to pay them, so they may be more willing to help you out than you may anticipate.


When you talk to your lender you can also ask them if it's possible to change your payment date. If you get paid at the beginning of the month and your loan is due at the end of the month it may be harder for you to make your payments on time. But if your lender allows you to change your payment date it may set you up for more success.


Refinance your loan.

If your lender is not willing to work with you or you do not have a good relationship with them, you may want to refinance your car loan with a new lender. There are a lot of benefits to refinancing your car. You can not only secure a better car loan APR, but you can change your repayment terms which can give you a lot of extra breathing room every month. Lengthening your repayment period means that you will pay off your loan over a longer period of time. You will end up paying more money in the long run because you will pay interest for longer, but this will mean much lower payments every month. If you are in danger of missing payments, this might be your best option. Companies that specialize in auto refinancing can help you secure a refinance loan that will work for you and help you navigate the refinancing process.


Get rid of your car.

If you are struggling, ask yourself “do I really need a car?” Let’s face it: cars are expensive. Not only do you have car payments, but you have to pay for insurance, gas, maintenance, parking, tolls, registration, and more. If you live in an area that has public transportation or you have someone in your life who can help you get around, it might make more sense to get rid of your car altogether. This will alleviate a lot of stress in your life. Selling your car will also give you a little cash injection depending on how far along you are in your loan.


Trade in your car.

If you still need a car to get around, selling your car is probably not a great option. But you can trade your car in at the dealership to get a car that has more affordable payments. If you have the time and inclination you can sell your car privately and use the income to secure a less expensive car. You will get more money if you sell your car privately, typically making 15%-25% more than if you were to trade it in. 

That’s what you can do if you are having trouble making your car payment.


The best way to ensure that you can always make your car payments is to select a car that you know you can afford. Determining a budget ahead of time and getting preapproved for a car loan will help you to stay within a healthy range of car prices. Try to avoid the unnecessary add ons and be sure to make a healthy down payment to further secure an affordable monthly payment.


If your monthly payment is too much, contact Auto Approve today to see how much money we can save you!


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