Personal finance: What happens if I can’t pay my car PCP because of coronavirus?

Richard Ross (inset) on what to do if coronavirus has damaged your ability to pay car PCP. Picture: Chadwicks/Getty

Richard Ross (inset) on what to do if coronavirus has damaged your ability to pay car PCP. Picture: Chadwicks/Getty


Richard Ross, director of East Anglian wealth management company Chadwicks, says lenders will be pragmatic if your income is impacted because of coronavirus.

Increasingly, we don’t buy a new car; we sign up to a PCP (Personal Contract Purchase) instead. We pay a deposit and a monthly payment for, typically, three years, at the end of which we can either make a ‘balloon’ payment or walk away.

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If you’ve paid at least half the total payments due a Voluntary Termination might be worth considering; you can simply hand the car back and walk away. This is better than going into arrears, which is likely to adversely affect your credit rating.

If the car is worth considerably more than the total outstanding you could consider selling it but, remember, you cannot sell the car without first buying it from the finance company.

You’d need to be pretty certain of its value and that you could sell it on quickly or you’ll end up in even more of a muddle.

If you’re less than halfway into your contract, then you’ll need to find the money to bring it up to halfway before you can walk away.

This may not be possible if your finances have taken a turn for the worse.

In that case, it’s really important you contact the lender as soon as you think you are going to struggle with your payments.

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They will almost certainly work with you to come to an arrangement that you can afford. It can be horrible getting up the courage to make the call, but you will feel so much better once you’ve spoken to them.

This applies to any debts you are struggling with – the sooner you speak to the lender the better the outcome.

Remember, the lender doesn’t want your car, they want as much of their money back as possible and they are likely to be pragmatic about this if you are honest with them.

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