Can’t Afford Car Payments

What To Do If You’re Struggling With Car Payments‍

Are you grappling with the reality that you can’t afford car payments anymore? Well, you are not alone. The rising cost of vehicles combined with societal pressures have led many people down the path of unmanageable car loan debts. In this piece, we will explore how car loans can lead to debt problems, steps to avoid car loan debt, options when you can’t afford car payments, and much more.

Understanding Car Loans and Debt Problems

Increasingly, cars are not just a mode of transport, but a symbol of status and accomplishment. This, coupled with the release of newer, more advanced models each year, has resulted in more people borrowing large sums to finance car purchases. According to a report by CBC, over half of all new car loans in Canada are financed for seven years or longer.

However, long-term financing for depreciating assets like cars can lead to debt problems. Moreover, the desire to upgrade to newer models every few years exacerbates this issue as individuals end up owing more than the worth of their vehicles.

When one factors in additional costs such as taxes, insurance, gas, and maintenance (especially for second-hand vehicles), it’s not surprising that car loan debts are escalating across Canada.

How to Avoid Car Loan Debt

To avoid finding yourself in a situation where you can’t afford car payments, it’s crucial to adopt a long-term perspective. Rather than focusing on the monthly repayments, consider the total cash value of the car and realistically assess what you can afford.

Before purchasing a car, spend time calculating an affordable amount, create a budget, and ascertain exactly what you can afford in the long term. If you can’t pay in cash, aim to make as large a down payment as possible to shorten your loan terms, making your car loan more manageable and less likely to lead to overwhelming debt.

What to do When You Can’t Afford Car Payments

If you find yourself unable to keep up with your car loan repayments, the first step is to consult a Licensed Insolvency Trustee. They are the only professionals legally able to administer all forms of debt relief in Canada and can provide authoritative advice tailored to your circumstances.

At companies like Bankruptcy Canada, we will review your financial situation and guide you to make an informed decision that best suits your needs. Let’s explore some common car debt relief options:

Consumer Proposal for Car Debt

Consumer proposals are a form of debt relief where your unsecured debt is reduced by up to 80% by agreeing to a manageable monthly payment with your creditors. While car loans are considered secured debts, consumer proposals can be beneficial if you have other debts like credit card debt or payday loans that are impeding your ability to make car loan repayments.

Bankruptcy for Car Debt

Just like consumer proposals, bankruptcy will only clear unsecured debt. However, it’s a viable option if you’re grappling with overwhelming debt that’s causing you to default on car loan repayments. Bankruptcy can clear any unsecured debt you have, including tax debt, allowing you to start afresh financially.

Refinance your Car Loan

If your credit score has improved significantly since you took out your car loan, you could potentially refinance your loan. This could grant you a new car loan with a more favourable interest rate, making your payments more affordable.

Sell your Car

As a last resort, you might need to consider selling your car if you can’t afford your monthly car loan payment. If you can sell your car for approximately the same amount you paid for it, you’ll likely be able to pay off most of your car loan. You can then find a cheaper car with a more manageable monthly car loan payment.

Car Repossession: What You Need to Know

Car repossession occurs for financed or leased cars when the dealership retains ownership of the vehicle until it’s fully repaid. If you miss payments, they can repossess the vehicle. The dealership must notify you that you’re behind on your payments, but they don’t have to inform you when they plan to repossess your car.

If your car is repossessed, it doesn’t absolve you of your car loan obligations. The vehicle is typically auctioned off or sold, and the proceeds are deducted from your remaining car debt. However, additional charges including repossession costs, interest, and late payment fees may be added, transforming it into an unsecured debt.

The best way to avoid repossession is to make the agreed-upon payments on your car loan. If you’re worried that you can’t afford car payments, consulting with a Licensed Insolvency Trustee can provide clarity on your options.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.