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Canadian drivers spend an average of just over $437 on monthly car loan payments, making it the third most expensive household debt that Canadians hold. Given all the other bills that need to be paid, it can be tough to scrape together enough to cover everything. 

For this reason, it’s not uncommon for some Canadians to miss a car payment or two. And in some cases, a missed payment may simply be due to an oversight.

Regardless, a missed car payment should be dealt with right away. Otherwise, there could be late fees involved, or worse: loan default and vehicle repossession.

In this article, we’ll go over the details regarding the potential repercussions of missed car payments based on how long overdue they are, as well as steps you can take to avoid missing payments and the consequences that come with them. 

When Is A Car Payment Considered Late?

Your car loan payment is considered late as soon as the due date passes. If you don’t make your payment by the end of the business day on the billing due date, the lender will consider your payment late.

That said, you may have a grace period (varies by each individual’s contract) to make your payment before any late charges or other penalties are issued. The repercussions for late payments will vary based on how late your car loan payment is. 

Late Car Payments And Your Credit Report

Payment history plays a key role in your credit health. A history of timely bill payments can help build your credit scores, while late or missed car payments can cause it to fall. That’s why it’s so important to be diligent about making all car loan payments on time. 

If you are late on making a car payment, the consequences you suffer will be based on how much time has elapsed since the due date:

What Happens If You Miss Your Car Payment By A Day? 

If you simply forgot to pay your bill by the due date but made up for it within a day or two, this shouldn’t be much of an issue. However, you may still be charged a late payment fee. 

As far as how your credit score will be impacted is concerned, a day late car payment usually won’t have an impact as most lenders won’t report the late payment to the credit bureaus until it’s 30 days or more late. As such, if you make a payment before the next billing cycle, your credit may not be impacted, but you’ll likely get a call from your lender. 

What Happens If You’re 1-Month Behind On Your Car Payments? 

If your car payment is 30 days late, there are a few things you can expect to happen, including the following: 

Your Lender Will Try To Contact You 

Lenders don’t want the hassle of dealing with delinquencies. Instead, they’ll likely want to see if the problem can be rectified early on before any further action is required. 

If your payment is 30 days late, your lender will likely reach out to you first to find out why the payment was late. They’ll also inform you of the consequences of having an outstanding payment, as well as what could happen if such behaviour continues in future billing cycles. 

As mentioned, you may be given a grace period within which to make up for your late payment in order to avoid penalties. This is more common if this is your first late payment.

Your Credit Report Will Reflect A Late Payment 

If your car payment is 30 days or more late and your lender reports this missed payment to the credit bureaus, your credit report will be noted accordingly. When this happens, your credit score can be negatively affected. 

You’ll Be Charged Late Fees and Interest

Late payment fees are typical for missed car payments. You may also be charged interest on the outstanding payment until it is repaid. That said, your lender may waive these fees if this is your first offence, and you continue to keep up with future payments.

What Happens If You’re 3 Months Behind On Your Car Payments? 

If the payment due date has long passed and you still haven’t paid it, you could face much more serious consequences, including having your vehicle repossessed. Most lenders will usually wait until a car loan is considered delinquent, which means no payments have been made in at least 60 to 90 days. In this case, the lender may take steps to repossess your car and sell it in order to recoup their losses. 

If this happens to you, you may still have a chance to reinstate your car loan contract by paying the missing payments. Alternatively, you may also have some luck negotiating with your lender to try to get more favourable terms or a longer payment plan that reduces the amount you need to pay each month.

What Happens If You’re 12 Months Behind On Your Car Payments?

If you haven’t made any payments toward your car loan, you’ll likely be considered delinquent on your loan and face the real possibility of having your car repossessed. As noted, even payments that are 60 or 90 days late could classify you as delinquent, so 12 months will almost certainly put you in this category. 

Most lenders will not allow a missed payment situation to get this far. Again, you’ll probably wind up having your car repossessed by this point, which can negatively affect your credit. 

How To Avoid Car Repossession

Once your lender has exhausted all other avenues to try to get your loan payments up-to-date, they may have no other recourse than to repossess your car. But there are things you can do to avoid that from happening:

1. Find Out What’s Outstanding And What You Can Pay. 

If it’s just a matter of forgetting to make a payment, simply make a payment right away. But if you’re missing payments because of financial hardship, find out all the details about your loan and what you still owe. Also, find out what the interest rate and terms are and check if there are late or missed payment penalties to pay. 

Then, go over your budget to see if there are any ways to cut down on any expenses so you can leave more behind for your loan payment. 

2. Find Out What Your Options Are.

If you can afford to make the missed payment, make it as soon as possible and pay any late fees that may apply. If it’s a matter of forgetting to pay, consider setting up autopay so payments are automatically made to avoid any future late payments. 

