September 23, 2008 - I signed a 5 year contrat for my car finance but I have only had it for a year, now my circumstances have changed and I now cannot afford my finance, what can i do? My finance is with carcraft.
Responses:
Despite an earlier answer, do not sell the car if it is a Hire Purchase(HP) agreement. This would be illegal as the car belongs to the finance company until you make the final payment. Check the agreement or seek advice if you are unsure.
If it is a personal loan then you could sell the car but it's very unlikely you'd sell it for enough to clear your debt!- You can default and let them repossess the car. Or you can sell the car and re[pay the loan from the proceeds. Depends on what the value of the car is relative to the loan.
- phone them and see what your options are
- Unless you are going to pay off the outstanding balance, you have no choice but to carry on paying, or you will be in trouble.
If the finance is a 'Regulated Hire Purchase' agreement, then the finance company actually own the car until the very last £ of the contracted payments are paid. Therefore you cannot legally sell it yourself if a shortfall will remain.
As it is so early in the term of the 5 year agreement, there will undoubtedly be a fairly large difference (shortfall) between the actual second hand resale value of the car (i.e what you can get for it if it is sold) and the balance of the remaining finance.
You need to contact the finance company IMMEDIATELY. They are not normally OGRES, and if you explain the situation, and it is only a tempoary financial blip, they will be more than accommodating. They would rather reschedule an agreement than have to reposess the car.
If it is a case that you have a serious long term problem, then you will probably be better to cut your losses and give the car back. If the agreement was regulated by the 'Consumer Credit Act 1974', then you will have the option to Voluntarily Surrender the car back to the finance company. If you do this, you simply write them a letter stating your wish to surrender the car. The date of the letter is the date to which the finance company recalculate an 'early settlement figure', and this amount will be your final liability to the company.
They will sell the car for as much as they can get through specialist large auctions, and it should get 'Trade' value of the car. It is in their interest to get as much as possible for the car, as they ideally want to recoup as much of the debt in one lump sum. The difference between what the car sells for, less costs incurred in selling it, and the 'settlement figure' is what you will still be liable for.
If you still owe anything, don't worry, as that amount will be now an unsecured debt, and you will be able to negociate an affordable amount to pay weekly/monthly, eg £5.00/week, depending on your overall finances.
SURRENDERING your car under the terms of the agreement that actually allows this option, is nowhere near bad as if you let payments default and have it REPOSESSED, as in that case you would be liable for the FULL balance you would have paid upto the end of the 5 years, instead of the early settlement amount. To avoid nosy questions from neighbours or relatives, you could always say you sold the car, or that it was faulty and you demanded they take it back etc?
People answering above have wrongly suggested struggling on with things, or default and let them REPOSESS, but if your financial situation has changed, you have to be realistic and take immediate steps to adjust your expenditure. The fact that you have asked this question is great, as it shows that you are not the type that buries your head underneath a ton of unopened brown letters!
Cut out the large monthly payments you were paying them, give the car back and get a few hundred £ together, if you can, to pick up a cheap little runner if you really need a car.
You don't need the added stress of being chased for payments you can't afford.
One final option that depends of your situation, is you may be able to arrange a loan from family or a bank or use a credit card to raise funds to clear the finance (Get an early settlement figure from the company). You could then keep the car and pay this 'unsecured' loan over a longer period/ lower monthly rate, but seriously NOT the best option! You will be adding interest onto interest at a very high rate! As you opted to have it on a 5 year term, I would guess you already were stretching yourself on the monthly repayments to afford a more expensive car?
I worked for the TSB in their car finance dept for 6 years, dealing with defaulting customers and dealing with surrendered and reposessed cars all lhe time, at the height of the early 90's Housing Crash.
Read the credit agreement you signed, as it will lay out your options and give the finance company a ring NOW and they will be VERY sympathetic and advise you on all your options in more detail!
Good luck.
Your options are:
1) Default on the loan and let them repossess the car. This is your last option since it will really damage your credit and make it much harder and more expensive to borrow money in the future.
2) Try to get it refinanced through another finance company at a lower rate or lower payment.
3) Sell it for what you can get out of it and figure out a way to pay any shortage.
4) Contact the current finance company, explain your situation, and see if you can negotiate some way to keep the car without defaulting on the loan.
Trust me on this, try everything and anything legal you can to not default on that loan.- Are you in the US? Call your lender and talk to them. I know of 2 people that turned their car back to the finance company and it WASN"T a repo.
- best thing would be to sell the car and repay the loan.
Other option is to default, they come and take car, you go on credtit blacklist and become liabe for any shortfall, baillifs come and take your stuff
Best sell car and pay off loan
You need to get with them and explain your situation, they may be able to refinance your car again.
If they can re do it, so that you start over, your payments will be lower because you have a year's worth of the loan paid off.
If they won't do it, you can try at your bank to take out a loan with them and pay off carcraft.
Otherwise, if you can't make the payments, you will need to try and sell it for what you have left to pay on the loan, or they will repossess it, auction it off, and you will be responsible for the difference if they don't sell it for what you owe.
Good luck.
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