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Car finance

27th January 2022

Published by The Real Debt Guy

  • Debt
  • Car finance
  • Finance agreements
  • Buying a new car

​​Everything you need to know about remaining car finance after repossession

How to handle the remaining car finance after repossession

When you’re in financial difficulties it can become a struggle to keep on top of all your monthly outgoings, and one of those, may in fact be your car repayments.

One of the most common reasons why a vehicle may be repossessed is when the agreed monthly payments are not made. This breaks your terms of agreement with the finance company and as a result, they can repossess your vehicle in order to try and claim their money back.

If you’re like most people, your car gives you your freedom and independence so, when it’s taken away, it can leave you feeling vulnerable and isolated.

Unfortunately, what many people do not understand is that when their car gets repossessed it’s not always the end of the issue. There are various routes the finance company may consider to try and get their money back, so we want to give you as much information as possible to help you discover what options are available to you.

Let’s break down what happens with the remaining car finance and how you can tackle the problem.

Not in the mood to read? We got you covered. Listen to the rest with the YouTube link at the bottom of the page.

What happens to your car?

Before we explain what your options are for handling any remaining car finance, it's important that you’re clear on what happens to your car when it gets repossessed. When the finance company repossesses your vehicle they don't like to hang onto it for too long. It’s of no use to them and they want their cold hard cash, meaning they will likely auction the vehicle.

An auction of a repossessed vehicle is nearly always guaranteed to get you less than what you would have been able to get from a private sale (i.e. you selling it yourself). This is not ideal, but it’s not always a problem unless... the sell price is not enough to cover the remaining finance you have on the car.

Let's say after your vehicle has been sold, there is £7,000 left to pay on the finance..

The first thing you need to know and understand is that the vehicle has been repossessed and sold. This means the finance that was previously secured to an asset (the vehicle) is no longer secured to anything. It has now become an unsecured debt. 

An unsecured debt can make car finance companies very uncomfortable because it means they lack control of how they will get their money back. When this happens, they will look for the best way to try and recover the outstanding debt.

You have remaining car finance, what now?

As mentioned above, when you have remaining car finance left after repossession, it means you now have an unsecured debt which finance companies like to avoid at all costs. So now what happens?

Well, one way they like to try and get their money back is by securing the debt (the remaining car finance) to another major asset. The most realistic asset would be a property; if you’re a property owner of course. It is important for you to understand that this is always seen as a last resort.

As stated by the Financial Conduct Authority, the finance company or whoever is representing them must make every effort to try and recover the money or come to a reasonable agreement with you before any legal action is taken.

Communicate clearly at all times

To ease the pressure of the situation, it’s important that you communicate with the finance company to let them know what your circumstances are. Please don't ignore the situation as this could make your situation worse. Your risk of legal action will be much higher if you are not communicating with the finance company. They will just let the time pass until they can make the move to get their money back through the court system.

Don’t think they’ll just forget about it. When money is involved, companies will do everything in their power to get it back.

The best thing you can do is try to come to a payment agreement or a settlement with the finance company. This can prevent any legal action against you that may lead to a County Court Judgment (CCJ) and on to a Charging Order. If you can, it’s best you avoid either of these.

What if you don’t own a property?

If you do not own a property it puts the finance company in a difficult situation, which may be easier for you, but it won’t help them. They have to employ a solicitor if they want to go down the legal route but they also have to decide if the juice is worth the squeeze.

 Again, they must make every attempt to come to an agreement with you but if they are unable to reach an agreement that's when things become tricky.

How tricky, you might be thinking? Well, the finance company has a few options, none of which they are guaranteed to take, let’s go through them below.

The finance company could decide that they want to pay a solicitor to obtain a County Court Judgment (CCJ) against you (the debtor) but after that, what happens? There is no asset to attach the debt to so what could the other possible recovery options be?

  • Attachment of earnings - This is when money is taken from your wage, every time you get paid, to pay the remaining debt. There are a few issues with this. The amount of effort it will take the finance company to get all this in place for minimal monthly repayments may seem pointless. The other problem is that if you have a low income, the time it will take for the whole debt to be paid off could be very long.
  • Instruct bailiffs - A finance company could choose the bailiff route to get their money back but that's another cost for them.  Let’s think about this realistically for a second. How likely is it, that through seizing your goods to sell at an auction, the finance company will recover all the money they need to cover your remaining finance plus the costs associated with hiring the bailiff in the first place? In the majority of cases the answer will be, not very likely. Remember, auctions typically generate lower amounts from the sale of goods so the finance company’s return would probably not cover the debt and costs associated. Not to mention that the bailiff may be refused entry by the debtor (you) so the whole exercise could be a waste of time.

Don't forget to read The Real Debt Guy's final thoughts below!

The information in this article is considered to be true and correct at the date of publication.

The Real Debt Guy's final thoughts.

If you find yourself in a situation where you’ve had your car repossessed, please don’t let it get you down, even though it’s hard not to. This is just a bump in the road of your life and you will recover from this. How you handle the situation will determine how big the bump is.

Make sure you keep communicating with the finance company and make it very clear as to what is affordable for you to pay each month. Do not feel pressured to pay what you cannot afford as the realistic options of recovery are very limited for the finance company especially if you do not own a property.

Finally, make sure as always, to keep all communications you have with the finance company or their representative in writing. This is very, very important.

To make it easier for the car finance company to understand your financial situation, complete our budget planner. You can download it, print and send it to the finance company to give a true picture of your financial situation. Also read our article Why you should avoid car finance and what could be better options to see alternatives to going down this route in the future.

Simplifying complicated matters.

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