If you can’t afford the payments, on the other hand, consider whether this is a short- or long-term issue. If this is a one-off late payment, find out if you can defer the payment to the end of the loan term. That way, you’ll only have to pay interest this month, though you’ll still end up having to make up for the missed payment. 

If this is an ongoing issue, look into longer-term solutions, like refinancing your loan or trading in your vehicle for a cheaper one. Just make sure you’ve dealt with the current missed payment first. 

3. Speak With Your Lender.

Call your lender to explain your particular situation and see if they’re willing to work with you. Be very detailed about your scenario and make sure you’ve already done what you can to rectify the situation. 

The lender may be more open to working with you if you’ve made an effort to fix things but are simply having a tough financial time. Most lenders would rather deal with the situation in different ways before resorting to loan default and car repossession. 

You may have to provide proof of your situation. For instance, if you were recently laid off or your hours were cut, you could provide verification from your employer. 

Tips For Avoiding Late Fees

Late payments often come with late payment charges. To avoid being late on a car payment ever again, consider the following tips:

  • Set up autopay. Instead of trying to remember when your car payments are due each month, consider setting up automatic payments so you never miss another bill. Just make sure there’s enough money in your account to cover these payments.
  • Sign up for lender notifications. Lenders often allow borrowers to set up notifications of upcoming payment due dates via email or text. This will give you the heads up that a payment is due soon.
  • Find out what the grace period is. Many lenders allow borrowers to make up for late payments without a penalty if it has been made within a specific grace period. Find out if your lender offers this and what the grace period is, but don’t rely on these all the time.
  • Request a waiver on the late fees. If you typically make timely payments and this is a first-time offence, call the lender and kindly request to have the late fee waived.

What Can You Do If You Can’t Make Your Car Payment This Month?

If you are unable to meet the due date for your car payment, consider the following options:

Defer Your Car Payment 

Some lenders allow borrowers to push a payment or two out to the end of the loan term. That means you can essentially skip a car loan payment for a month or two if you’re unable to come up with the funds to make your payment on time in a billing cycle. If this happens, make sure to contact your lender to notify them, or review your lending agreement. 

Keep in mind that the payment is still payable by the end of the loan term. Also, the monthly interest may still be due for payment. 

Change The Billing Due Date

Your lender may also be open to changing the due date for payment. If so, you can ask the lender to push the payment due date out a few weeks to give you some time to come up with the funds. 

It should be noted, however, that changing the due date of your car payment could result in more interest paid over the life of the loan.

Refinance Your Car Loan

If you think your financial woes will be long-lasting, consider refinancing your car loan. Refinancing involves taking out a new loan with new terms and a different interest rate to replace your old car loan. 

If you’re able to lower the interest rate with better terms, your new loan could be cheaper. In turn, your monthly car loan payments may be easier to manage. This option might make sense if your credit score and or finances have improved since you initially took out the loan. 

However, refinancing might not make as much sense if your car loan is almost nearing the end of the term or the vehicle isn’t worth much. Refinancing also comes with fees, so you’ll need to do some number-crunching to make sure the fees don’t negate your potential savings by refinancing.

Sell Or Trade In Your Car

If you can’t afford your car loan payments, you may have no other option than to sell it and get yourself something that’s more affordable. Alternatively, you could trade in your car for a cheaper one to keep costs lower.

Voluntarily Surrender Your Car

Instead of waiting until the point that your car is repossessed, consider voluntary repossession. Rather than your lender taking the car back due to delinquency, you can be proactive and hand back the vehicle if you’re unable to afford the car loan payments. 

Do note, that voluntary repossession doesn’t always mean you no longer owe your lender any money. If the amount your lender gets from the sale of the vehicle is less than what you owe, you will be required to pay the difference.

On a further note, remember that voluntary surrender is still considered a loan default, meaning it will be marked on your credit report and could affect your credit scores. 

Late Car Payment FAQs

How many car payments can you miss before repossession?

Generally speaking, most lenders won’t repossess a car until the loan has been delinquent for at least 60 to 90 days.

What happens if you miss a car payment by one day?

If you miss a payment by one day, there shouldn’t be any issue, though you may be charged a late penalty fee. However, if you miss a car payment by several days, your lender may reach out to you via mail or phone to remind you of your payment. If you make up for the payment before the next billing cycle, you might just face a late payment fee, or even no fee at all if you pay within the grace period. But if you fail to make up for that missed payment, the lender will eventually report it to the credit bureaus, which can negatively affect your credit.

Can one missed payment affect my credit scores?

Even one missed payment could negatively affect your credit scores. Generally, payments that are 30 days or more late will be reported to the credit bureaus. If your payment is 60 to 90 days past your payment date, your creditor may report your loan as a default, which can further damage your credit. 

Final Thoughts

One missed car payment might not be the end of the world, but an extended period of time without making a payment could put you in trouble. Before you wind up in hot water, take proactive steps about your missed car payment to minimize the repercussions.

Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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