The coronavirus has created a lot of uncertainty, especially with many people’s income, and aside from your mortgage payments you may be wondering “can I freeze my car finance payments during coronavirus?”
Understandably, this is a concern for many who are facing financial difficulties during the COVID-19 pandemic. As of yet, the government have not announced any specific measures to help households with their car repayment costs, however, you may be entitled for a car payment holiday via the manufacturer.
To find out what a car payment holiday is, how you might be able to claim it and other options available to you, we’ve put together some key information below.
If you pay a monthly fee for your car you should get in touch your finance lender as soon as possible. Rather than defaulting on payments, it is better to tell them about your current situation. Missing payments will have a negative effect on your credit rating, which could make things more complicated financially in the current environment.
Some lenders may be more willing to help than others, but it is worth suggesting a temporary alternative. This could be anything from offering to reduce payments in the short-term, or asking for payments to be paused for a month or two.
Read through your contract to see if a deferment option has been included, which could make things easier. This could allow you to add the deferred payment onto the end of the contract. Bear in mind, however, that this is likely to accrue more interest and could cost you more in the long run.
If you ask a lender to miss a payment they may ask you to produce a hardship letter explaining your current financial situation in more detail. In both instances it is important to note you may also have to pay an additional fee for missing scheduled payments.
Customers that have been furloughed by their employers will be able to claim for up to 80% of their wages thanks to the government’s pledge to cover salaries and wages. This could be another way of finding much needed money to work out a temporary repayment scheme with the lender. It may take a few months for this money to arrive, so be sure to consider your options in the meantime.
A car payment holiday works in the same way as the coronavirus mortgage payment holiday scheme recently agreed to by mortgage lenders.
If eligible it will mean your finance provider gives you a break from repayment fees for up to three months. The payments missed will be added onto the existing loan amount and your monthly instalments recalculated.
This is not a government backed scheme, rather, one driven by manufacturers. Anyone with a HP or PCP-style finance agreement on a new car is more likely to have some sort of protection like this in place.
For example, Volkswagen have said that UK customers dealing with financial difficulties may be able to claim a payment holiday of up to 60 days. An alternative option could be to extend the payment plan and reduce the monthly payments.
Hyundai and Kia may also offer similar payment holidays, while Ford have told Parkers that it plans to introduce payment holidays, which includes the temporary removal of late fees.
While some have been quick to announce their support of customers through this difficult period, it cannot be guaranteed that all manufacturers will do the same. However, finance lenders are obligated by law to offer help of some kind.
The Financial Conduct Authority (FCA), the UK’s official financial services and financial markets regulator, have reminded lenders that they are expected to offer a strong level of support to customers during the coronavirus crisis.
It may also take some time for the car payment holidays to be made available. There have been some estimates suggesting it could take up to 3 months for some manufacturers to have everything in place. If you have to wait 3 months for a car holiday scheme to begin, your best option is to contact your lender to discuss your current situation.
If you have any questions or need further help, please contact us today.