How to Deal With Car Payments You Can’t Pay

Setbacks in life are inevitable, but how you deal with challenges like a lost job or sudden costly repair are how you establish your character. Whether it is a one-time occurrence or potentially a long-term issue, if you find yourself in a situation where you are unable to make your monthly car payment, there are actions you can take to minimize the consequences. This can include the loss of your car and a significant drop in your credit score.

Method 1 of 4: Contact your lien holder

Step 1: Get in touch with your lien holder. While your first instinct may be to avoid the issue and pretend it doesn’t exist, this does nothing to help your situation.

Call or visit your lien holder - the individual, car lot, or banking institution that financed your car.

Step 2: Let them know you will not be able to make your payment. Tell the lien holder you will not be able to make your payment and why.

Also, include an idea of when or if you expect your financial situation to improve. The person handling your loan will appreciate your honesty and be more inclined to make arrangements with you when you take an honest approach.

Step 3: Request an extension. Ask if you can have an extension on your monthly payment or refinancing to reduce the payment to something you can afford.

The lien holder may prefer to work with you now so that both parties can eventually complete the sale.

Method 2 of 4: Refinance your car loan

If your credit is good or your interest rates have recently declined, refinancing your loan is a possible way to get your monthly payment lowered. As with refinancing a home loan, this method will only work if you have enough equity in your current car loan.

KBB value
Image: Kelley Blue Book

Step 1: Find the current value of your car. The first thing you will need to do is obtain the current value of your car.

Websites like Kelly Blue Book or NADA are ideal for this purpose and are free of charge while being easy to navigate.

Step 2: Find out how much you owe on the car. Check how much you still owe on your car. The balance remaining should be on your prior payment receipts, but you can also call the lien holder to obtain this amount.

Step 3: Determine whether refinancing the car is feasible. If the balance of your loan is less than the current value of your car, refinancing your car is an option worth exploring. In the case that you owe more on your car than it is worth, you will most likely need to try another method for handling late car payments.

Step 4: Seek out other lenders. Compare interest rates from various lenders, and apply for a refinancing loan through the lenders with the best interest rates.

  • Tip: Bear in mind that, each time your credit report is accessed by a potential lender, it negatively affects your credit score. Limit your credit inquiries by only approaching lenders with the best chance of success, such as your banking institution or another lender with which you have an established history.

Method 3 of 4: Sell your car

While not the most attractive option, you can get out of your loan repayments by selling your car. Advertising in print and online classifieds is a great way to get the word out about your vehicle for sale. Once you find a buyer, use their money to pay off your loan and then transfer the title to the new owner.

  • Tip: This method will only work if you can sell your vehicle for more than what you owe on it. For the best idea of what you can get for your car, check your local classified ads to see the asking price on cars that are similar to yours. This will be a more realistic price than the estimated value of your car that you can find on websites like Kelley Blue Book and NADA.

Step 1: Determine a price for selling your car. Similar to Step 1 in Part 1, find out the current worth of your vehicle from websites such as Kelly Blue Book or NADA.

Keep in mind, that in order to quickly make this sale, you may have to sell the car at a much lower price than usual.

If you’re fortunate, there may be enough money left over for you to purchase another cheaper car, or one with payments low enough for you to afford in your current financial situation.

craigslist ad
Image: Craigslist

Step 2: Advertise your car. You should now choose a medium for listing your car. Common places to advertise your car are Craigslist and AutoTrader.

You may even want to tell family and friends that you are selling the car at a good price. It may be the most convenient to deal with someone that you already know.

Step 3: Sell the car and transfer the title. Meet with potential buyers and show them the car. If they like what they see, draft a bill of sale and complete a title transfer after the payment has been made.

Method 4 of 4: Voluntarily surrender your car

Once you have checked into other options without success, your only recourse may be to voluntarily surrender your car, or allow the lienholder to repossess it without any fuss.

Although this will be reflected on your credit as a standard or involuntary repossession, you will not owe your lender for expenses associated with them physically taking your car back. The lien holder will likely then sell the car at auction. You will be responsible for any difference between what you owe on the car and the amount it sells for to the highest bidder, but that amount won’t incur any interest.

Step 1: Get in touch with your lienholder. If none of the methods above were successful, you can simply have the car repossessed by the lienholder.

At this point you will need to make an appointment to relinquish the vehicle and sign any paperwork.

