What happens if you miss one car payment?

Posted on 25 November 2021

Written by Ashvin Sharma

Car loans in Canada are becoming increasingly expensive, especially as new models are constantly being released, each with new bells and whistles. As a result, car loan payments are going up and there is more demand for the newest and greatest cars. In fact, the average monthly car payment in Canada for a new vehicle in 2021 is $662. A substantial amount, this is a lot for most of us to afford, especially when for many jobs owning a car is essential. This can create financial pressure, and can sometimes mean it is not always possible to make your monthly car payments. So, what happens if you miss one car payment? In this article, we will explain the consequences of missing a car payment or more, and what you can do to resolve the situation.

Your car loan lender will be in contact

This first step is usually expected – you signed a contract to make car loan payments each month. If, therefore, you miss one, it is likely that your lender will want to know what has happened, and why they have not received their payment. They will probably try to contact you via telephone, email, or mail to warn you about the consequences of missing payments. If this is the first car loan payment you have missed, it is likely that your lender will give you a few buffer days. These days are for you to make your car payment to avoid penalties. It means slightly less reason to panic, although you should always try to make your payments on time wherever possible. If you are struggling with car loan debt, it is a good idea to reach out to a Licensed Insolvency Trustee for advice on how to reduce it.

You may face penalties and additional interest

This will not be the case in all situations, but should you miss a car payment, some lenders may charge a late fee. In addition to a late fee, interest will most often continue to accumulate on the unpaid remainder of your car loan. As a consequence, this can increase the overall amount left to be paid on your car loan in the longer term. If, however, you are quick to make the payment you missed, your lender may well waive the fees and interest provided you are able to make any subsequent car loan payments on time. The same goes if this is your first missed car payment – your lender is likely to be more lenient with you. It is best to be extra vigilant should this have been an accidental one-off.

Your credit score may be affected

What happens if you miss one car payment in relation to your credit score? Well, in some cases it can have a negative impact on your credit score. This is hugely variable on a few different factors. It depends, for example, on how long your credit history is, whether you have a good credit score to begin with, and how many times you have missed car payments previously. If you have a relatively good credit score, missing one car payment could cause you a drop of around a hundred points. This in itself can take several months for you to rebuild your score, so if it is not too late, it is well worth understanding the consequences of missing a car payment. If your payments are becoming overwhelming, you can choose from various debt relief options to make them more affordable.

Your car may be repossessed

As a car loan is a secured debt, it means that your finances are tied up with an asset, or a physical object. This means that should you not be able to afford your car payments any more, the lender may decide to repossess your vehicle. This is a process that would first likely mean a number of missed car payments and several formal warnings. Repossession is not something that would happen as a consequence of one missed payment, but it is important to be aware of the consequences of missing car payments. Most lenders will not choose to repossess a car until zero payments have been made for around two to three months. This can vary from lender to lender. If it does happen, it is important not to panic – there are options to keep your car by making your missing payments.

What happens if my car is repossessed?

If your car is repossessed, it is not the end! In fact, it is possible to negotiate with your lender for more favourable payments, or even a new payment plan that works better for your circumstances. A reputable Licensed Insolvency Trustee is best positioned to advise you on how to do so. There are debt relief options including a consumer proposal or even bankruptcy that may be useful if you have other unsecured debts that are making it difficult to pay for your car. Should your car continue to be repossessed without any attempt to recover it, it will be auctioned off. The amount your car sells for at auction will go towards the repayment of your loan until the entire process is complete.

How do I make my car payments more manageable?

If you are wondering ‘what happens if I miss a car payment?’, there is a good chance your car loan payments are simply too much for you. Whether you have other overwhelming debt, or have had a change in life circumstances, there are many reasons why your car loan may no longer be affordable. In some cases, it may be helpful for you to gain debt relief to make your debts more manageable. At Spergel, our Licensed Insolvency Trustees will be able to advise you as to the best possible options for you, based on your unique financial circumstances. It may also be a good option for you to sell your car for a more affordable model to ensure you avoid situations that affect your credit score, or even end in repossession.

For more advice on what to do if you have missed a car payment, book a free consultation with a Licensed Insolvency Trustee at Spergel. We will look at your unique financial circumstances and advise you on the best pathway to take. Whether you have simply missed one payment or are struggling to keep up, there is a debt relief solution no matter what your situation.


Ashvin Sharma

Ashvin Sharma is a Chartered Insolvency and Restructuring Professional and LIT (Licensed Insolvency Trustee) overseeing all of Spergel's offices in the Greater Vancouver Area and British Columbia. He is also our resident expert on homeownership debt and health debt. In his spare time, Ashvin loves to play sports, spend time with family and friends, and serves as a volunteer coordinator for "Free-Them", a Canadian organization committed to raising awareness about human trafficking.

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