What happens if I don't pay my car finance?

In this guide, we'll break down everything you need to know about car finance and missed payments. We'll also answer some of the key questions you might already have on your mind.

Struggling with your car finance payments?

If your financial situation has changed or you're worried about missing repayments, speak to your lender as soon as you can. They should have policies and protocols in place to help you find a solution without falling further into financial difficulty.

Whatever you do, don't ignore the problem. This won't make it go away - and it might even make things worse. There are organisations and charities there to help you take steps to address the situation and avoid facing bigger problems down the line. Your lender can't do anything to help if they don't know what's happening.

I've already missed a car finance payment. What should I do?

Don't panic. The best thing to do is still to contact your lender, regardless of how long it's been. Make the overdue payment if you can. If you can't, your lender may be able to help with alternative solutions.

Again, don't ignore the problem - it won't go away. You might be surprised by how much help your lender is able to offer.

Managing your finance agreement FAQs

What happens if you miss a car finance payment?

Missing a car finance payment is essentially breaking the terms of the contract you signed with your lender. You may get a few reminders and some added late fees at first, but the consequences will only grow the longer you leave the issue unresolved.

Depending on your lender, the process could look something like this:

Step

After a missed car finance payment, you'll almost certainly hear from your lender in one way or another. You might receive a letter, email, or phone call letting you know that your payment is overdue. Some companies will allow a grace period, while others might apply late fees to your account immediately.

If you pay the amount owed at this point, you might get away without any long-lasting consequences. A missed payment could still impact your credit score, though.

If you're unable to make the payment immediately, you should be able to discuss alternative options with your lender, such as delaying a payment or arranging a new payment plan.

Can a missed car finance payment affect my credit score?

Yes, missed repayments can leave a negative mark on your credit file, which will likely harm your credit score. Car finance lenders report these to credit reference agencies in the UK, and this means they could appear on your credit report - which other lenders see.

The impact on your credit score depends on your specific circumstances. If you've missed several payments or failed to repay debts after a statutory notice, this could be marked as a default. This is likely to have a bigger impact on your credit score than one late payment.

Missed car finance payments and account defaults added to your credit report will stay there for six years. This could mean you:

Find it harder to borrow money: lenders check credit reports when assessing applications for mortgages, credit cards, loans, and even smaller things like phone contracts. You could find it more difficult to get approved with a missed payment on your file.
Have to pay more when you do borrow: even if lenders do approve you, they'll likely charge a higher interest rate to cover the increased risk they're taking on. This could make buying your own home or taking out a personal loan less affordable.

What options do I have if I can't afford my car finance payments?

First, you should contact your lender and explain your situation. If you're struggling financially, they'd much rather know before you miss a payment than afterwards. Depending on your car finance provider, they may be able to offer the following support:

A temporary payment break

A payment holiday could provide temporary relief on your finances, allowing you to get back on track before the next payment is due. Interest may still be added, which would increase the overall cost of the loan.

Changing your repayment plan

If you're struggling with your repayments, you could discuss a plan revision with your lender. They might be able to reduce your monthly payments by extending the loan term, although this would cost you more overall. It's worth weighing up the pros and cons.

Changing payment dates

If your payday doesn't align with your current repayment schedule, your lender might be able to adjust the due dates to make things easier for you. You could even take a more flexible approach to payments, such as paying weekly or fortnightly if that's easier for you.

and...

Giving the vehicle back through Voluntary Termination (VT)

If you can't afford your car finance payments, you might be able to return the car. VT allows you to walk away from the agreement, so long as you meet certain criteria. You need to have paid at least 50% of the total balance, including any missed payments, and the car must be in good, working condition. You might still owe some money if the car's resale value doesn't cover the car finance debt you owe.

Help with managing your finances

Many lenders will be able to refer you to charities or organisations who can help if you're in financial difficulty or struggling with debt.

Can I sell my car to settle car finance debt?

This might be an option, but you'll need your lender's permission or to pay off the car in full to transfer ownership. On a PCP or HP finance deal, your finance provider still owns the car until you've made the final payment.

Create a budget

Knowing where your money is going each month can make it easier to prioritise outgoings. Include car payments in your essential expenses category so it's always covered.

Set up automatic payments

An automatic payment from your bank account can help to make sure you never miss a due date. It's one less thing to worry about, and you'll avoid any late fees.

Review your finances regularly

Life can change quickly, so it's important to check in on your finances from time to time. If your circumstances change, planning ahead gives you the ability to adjust your budget so you don't fall behind.

Avoid taking on additional debt

While it may be tempting to take on more credit or loans, additional debt can stretch your finances thin. Stay focused on paying off your car loan before taking on any new financial obligations.

Save for unexpected expenses

Life throws a few curveballs from time to time, whether it's a car repair bill or an expensive trip to the dentist. Build an emergency fund to help cover these unforeseen costs so they don't interfere with your car finance payments.

Contact us if you're struggling with payments

If you're already a First Response Finance customer and you're worried about falling behind on your repayments, get in contact with us as soon as you can.

We've already helped lots of customers with their money worries - and we can help you!

This page was last reviewed in December 2025.

First Response Finance is a responsible vehicle finance lender, and all decisions are made in the best interests of the customer; based on credit scores, status, and income at the time of application. We'll never approve an application if we believe you might struggle with repayments.

Get independent advice on money, finance products, debt management, and budgeting through Citizens Advice and MoneyHelper.