What to do if you can’t make your last car loan payment

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Published on April 16, 2024 | 4 min read

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Key takeaways

Late or missed car payments can result in repossession, regardless of whether it is your first or last payment.
There are options to avoid repossession, such as loan modification, deferral, trading in your car or selling it privately.
It is important to budget for your next vehicle purchase and build an emergency fund to avoid future financial struggles.
Setting up automatic payments can help you on-time payments.

Late and skipped auto loan payments have the same consequences, regardless of whether that car payment is your first or last. Not being able to make your vehicle payments can mean repossession. But there are options to hold onto your vehicle and avoid repossession, even if it is the final payment.

1. Request loan modification

Requesting a loan modification results in exactly what it sounds like: changes to your loan. Loan modification is a process done directly with your existing lender in order to change your terms. A typical modification could result in lower interest rates or deferred payments.

Reach out to your lender as soon as possible to discuss your options. But know that negotiating this late in the loan may be difficult.

2. Ask for a deferral

A deferral allows you to skip one to three payments if you are experiencing sudden financial hardship, like losing a job, and can’t make your final payment. Lenders only defer payments, not interest, so you will be responsible for paying the extra interest that accrues during deferment.

A deferred payment gets tacked on to the end of your loan. The lender may want to see proof of hardship, so be prepared to submit documentation to demonstrate your need for a deferred payment.

3. Trade in your car

Reach out to several dealerships to get quotes on trading in your car. There may be more affordable options available, and you can always shop around for quotes. Remember: You don’t have to buy a car from the dealership where you trade in your car. You can find a good deal on a vehicle that fits your budget and get the most money for your current car at different businesses if needed.

Learn more: Should you refinance or trade in your car?

4. Sell privately

While selling your vehicle with a loan does take some extra consideration, it can alleviate the stress of your current car and allow you to get a more affordable option. The car market is currently strong, so you will likely get a good price. But selling your vehicle will mean the need for a new car. With a hot market, it may be challenging to find a vehicle for your specific needs and budget.

5. Ask friends and family for help

The final option is to reach out to friends and family for help. While this help doesn’t need to be financial, it can feel uncomfortable. Use this as a final effort to afford vehicle repossession rather than your first line of defense. Ask those around you if they know anyone interested in purchasing or selling a less pricey vehicle, and work from there.

And if it’s just the final payment that’s troubling you, you may be able to borrow from a loved one and pay them back in the future. Just get everything in writing so the terms of the loan are clear.

Refinancing your loan isn’t an option

Unfortunately, if you are at the final payment stage of your loan, you are too far to refinance. Lenders generally want at least six months left on your loan to refinance it.

How to avoid car loan payment issues in the future

Not making your final car payment can be discouraging, but you can learn from the situation. Take some time to prepare for your next loan to and make sure you manage it well.

Budget for your next vehicle purchase: The key to avoiding future financial hardships comes down to only financing a vehicle you can afford. Before signing off on your next auto loan, calculate the monthly payments and how they fit into your budget.
Build your savings: Outside of budgeting for future vehicle purchases, if you are able, start building an emergency fund. This way, you have a cushion if you face financial struggles near the end of your next loan.
Set up automatic payments: Not all lenders offer an automatic payment option, but most do. If you have consistent pay, it is a great way to ensure you make your loan payments on time and in full. Some lenders even offer a rate discount of up to 0.5 percent when you sign up for autopay.
Check for loan add-ons: If you’re financing through a dealership, read the fine print on your loan agreement and ensure you aren’t spending extra money each month on vehicle add-ons. None of these are required to qualify for a loan, and if you do sign up for it, you should be able to get a prorated refund in the future.

The bottom line

Struggling to make your final car payment can leave you without your vehicle if you don’t act fast. But there are options. Consider loan modification, trading in your car, selling privately or reaching out to friends and family before accepting vehicle repossession. Keep an eye on available auto loan rates to ensure you aren’t in this precarious situation with your next set of wheels.