Uh-Oh… You Missed a Car Payment…

If you missed our recent post, “How to Never Miss a Car Payment,” you should go back and check it out. We have some good advice and tools on how to ensure that your car loan is always current and paid on time.


But what happens if you don’t make your payment?


Well, there are a few things. And none of them are good. Here’s what happens…




1. You’ll Get Hit with Late Fees







Yep, it’s going to cost you to miss a car loan payment. Some lenders may allow a grace period, although that’s far from the norm. If your lender doesn’t have one, or if you don’t make your payment before the grace period ends, you will be charged a late fee. How much that is depends on your lender but it’s definitely in your loan paperwork. Suffice to say that it’s usually enough to help deter you from making that payment.


The question is, who wants to pay more just because they’re forgetful? This assumes you have the money to make the payment on time, of course. If it really is just a memory thing, go check out the article mentioned at the top of this post.


2. Your Credit Score Will Take a Hit







When you miss a payment, your lender is not only going to let you know, they’re going to let the credit reporting agencies know. When that happens, your FICO score (the most common credit score) will drop.


How much? That’s hard to say. But if you’re planning on applying for any other sort of credit, like a home or personal loan, or a credit card, your interest rate will almost certainly be higher when your credit score is lower. So that’s going to cost you, too. Check out our previous post, “Calculating the Cost of Credit,” to get an idea in dollars of what lower credit scores will cost you.


Your credit score is certainly recoverable, but you have to make a lot of on time payments to make up for it.


3. You Could Lose Your Car







Most lenders aren’t going to take your car if you miss a payment. That is, assuming you realize you missed the payment and make up for it as soon as possible. This is key: you have to make that payment.


But if you never make up that payment, well, the lender is eventually going to exercise its right to repossess your car. This will not be fun. I once witnessed a repo from my office window. The owner of the car didn’t know anything happened until he left the building to go to lunch. He wandered around the parking lot in a daze, with no idea what had happened. Very sad.


Now if you happen to have purchased your car from a buy here – pay here dealer, it’s likely you’ll have an even tougher go. Many of them have remote disabling devices installed on the cars they sell. They can and will shut your car down and leave you stranded as soon as the day after a payment is due. And eventually they’ll come get it.


Okay, so lots of bad news if you miss a car payment. We highly encourage you to do everything in your power to make sure that doesn’t happen. This includes making sure that you spend within your means when you make your car purchase, and that if your financial circumstances change, you make smart decisions about whether or not it’s feasible to keep your car or see about getting something cheaper.