What to Do When You can’t Afford your Car Payments

The following is a contributed post.

Whether you’ve recently lost your job or simply bit off more than you can chew when you purchased a new car, there are times when making monthly car payments can seem next to impossible. If you’re having difficulty paying your bills, it’s time to re-examine your options before you default on your loan. Missing car payments could lead to your car being repossessed and your credit damaged, so the sooner you can take action the better.

Go Back to the Dealer

One of the first options is to try and take your car back to the dealership. You can speak to the finance manager about the possibility of trading in your car for a more affordable model. For example, Hyundai has a policy that allows you to return your car within the first 12 months of purchase if there’s a change in your financial circumstances. The exchange policy will vary by dealer, but it doesn’t hurt to ask. However, it’s important to bear in mind that the value of a new car depreciates as soon as it’s driven off the lot. Even after only a few months of owning a new car, you may owe more than what it’s currently worth and you would need to pay the difference.

Refinance your Loan

Another option is to speak directly to your lender. It’s in the best interest of a lender to keep you as a customer, so they may be willing to work with you to refinance your loan. If your Subaru Forester is proving to be too much car for you, before you call the lender it’s a good idea to determine what you still owe on the car and what used Subaru Foresters are currently worth by looking at listings sites like Motoring. This will help you negotiate. The lender may be willing to extend your loan period to lower your monthly payments, although you’ll pay more interest in the long run.

Sell your Car

Rather than selling the car back to the dealer, you could try to sell it privately to pay off your loan. You may need to take out a separate personal loan to cover the difference if you owe more than what the car is currently worth. After selling the car, you could look at more affordable used vehicles as an alternative mode of transportation. Rather than selling the car to pay off the loan, another option is to find a buyer who would be willing to take the loan from you and continue making payments.

Transfer your Lease

If you are locked into a lease agreement, the situation can be a bit trickier. You don’t own the car so you can’t sell it to pay off your loan, and if you return it the dealer you’d still have to pay off the remainder of your lease. However, you may be able to find someone who could take over the payments for you in a lease transfer.

When you can’t afford to pay your bills, it’s natural to worry. However, before you panic it’s a good idea to think carefully about these options to determine if any of them could work for you. The first step is to admit that you can’t afford your car, and to take action before you get in any deeper into debt. In most cases, lenders and dealers alike will want to work with you to minimise damage on all accounts.

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