

What to do when your car loan outlasts your car
23rd September 2024
Finding yourself still making car loan payments while your vehicle is no longer roadworthy can be a stressful and overwhelming experience. Whether due to an accident, costly repairs, or unforeseen mechanical issues, being stuck with a loan for a car you can no longer drive isn’t a situation anyone expects.
Here we’ve compiled a few suggestions that may help you get back on track again.
1. Check if you are protected under The Consumer Rights Act 2015
As per The Motor Ombudsman, this Act applies to cars bought from a trader after 1st October 2015.
The Consumer Rights Act gives you the legal right to either get a refund for goods that are of unsatisfactory quality, unfit for purpose or not as described, or get it repaired – depending on how long you’ve owned it:
Between 0 to 30 days
You can claim a full refund for goods that are of unsatisfactory quality, unfit for purpose or not as described. Between 30 Days and 6 Months
After the initial 30 days, you must give the seller one opportunity to repair or replace the vehicle. If the issue isn't resolved satisfactorily, you can request a price reduction or reject the car for a refund, which may be adjusted to account for the usage you've had from the vehicle.
After 6 Months
If problems occur after six months, you still have rights under the Act, but the responsibility shifts to you to prove that the fault existed when you purchased the car. This might involve obtaining an independent technical report to support your claim. You must still give the retailer one opportunity to repair or replace it before you can claim a partial refund.
If you are unsure about your rights Citizens Advice or the Motor Ombudsman offer free and impartial advice.
2. If your case falls outside the protection of The Consumer Rights Act
If your situation doesn't qualify for protection under the Consumer Rights Act—such as if the issue was caused by your own actions or wasn’t present at the time of purchase—there are still steps you can take to address the problem. While it can be frustrating to face car troubles without the backing of legal protections, exploring these options may help you find a way forward.
Start by having a qualified mechanic assess the condition of your vehicle. This will give you a clearer understanding of the damage and the potential costs involved. Based on the mechanic’s evaluation, you can then decide whether to repair the engine, replace the vehicle, or possibly trade it in for a new one.
3. Check Your Insurance Coverage
If your car becomes unusable due to theft, an accident, or severe damage, your car insurance can be a crucial safety net. Your insurance provider might cover the cost of repairs or even reimburse you for the loss of the vehicle, which can help pay off a significant portion of your remaining loan. The only cost you may need to cover is your excess, after which you could potentially apply for and qualify for a new car loan.
It’s important to review your insurance policy carefully to understand what’s covered. If your policy includes coverage for repairs or replacements, this could significantly ease the financial burden. Don’t hesitate to contact your insurance provider to clarify your coverage and explore your options. By understanding your policy, you can better navigate this challenging situation and ensure you’re making the most of the protection available to you.
4. Communicate with Your Lender
It’s always best to keep your lender informed if you're experiencing difficulties with your car loan. Open communication could lead to flexible solutions and may help you manage the financial burden more effectively, giving you the flexibility to choose the best option for your situation.
5. Take Preventive Measures to Reduce Risk
Regular maintenance is key to preventing breakdowns and keeping your car running smoothly. Simple actions like checking and changing the oil, using the correct fluids, and maintaining your tyres can make a big difference in avoiding costly repairs.
Conclusion
Dealing with a car loan when your vehicle is no longer usable is tough, but understanding your rights, exploring insurance options, and communicating with your lender can help you manage the situation.