Will my car be repossessed if I miss one payment?

If you’ve missed just one payment on your car loan, it’s unlikely that your car will be repossessed. However, there’s nothing good about missing a payment. You will get closer to your car being repossessed if you don’t rectify the situation as soon as possible.

How many payments do you have to miss before your car is repossessed? Policies differ among lenders. Some will repossess a car after two missed payments; others will wait until the third missed payment. It’s unlikely to find a lender who will offer a grace period beyond three missed payments.

If you miss your first payment — either because you simply forgot to make the payment or because you’re struggling and couldn’t afford the full amount — you have options to handle the fallout. You might be able to work with your lender to find a solution.

Calculating Your Amount and Budget

One of the most important things about missing a payment is to know how much you owe and then how much you can pay. Talk to your lender about your loan balance, the interest rate, and how long the loan runs (the term). Even if your car won’t be repossessed after a late or missed payment, there might be a fee you have to pay by your next payment.

When it comes to knowing what you can pay, look over your budget to see if you can cut any expenses (even important expenses temporarily), so you can siphon that money toward your loan payment.

Reviewing these two items should identify how much you can pay for a given month. Financial experts recommend that car expenses (covering loan payments, insurance, gas, and maintenance) should total a maximum of 20 percent of your take-home pay.

Making Payments and Loan Deferments

What you do next depends on whether the missed payment is the only one you’ve missed or part of a larger problem that your car loan is unsustainable. If the payment still fits within your budget, you should call your lender (or go online) to make the payment as soon as possible. There might be a late fee for missing the date, but if this was a one-off mistake (and you have a pattern of not missing payments), you might ask for the fee to be waived.

If this is the reason you missed the payment, you might be able to schedule an automatic payment to make sure the problem doesn’t happen again.

If your budget cannot handle the payment, your lender might be open to the possibility of a loan deferment, but this tends to apply only for an isolated missed payment. What happens with a deferment is that the missed payment is added to the end of the loan term, leaving you with only the interest to pay for that month.

If your payment history is good, and if you show initiative in trying to redress the situation, some lenders may even give you a pass on the late payment fees. Lenders, in general, tend to be more flexible (and even forgiving) when you demonstrate that you’re willing to do the work to make up for a missed payment. Multiple missed payments and/or being difficult to reach will make lenders less likely to cut you any slack.

Refinancing and Voluntary Repossession

If the amount of the loan is hurting your budget, getting a deferment will stave off the immediate danger of late payments impacting your credit score or your car being possessed if your lender is unlikely to give you a break. Repossession can also hurt your credit score, so this is something to avoid as much as you can.

If you’re successful in securing the deferment, try to look into long-term solutions, like refinancing your loan, trading in your car for a more affordable vehicle, or, if possible, even giving up your car (known as “voluntary repossession”).

Call Your Lender

Notwithstanding your overall situation, if you miss a car payment, it is vital that you call your lender as soon as possible (once you have worked out how much you owe and what your options are). Explain why you missed the payment, and talk about deferment and other potential solutions. Ultimately, you’re contacting your lender to ask for short-term or long-term help.

When speaking to your lender about your missed payment, it is important to explain the context, and what you’ll do to make sure you take care of it and that it doesn’t happen again. If you can present a complete story to your lender, there’s a better possibility that they will meet you halfway than if you’re vague, misleading, angry, or defensive.

Of course, your lender may ask for proof that you’ll be able to make your next payment or that you’re struggling financially. If you have documentation that can support your reasons for missing your payment, you might be able to stave off any decisions about repossessing your car.

Even if the lender offers you a deferment, there might be additional terms attached. Make sure you fully understand what they’re telling you and what they expect from you. Ask them to put their new terms in writing and send you a copy.

By and large, lenders don’t want to repossess cars. It costs them time and money, and it works out better for the lenders if you can pay off your loan. For this reason, it’s unlikely that your car will be repossessed after missing one payment.

Just understand your loan amount and your budget. Then, let your lender know what happened, what your plans and hopes are, and see if they can help you out. By doing this, you can likely avoid missing future payments and having your car repossessed.

References

My Car Has Been Repossessed, and I Was Told It Will Be Sold. What Can I Do? (September 2016). Consumer Financial Protection Bureau.

If I Can’t Make My Auto Loan Payments, Will My Vehicle Be Repossessed? (September 2016). Consumer Financial Protection Bureau.

Coronavirus Pandemic: What Should I Do if I Can't Make My Car Payment? (December 2020). US News & World Report.

Minimize Credit Score Damage From Late Payments. (June 2021). NerdWallet.

Car Repossession: What Is It and How Will It Affect My Credit? (March 2020). Credit Karma.

Millions Can't Pay Their Car Loans. Here's What to Do if You're One of Them. (August 2020). CNET.