What happens if I miss a car finance payment?

The lender cannot act at once

Under section 87 of the Consumer Credit Act 1974, a default notice is needed before a lender can terminate a regulated agreement, demand earlier payment, recover possession of the goods or enforce security because of your breach. Section 88 says the notice must state the breach, what you must do to put it right and the date by which to do it, and that date cannot be less than 14 days after the notice is served.

If you take the action the notice requires before that date, the breach is treated as not having occurred (section 89).

When a court order is needed

Under section 90, once you have paid a third or more of the total price of the goods under a regulated hire purchase or conditional sale agreement, and the property in the car is still with the lender, the lender cannot recover possession except on a court order. If it does so without one, the agreement terminates, you are released from all liability and you can recover everything you paid (section 91).

The Act’s “total price” includes any sum payable on exercising the option to purchase, so on a PCP the final payment is part of it and the point at which a third has been paid comes later in the term.

Entering your property

Section 92 says the lender cannot enter premises to take possession of goods under a regulated hire purchase agreement without a court order, whatever has been paid.

What the FCA expects of lenders

The FCA’s rules in CONC 7.3 require a lender to treat customers in or approaching arrears with forbearance and due consideration, and not to take steps to repossess a vehicle other than as a last resort, having explored all other options. A lender must not start or continue repossession action while a forbearance arrangement is in place and you are meeting its terms. Where appropriate, the FCA also expects lenders to tell you that free and impartial debt advice is available.

What to do

Tell the lender before you miss a payment if you can: the FCA treats a customer as approaching arrears when they say they are at risk of not meeting repayments. GOV.UK points to MoneyHelper for free, independent help with debt. If you think the lender treated you unfairly when you were in difficulty, you can complain to the lender and then to the Financial Ombudsman Service. You have six months from the date on the lender’s final response to bring it to the Ombudsman, which usually cannot help after that. These Act sections extend across the UK, including Northern Ireland.