How Late Can You Be on a Car Payment?

Contact your lender immediately if you think you’ll miss a car payment. Discuss your available options with them, and be ready to present a solution. Lenders would rather work with you and potentially defer a payment than go through the legal rigamarole of initiating a car repossession. 

Lender contact

Lenders often stay in close contact with consumers to ensure complete and on-time payments. You may receive notifications of upcoming due dates and reminders that your payment is due. Alternatively, your lender should inform you that your payment is late. This type of correspondence may come via text messages, emails, phone calls, or snail mail. 

Late fees

Lenders often charge late payment fees as financial reinforcement that paying late has its consequences. Most lenders stipulate in the loan agreement specific late fee amounts. Standard late fees range between $15 and $35, but late fees can also be assessed based on a flat or daily rate. 

It’s essential to understand the difference between late and missed payments, especially regarding late fees. A late payment occurs when you miss your original payment due date by a few days, potentially up to one or two weeks. Lenders typically also consider partial payment to fall under late payments. 

Missed payments signify that you haven’t yet made a payment or were more than three or four weeks from your original due date when you made a payment. Continual missed payments put you at risk for default and repo. Even a single missed payment could give your lender the legal right to repossess, regardless of your ability for repayment. 

Immobilization  

Lenders may install an immobilization device on your vehicle, rendering it useless if you don’t make your payments. It’s similar to what you’d experience if you didn’t pay your water or power bills. Indeed, your lender will likely charge you to disable the immobilization device should you make a payment. If so, you’re responsible for this immobilization fee and any late fees incurred.  

Negative impact on credit score 

Part of your credit score stems from your payment history. A late car payment can negatively impact that portion of your credit score and cause you to lose points. In addition, voluntarily repossessing or defaulting on a loan can cost you 100 or more credit score points and damage your credit report for up to seven years. 

(Voluntary) repossession or default 

If you miss a car payment and don’t communicate with your lender, they can legally repossess your car. However, you can also voluntarily repossess it by contacting your lender and arranging an amicable vehicle pickup. Voluntarily repossessing your car doesn’t preclude you from owing the remainder of your payments, but it does look better on a credit report than defaulting on the loan contract entirely. 

Depending on where you live, your state laws may give the lender full rights to repossess their property if you miss a single payment. While a single missed payment can incur repossession, most lenders attempt to contact you and discuss options before moving forward. Mistakes happen, and it’s better for all parties involved to reach an amicable solution before legal action occurs. 

Part of knowing how car loans work is understanding the terms and conditions within a legal loan term agreement. Most lenders outline their process of acquiring payment if you miss your payment date. One missed payment isn’t an immediate red flag, but a history of missed payments or several consecutive missed payments can put you at risk for repossession. Typically, lenders move ahead with full-fledged repossession efforts after three consecutive missed payments.

How repossession works

Missing a car payment alerts the lender that they may need to repossess their asset if you continue to miss your monthly car payments. Repossession typically requires two or more missed payments to take effect. Under the circumstances, the lender can reasonably assume that not only is a single month’s payment too much for you financially, but three months of payments are also out of the question. 

Delinquency characterizes the period of time in which you miss car payments but are not yet at risk of repossession. This term mirrors the situation you may find yourself in if you receive a warning for speeding. Default and repossession coexist. A car loan in default signifies the continuance of lack of payment, which has real-world consequences, just like a speeding ticket.  

After 90 days, lenders send your account to collections and begin repossession. