Late Fees: Car Finance Jargon Busters

If you start missing payments on your car finance, it’s likely that you’d also have to pay late fees. 😙  The amount you’d have to pay for late fees depends on the terms and conditions of your car finance agreement. Be sure to check your contract with the car finance company so you’ll know how much you need to be prepared for. If you’re really struggling to make your car finance payments, there are also options that you can consider. 

What to Do When I Miss a Payment?

If there are changes to your financial situation and you find that it’s becoming difficult for you to pay your car finance repayments on time, the best thing to do is to contact your car finance company, and do inform them about this as early as possible. By being honest and straightforward about your situation, the lender might be able to help you figure out ways to afford the repayments, such as extending your term, and may be able to offer you several options to choose from. 

Late Fees, Penalties and Interest Charges

When you miss even just one car finance repayment, it can have serious effects on your credit report and your ability to secure credit in the future. The most immediate consequence of missing payments on your car finance is that you’d have to pay late fees.

The lender will get in touch with you to remind you that you’ve missed a payment and that there may be corresponding penalties involved. The sooner you settle can this the better, because interest charges and late fees can accumulate, making it even more difficult for you to pay off your debt. 

Defaulting on Your Car Finance and CCJs

Also, if you fail to make payments on time, it will be recorded on your credit report. If this leads to you defaulting on your car finance agreement and you get a county court judgment because of it, all these details will stay on your credit report for up to six years.

If you apply for other financial products in the future, lenders will see them when they conduct a hard credit check. Defaults and CCJs on the credit report are not good to see because lenders will think you’re a high-risk borrower, and they might not approve your loan application. 

How to Calculate Car Finance Charge

How do you calculate car finance charges on a car loan? Each lender may have their own way of calculating charges and their interest rates may also vary. However, here's a general formula on how you can do it.  First, multiply the amount of your monthly repayment by the number of months of your contract term.

When you have the result, subtract the amount that you've borrowed from that number. What you have now is the finance charge for financing a car. The amount for the charge might not only include interest but also other fees. You may check your car finance agreement to check the specifics of the other charges. 

There are a number of charges and fees to pay when financing a car so be sure to be ready for that. You may also want to find ways how to reduce finance charges on a car loan. You may ask the car finance company which charges can be removed or are only optional or add-ons.

When it comes to late fees expect charges for this too. These will vary from company to company, but you can check in the terms and conditions of the loan, or do ask if you cannot find these for yourself. Of course, the best way to avoid these charges altogether is to pay your monthly instalments regularly and on time, but if your circumstances do change, and you can no longer afford the monthly repayments, get in touch with your lender immediately to negotiate an alternative plan. 

What to Do When I Can’t Afford to Pay?

There are a number of reasons why some borrowers can’t pay their car finance anymore. Each case is unique and the solutions to it may vary depending on the lender, type of car finance, and other factors. One sure thing that borrowers in this situation need to bear in mind is to never ignore their financial responsibility to the car finance company. 

Yes, it seems so stressful to confront this problem while you’re also having other issues to take care of. However, you’re legally bound to the lender and you have an obligation to repay them for the car. If you’re in this situation, don’t ignore your responsibility to the car finance company, thinking it will go away. That’s simply not how it works. 

As soon as you encounter a problem making repayments on time, contact the car finance company and inform them about your situation. Ask them if it’s possible to have a special arrangement so that you can still make payments and maybe not have to pay any late fees and penalties.

Ask them about payment deferral or a new repayment schedule, and also ask if it’s possible to reduce the payment amount or extend the contract term so that it will be more affordable for you. 

You’ll be surprised that lenders are actually willing to help you out. They might give you time so you can have the money to make the payment and even make a new payment arrangement so you won’t have a missed payment on your record. What’s important here is for you to communicate with the car finance company and be honest with them about the changes in your financial situation. 

Should I Choose Voluntary Termination?

You may choose to get out of your car finance agreement early through voluntary termination. However, do this if you really can’t afford to make the repayments on your financed car. You may get in touch with the car finance company and inform them about your intention to end the contract and return the vehicle. It’s possible that you won’t have to face any penalties and charges if you do this at the right time. 

For example, if you’ve paid more than half of the amount you borrowed, then you may return the car. However, note that none of the money you’ve paid will be returned to you. The good thing here is you won’t have to worry about late payments, penalties, or breaking your car finance agreement.

But what if you haven’t reached 50% yet? Call your car finance company and ask about what your options are. You might be asked to make a one-off payment so you can reach 50% of the loaned amount and then return the car. 


Being unable to pay your car finance on time can be stressful. However, ignoring it won’t help at all. When you start missing payments, the lender will contact you. Be sure to answer their calls, emails, or notices. It’s always better to confront the issue head-on, be honest with your situation, and ask what your options are so you can get out of your car finance agreement early. 

If you don’t talk to your car finance company, they will be forced to send you a default notice, repossess the vehicle, and then they will ask a debt collection agency to demand payment from you. Further down the line, you might even get a county court judgment, and this is not good for you.

It will become more problematic when the lender takes legal action because of your non-payment. So, as soon as you encounter financial setbacks, evaluate your capacity to repay your car finance and get in touch with the lender immediately.