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What If I Can't Make My Car Payments Because of the Coronavirus Pandemic?

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author photo by Russ Heaps March 2020

Although it probably hasn't happened yet, the possibility of missing car payments because of the coronavirus pandemic (COVID-19) is very real for many, particularly those working in industries the government deems nonessential. Living paycheck to paycheck is distressing under normal circumstances. It's downright frightening when faced with a job-killing catastrophe like the coronavirus.

Just as experts tell us to be proactive in minimizing the spread of COVID-19 by staying in our homes, washing our hands and social distancing, staying current with that monthly car payment when cash becomes tight requires being proactive as well. One of the last things you want to happen is a creditor repossessing your car.

Will an Automotive Lender Work with Me?

Whether your car loan is through a bank, credit union or the captive finance company of one of the automakers such as Toyota Financial Services or Ford Motor Credit, ultimately their goal is to keep you in your car and your monthly payments up-to-date. That's how they make their money. It's both easier and preferable to work with you to achieve that goal than to repossess your car and then have to dispose of it. Here's what some automakers are doing to deal with car payments during the pandemic.

Yes, there is a fairly efficient system established for getting repossessions off a creditor's books through auctions and other wholesale avenues, but they are time-consuming and expensive for the creditor. AFSA (American Financial Services Association) is the national trade association for the consumer-credit industry. It says that on average, the lender loses somewhere between $4,000 and $7,000 on each vehicle repossessed. That's a lot of incentive to work with borrowers to keep their payments current.

If your worried about your credit score during the coronavirus pandemic, read our advice here.

What Should I Do If I Can't Make My Car Payments Due to COVID-19?

If a reduction in hours or temporary layoff has you unable to make your car payments, first on your list of things to do should be evaluating your financial situation. Be honest with yourself. Can you make a reduced monthly car payment? If so, how much? Or, maybe deferring your monthly payments for 90 days would solve the problem? Consider which possible solutions are doable.

Then pick up the phone and call your lender. Don't put it off. The sooner you establish a bridge of communication, the better. Don't expect a miracle between now and the due date you anticipate not being able to meet. Without customer contact, the lender doesn't know whether you are past-due or committing fraud. Taking the initiative and reaching out to the lender before the lender has to look for you will make a big difference in the relationship. Moreover, it will also determine how much trust the lender will have in you in the future.

What Are the Options If I Can't Afford My Car Payment?

Because each lender is unique, there are no hard-and-fast answers. Most lenders work with struggling borrowers on a case-by-case basis to craft a tailor-made solution. Several of the captive finance companies have formally announced a willingness to work with borrowers affected by COVID-19. In nearly every instance, it is on a case-to-case basis.

According to AFSA, there are a variety of solutions available when you suddenly find yourself unable to make that next car payment. Those solutions include refinancing the loan, modifying the terms of the loan, changing the due date, deferring payments by extending the length of the loan and waiving late charges. Sometimes the lender will even settle with the borrower.

Another thing to consider is using your stimulus check from the government to either make your car payments to stay current or make up for missed payments to get current.

In the end, if you see trouble on the horizon, take the bull by the horns. There are options, but you must open yourself to them by contacting your lender. 

Looking for more info relating to you, your vehicle, and the COVID-19 pandemic?  Check out more of Autotrader's Coronavirus content.

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What If I Can't Make My Car Payments Because of the Coronavirus Pandemic? - Autotrader
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