Regardless of the outcome of any of the above methods, it is better to face the issue of being unable to make car payments as soon as possible. The longer you wait, the less inclined your lien holder and other institutions will be to help and the more your potential array of solutions shrink. Taking care of the problem now will also save you stress and hassle down the road.


Next Step

Schedule Oil Change

The most popular service booked by readers of this article is Oil Change. YourMechanic’s technicians bring the dealership to you by performing this job at your home or office 7-days a week between 7AM-9PM. We currently cover over 2,000 cities and have 100k+ 5-star reviews... LEARN MORE

SEE PRICING & SCHEDULING

The statements expressed above are only for informational purposes and should be independently verified. Please see our terms of service for more details

Recent Oil Change reviews

Excellent Rating

(21,699)

Rating Summary
20,382
845
179
87
206
20,382
845
179
87
206

Matthew

33 years of experience
991 reviews
Matthew
33 years of experience
Volkswagen Passat - Oil Change - Hampton, Virginia
Matt always does a great job. Very professional. I look forward to my next appointment.... A++++++
Ford Expedition - Oil Change - Hampton, Virginia
I am so please to have Matt work on my vehicle, he is very friendly and personable, and always does a great job.

Greg

22 years of experience
37 reviews
Greg
22 years of experience
Audi A3 - Oil Change - Queen Creek, Arizona
Job well done! Greg was on time and professional. He treated my vehicle with care. He completed the job smoothly and so far so good. First time using Your mechanic and it was a pleasant experience. I will be looking into them again. Thanks Greg!
Ford Explorer - Oil Change - Scottsdale, Arizona
Greg was very friendly and professional. Communication was great, he let me know what he was doing. He went above and beyond to make sure everything was running smoothly. I would 100% recommend Greg!

LAVELL

27 years of experience
93 reviews
LAVELL
27 years of experience
Buick Encore - Oil Change - Oakland, California
Another home run! Really appreciate the flexibility regarding my service appointment. Due to my work schedule I desperately needed a late appointment. So grateful my car is receiving top shelf professional service. Replaced a oil pan drain plug that was seriously damaged and stripped by a competitor that will NEVER get my business again! All services were quickly completed. Thank you so much for another great experience with my.... Your Mechanic Lavell 5 ⭐️ Service consistently.

Brian

23 years of experience
483 reviews
Brian
23 years of experience
Porsche 911 - Oil Change - Ponte Vedra Beach, Florida
Brian is extremely knowledgeable and very personable and has taken very good care on my 911. I would recommend Brian to any one who has mechanical car challenges. I would recommend Brian to all My friends and family

Need Help With Your Car?

Our certified mobile mechanics make house calls in over 2,000 U.S. cities. Fast, free online quotes for your car repair.

GET A QUOTE

Related articles

How to Finance a Used Car
You’ve You’ve saved some money to purchase a used car. And while you could use those funds to pay cash for a vehicle from an individual, you can also benefit from having money in hand when visiting a dealership. The...
How to Get a Car Loan When You Have Bad Credit
A A few financial missteps can greatly impact your credit score, and it is far more difficult to repair bad credit than it is to gain it. If you have managed to be branded with a poor credit score,...
How to Make Your Car Payment
Typically, Typically, you don’t have the whole purchase price in cash when you purchase a vehicle. When that happens, you can set up a loan with a financial institution or lender to borrow the funds you need to pay for...

Related questions

AC blower motor quit, ABS and brake lights on - 2003 GMC Sierra 2500

A common issue on the Sierra is a failure of the blower motor resistor. This should be checked and replaced if faulty. The ABS Light being on indicates a fault in the ABS system, wheel speed sensors and or solenoid...

intake manifold gasgit replacement

If oil is leaking into your cooling system, it is very possible that you have an intake gasket leak. It is also possible that you could have a cylinder head gasket leak. If oil can also be seen from the...

Vibration when driving at 20-40 mph

If you are feeling vibrations in the drivetrain when only going 20 to 40 miles then the problem is inside the transmission. If you just had the transmission rebuilt then take it back to the rebuilder to diagnose the problem...

How can we help?

Our service team is available 7 days a week, Monday - Friday from 6 AM to 5 PM PST, Saturday - Sunday 7 AM - 4 PM PST.

1 (855) 347-2779 · hi@yourmechanic.com