I Can’t Pay my Car Loan

Most car loans are secured against the car. You can check if your car is security for the loan by checking your loan contract or the national Personal Properties Securities Register

If your car is security for your loan, your car may be seized (repossessed) and sold by the lender. If it’s a personal loan, a default notice must be sent first. This will give you at least 30 days to pay your arrears before your car can be seized. If you receive a default notice, do not ignore it.

If your car is not security for your loan, your lender can’t seize it unless they have a court order authorising the Sheriff to take it.

When can your car be repossessed?

The lender can’t repossess your car or goods without a court order if you owe less than $10,000, or 25 per cent of your loan (whichever is lower).

If you owe more than this, they can repossess your car, but only if:

  • You’re behind on repayments
  • They have sent you (and your loan guarantor if you have one) a notice giving you 30 days to pay the overdue amount
  • 30 days have passed and you haven’t paid this amount, or made an arrangement to pay, or asked to postpone repossession.

Your car can’t be repossessed if it’s parked on your property — this includes your garage and yard. If your car is parked on the street, it can be towed away.

Credit providers can only come onto your property with your written consent or with a court order.

I can’t make my repayments – what can I do?

If you can’t afford to pay something, contact your lender (refer to fact sheet 11 ‘Talking to Creditors’ for tips). Ask to speak to the hardship team to negotiate a repayment plan that is realistic for your current situation. Don’t offer to pay more than you can afford – regular smaller payments are better than trying to keep up with payments you can’t afford and breaking the agreement.

If you can’t afford to pay anything right now, but your circumstances are temporary (for example you lost a job, but are seeking work; or you are unwell but are likely to recover) contact your lender and request a hardship variation. You can request this in writing by using this sample letter from the Financial Rights Legal Centre.

If you can’t pay at all and don’t know when you will be able to, contact Anglicare Victoria’s financial counselling service and let the team know your car may be at risk of repossession

My car has just been repossessed – what happens now?

Within 14 days of it being repossessed, the credit provider must send you a notice including:

  • The estimated value of the goods
  • The cost of the repossession, plus any ongoing costs
  • A statement of your rights under consumer credit law.

For 21 days after sending that notice, the lender can’t sell your car or goods. You have a chance to get it back if you pay the overdue amount (plus costs) or the full amount owing.

During those 21 days, you might find someone who will buy the car or goods for at least the estimated value. If you do, give the buyer’s details to the credit provider in writing.

What happens when my car has been repossessed and sold?

You may still owe the lender money. Your lender will write to you stating:

  • How much it sold for
  • How much it cost to repossess and sell it
  • Any outstanding balance (the amount you still owe).

Example: Your car loan was $15,000. The car is repossessed, and the cost of recovery including fees is $3,000, which is added to the loan. The outstanding amount is now $18,000. The lender sold the car for the best price they could get, which was $14,000. The outstanding balance is $18,000 less the $14,000 recovered, leaving you with $4,000 to pay.

If there’s an outstanding balance, you need to pay it immediately. If you’re in financial hardship, you can call the lender and arrange a payment plan for the outstanding balance.

If you need further help, get in touch with Anglicare Victoria’s financial counselling service, who can advise you on the best way forward.

If you can’t pay at all and don’t know when you will be able to, contact Anglicare Victoria’s financial counselling service and let the team know your car may be at risk of repossession