Car finance payments can be delayed and interest will be frozen for two months
MOTORISTS with car finance deals who are struggling financially due to the coronavirus crisis can delay their payments with interest frozen for up to two months.
Roughly 6.5million vehicles across the UK are financed through leasing deals, with the debt worth a collective £75.5billion.
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If your income has suddenly dived due to the pandemic, you'll probably find that the monthly payments have become unaffordable.
Last week, the Financial Conduct Authority (FCA) proposed that banks should offer free £500 overdrafts and three-month payment holidays for credit card customers.
Since then, a number of banks including HSBC, Lloyds, and Santander have increased their free overdrafts.
But car finance deals and other expensive credit arrangements such as payday loans weren't part of the proposals.
Yet car dealers have started rolling out support for struggling customers in order to avoid a wave of cars being handed back by buyers.
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Ford told The Sun that support for struggling customers include reduced payments, payment extensions and payment holidays for up to three months.
While Toyota said it may offer drivers interest-free payment holidays, alternatively reduce their monthly payments.
Volkswagen, whose brands include Audi, Seat and Skoda, said that customers will be offered a “breathing space” of up to 60 days in which it won’t chase you for payment or rack up fees.
It said it will also consider extending the period of time for the buyer to pay off the debt.
Hyundai and Mercedes-Benz said customers should get in touch if they're struggling, but they haven't yet clarified the support on offer.
We've also contacted BMW, but we haven't heard back yet.
But the Finance and Leasing Assocation (FLA) said support measures may include payment breaks, payment reductions or waived interest.
If you're struggling to make your monthly payments, contact your lender for help.
Before calling, it's worth checking on its website whether it has any online request forms.
Hyundai Finance, for example, is urging customers who can't make their monthly payment to only call if it's due in the next 10 days.
The FLA said: "Lenders are working flat out to provide help but with reduced staff numbers it will take longer to get through. Please bear with them."
The association is now also seeking government help for car loan companies so that they can in turn provide help to customers.
Meanwhile, James Jones at Experian, told The Sun: "Car finance is the elephant in the room at the moment, although all lenders have to treat customers fairly, and I've heard of car finance lenders proactively contacting customers to help.
"But I wouldn't be surprised if we saw some movement here from the FCA given the size of payments and the popularity of personal contract purchase (PCP) products.
"It's a large financial commitment and the consequences of not making payments are quite important as your car could be repossessed - and if you're a key worker, that can be a problem.
"People should speak to their finance provider if they're struggling."
If you're considering a payment holiday, keep in mind that you'll need to make up the missed repayments in the future, which could be over the remaining term of the contract.
If this is the case, then your monthly repayments will be slightly higher than before if you want to pay off the financing deal in the same time.
The interest you should have paid will also be added to the total which you owe and will need to be paid later - it does not automatically get wiped off your account.
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At the end of last year, motorists were offered finance deals that are £5,600 CHEAPER than buying cars outright.
But some critics have warned that the car finance market could be heading towards a mis-selling scandal, which has so far potentially left thousands of motorists unable to keep up with the monthly payments.
Last year, an investigation by the city watchdog found that half a million people are being stung by £1,100 in extra charges by firms trying to make commission.