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Car finance

voi5
voi5 Posts: 4 Newbie
First Post
Hi everyone,
 I have an issue with a car loan company. I lost my job in April 2020 due to lockdown. I couldn't afford to pay my car loan and my account went in arrears. After 18 months I started repaying my monthly payments and made an arrangement to pay my arrears. I sent them my monthly budget and they agreed with an amount that was affordable to me. We agreed that we will reassess in 3 months. After a month of payments, they call me and say that they need to increase the payment in 3 months to an amount that is paid off in max 18 months. This means, I will not be able to afford paying it anymore. It would be 3 times more than I pay now. They said they will terminate the agreement if I cannot afford it. Is there anything I can do? I have no other means of transportation to get to work and I explained them my situation many times with no result. Any advice is much appreciated. 

Comments

  • Grumpy_chap
    Grumpy_chap Posts: 17,013 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    voi5 said:
    Hi everyone,
     I have an issue with a car loan company. I lost my job in April 2020 due to lockdown. I couldn't afford to pay my car loan and my account went in arrears. After 18 months I started repaying my monthly payments and made an arrangement to pay my arrears. I sent them my monthly budget and they agreed with an amount that was affordable to me. We agreed that we will reassess in 3 months. After a month of payments, they call me and say that they need to increase the payment in 3 months to an amount that is paid off in max 18 months. This means, I will not be able to afford paying it anymore. It would be 3 times more than I pay now. They said they will terminate the agreement if I cannot afford it. Is there anything I can do? I have no other means of transportation to get to work and I explained them my situation many times with no result. Any advice is much appreciated. 
    What is the current settlement figure?
    If you sell the car, does that generate sufficient to settle the finance? 
    Used car prices are strong right now, so you may be able to do that and any excess above the finance settlement will be returned to you.
    You can then look to acquire a cheaper vehicle than the one you have now, that maybe is a better fit to your current financial status.

    I know this is not what you want to do, but if you do nothing your credit file will be severely damaged and affect future ability to borrow, plus you likely lose the car in the process anyway.

    If you take control of the situation, you can achieve the best outcome from a poor situation.

    In addition, you may wish to consider preparing your SoA (statement of affairs) and seeking advice form within the DFW (debt free wannabee) section of the forum.  The Forumites over there may be able to advise on where you may be able to make other efficiencies and / or how to make the loan repayments affordable.
  • Thank you for your response. If I sell the car, I still have to pay £3500. I don’t have that amount. I went to a car dealership and told them about my situation. They said they could buy the car from the car finance company but I need to pay that £3500 to them first. The car’s evaluation is £6500
  • Ebe_Scrooge
    Ebe_Scrooge Posts: 7,320 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    edited 6 January 2022 at 2:03PM
    voi5 said:
    Thank you for your response. If I sell the car, I still have to pay £3500. I don’t have that amount. I went to a car dealership and told them about my situation. They said they could buy the car from the car finance company but I need to pay that £3500 to them first. The car’s evaluation is £6500
    Are you saying that you still have £3500 outstanding finance to pay, and that the car is worth £6500.  If so, sell the car, pay off the finance, and you'll have £3000 left over which will buy you quite a decent little used car.  I don't quite understand what you mean about the car dealership - it sounds like they're not interested in buying a car that's still got finance outstanding on it?  If that's the case, it's worth shopping around - there are plenty of places which will buy the car off you "as is", clear the finance and give you back the difference.  The much-maligned "We Buy Any Car" is one that springs to mind - I'm not suggesting that should be your first port of call, there are plenty of dealers around who will buy cars on finance.
    Or is it the case that the car's worth £6500 but you still owe £10,000, in which case that kind of makes sense - the dealer you spoke to is (quite reasonably) asking you to make up the difference between the car's value and the outstanding finance.

  • Grumpy_chap
    Grumpy_chap Posts: 17,013 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker

    is it the case that the car's worth £6500 but you still owe £10,000

    If this is the case and the OP allows the car to be re-possessed, then AIUI the OP will still be without the car and will still owe the outstanding balance of £3.5k.

