Car finance, usually hire purchase or a personal contract purchase, is secured against the vehicle rather than your home, but a missed payment still shows on your credit file in much the same way as any other missed payment. Because car finance is a regular, often sizeable monthly commitment, mortgage lenders tend to look at it fairly closely, both for any missed payments and for what it means for your overall affordability.
This page looks at how missed car finance payments are recorded, what voluntary termination does and does not change, and how this compares with missing a mortgage payment. See our main page on remortgaging with missed payments for the wider picture.
On this page
This page covers
- Credit issue
- Missed paymentsUsually stays on your credit file for 6 years from the date recorded.
In short
- Missed car finance payments are recorded on your credit file like other loan accounts, for 6 years.
- Falling far enough behind risks the finance company repossessing the vehicle, separate from any effect on your credit file.
- Voluntary termination does not remove the record of any missed payments already made.
- Car finance is also a regular commitment lenders weigh up when assessing what you can afford to borrow.
How are missed car finance payments recorded?
Car finance providers report your payment status to the credit reference agencies each month, in the same way as a personal loan or credit card. A missed payment is marked for that month, and if you fall further behind the marker shows how many payments you owe. Each marker stays on your file for 6 years from when it was recorded, whether or not you later catch up.
Our guide on car finance and your mortgage application covers how lenders generally view car finance alongside a mortgage application, beyond just missed payments.
What happens if you fall behind on car finance?
Car finance is secured against the vehicle, so if payments are missed for long enough, the finance company can ultimately repossess the car, separate from any action affecting your home. This is different from a mortgage or a second charge loan, which are secured against your property. Our guide on secured versus unsecured debt explains the general distinction.
| If payments are missed for long enough | What is usually at risk |
|---|---|
| Unsecured credit card or personal loan | No specific asset, though the debt can still be pursued and may lead to a CCJ |
| Car finance (HP or PCP) | The vehicle can be repossessed by the finance company |
| Mortgage or second charge loan | The home can ultimately be repossessed as a last resort |
For illustration only. The route to repossession and the steps a lender must follow differ between these.
Does voluntary termination avoid a missed payment marker?
Voluntary termination lets you hand a car finance vehicle back once you have paid at least half the total amount payable, ending the agreement. It can be a way to exit an agreement you can no longer afford, but it does not undo any missed payments already recorded before the termination, and it may itself show on your credit file as the agreement ending early rather than running its full term.
If you are considering this, it is worth getting independent advice first, since there can be costs involved and the effect on your credit file can vary depending on your circumstances and the finance company’s own reporting.
How does missed car finance compare with a missed mortgage payment?
Both are secured borrowing, in the broad sense that missing payments carries a risk to an asset, the car in one case and the home in the other. Many mortgage lenders weigh missed payments on car finance somewhere between an unsecured account, such as a credit card, and a missed mortgage payment itself, though this varies. Our page on one missed mortgage payment covers how that specific situation is generally viewed.
Whichever type of account was affected, lenders will usually want to see the account up to date now and will look at how long ago and how often payments were missed.
What can help before you apply to remortgage?
Bringing your car finance up to date, and keeping it that way, is the most useful step, along with being ready to explain briefly what happened if you are asked.
- Check all three credit reports to see exactly what has been recorded against the finance agreement.
- Confirm with the finance company, in writing, once the account is up to date.
- If the agreement has since ended, whether by completing, settling early or voluntary termination, keep the paperwork showing how it ended.
- Avoid taking on new finance agreements shortly before applying, as hard searches are visible to lenders.
What tends to matter with missed car finance payments
As with other secured borrowing, lenders tend to look closely at what happened and what has changed since.
| Factor | Why it matters |
|---|---|
| How recent the missed payments were | Payments missed in the last 12 months usually carry more weight than older ones with a clean record since. |
| Whether the agreement is up to date now | An account still behind at the time of applying is generally a bigger concern than one already caught up. |
| How the agreement ended, if it has | Completing the term, settling early or voluntary termination can each look different, alongside any missed payments already recorded. |
| Whether the vehicle was repossessed | A repossession is generally viewed more seriously than missed payments that were resolved before it reached that stage. |
| Other missed payments or defaults | Car finance issues alongside wider credit problems are usually assessed together rather than in isolation. |
| Current car finance commitments | An ongoing monthly payment is treated as a commitment when a lender works out what mortgage you can afford. |
| Income and affordability | Lenders will want to see your income comfortably supports the new mortgage payment alongside any remaining car finance. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- Which car finance agreement had missed payments, and roughly when
- Whether the agreement is up to date now, or how it ended
- Whether the vehicle was ever repossessed
- A recent credit report from at least one agency
- Details of any current car finance commitment, including the monthly payment
- Your mortgage balance, monthly payment and deal end date
- Recent bank statements and proof of income
Frequently asked questions
Will missed car finance payments stop me remortgaging?
Not necessarily, especially if the account is up to date now and the missed payments were some time ago. Lenders generally look at how recent and how frequent the missed payments were, alongside the rest of your credit file, rather than treating car finance as an automatic decline.
Does the car being repossessed affect my mortgage application separately from the missed payments?
A repossession is usually recorded as part of how the agreement ended, alongside any missed payments that led up to it, and lenders tend to view a repossession as a more serious entry than missed payments that were resolved before that stage.
Is a personal contract purchase treated differently from hire purchase?
Both are generally reported to the credit reference agencies in a similar way when payments are missed, since both are types of car finance secured against the vehicle. Some of the finer details, such as what happens at the end of the agreement, differ between PCP and HP, but missed payment reporting is broadly the same.
What if I have settled the car finance early since the missed payments?
Settling the agreement does not remove the record of any missed payments already made, but it does show the debt is no longer outstanding, which can be a useful point to raise with an adviser alongside your clean record since.