    To be in £3.5k negative equity on a £6.5k car is outside the way most car loans are regularly structured even if only because the finance company always want to be secure of having their own position protected.

    Is the OP certain that the "amount owing" they are using is the current settlement figure?  OR, is that the amount that will remain to be paid in total if the loan runs the full term?  Settlement figure should be lower than full term payment because of the future interest that is no longer accrued.   

    I really recommend that the OP heads over to DFW board for further advice or, if that is too daunting, needs to share more details about the car loan here.
  • voi5
    voi5 Posts: 4 Newbie
    First Post
    Early settlement amount is £9,900. The value of the car is £6,500. When they repossess the car, I will still owe them £3,400. At the moment we agreed on £258/month car payment plus £90/month towards arrears. From March they want £258 plus £214 (for the arrears). They are set on that amount even after multiple attempts of negotiation. I explained my situation and even provided evidence of how much I can afford. 
  • Grumpy_chap
    Grumpy_chap Posts: 17,013 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Combo Breaker
    Keep paying the £258 + £90.
    Repossession is not a quick process.

    Is the £258 + £214 what needs to be paid to allow the loan to be settled within the original term?  Rather than asking for a lower monthly payment, what would be the answer from the finance company if you requested a longer repayment term?

    Better for the finance company to have an agreed route to repay the loan than have to take the car back.

    Also, prepare your SoA and head over to DfW board.


  • Ebe_Scrooge
    Ebe_Scrooge Posts: 7,320 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    Keep paying the £258 + £90.
    Repossession is not a quick process.

    Is the £258 + £214 what needs to be paid to allow the loan to be settled within the original term?  Rather than asking for a lower monthly payment, what would be the answer from the finance company if you requested a longer repayment term?

    Better for the finance company to have an agreed route to repay the loan than have to take the car back.

    Also, prepare your SoA and head over to DfW board.


    This is good advice.  Especially the bit about the DfW board.
    OP, it's in your best interest to try and maintain the payments if you possibly can.  Firstly, if the car does end up being repossessed, you're then left with no car, and a debt that still has to be repaid, and no money to buy another cheap runaround.
    Even if they do insist on paying the extra £124 a month, you may be pleasantly surprised at what savings you can make if you allow others to scrutinise your SOA.  It's got to be worth a relatively short period of pain if it means you can keep up the repayments and keep the car.

  • voi5
    voi5 Posts: 4 Newbie
    First Post
    I have asked for longer repayment term and they refuse. They want to stick to the original term and this is why they ask for the amount mentioned.
    a month ago they agreed to £90/ month towards arrears and now they want £214/month. It’s a huge increase for me. I cannot afford that and I cannot afford to buy a new car either. 
    I don’t understand why they are doing this. It’s not advantageous for them either.
    Do they need to go to court to be able to repossess? They keep asking me to agree to the termination and handing them the car.

  • MattMattMattUK
    MattMattMattUK Posts: 10,165 Forumite
    1,000 Posts Fourth Anniversary Name Dropper
    voi5 said:
    I have asked for longer repayment term and they refuse. They want to stick to the original term and this is why they ask for the amount mentioned.
    They are within their rights do to this, so it is worth building a strategy that fits.
    voi5 said:
    a month ago they agreed to £90/ month towards arrears and now they want £214/month.
    It seems odd that they changed from one month to the next, is there anything behind that, eg. a missed payment? Was it for one month, then they would recalculate the amount that was owed? How many months did you not pay for?
    voi5 said:
    It’s a huge increase for me. I cannot afford that and I cannot afford to buy a new car either. 
    As others above have mentioned it would be worth posting a SOA to the DFW board, they can almost certainly find you savings and with any luck would be able to find you more savings than the £214 pcm.
    voi5 said:
    I don’t understand why they are doing this. It’s not advantageous for them either.
    They don't lose out either way, they have the car as collateral for the majority of the debt and they can take you to court for the rest.
    voi5 said:
    Do they need to go to court to be able to repossess?
    Yes, which would take some time.
    voi5 said:
    They keep asking me to agree to the termination and handing them the car.
    I suspect that they are saying this because you are saying you will not meet the required payments.
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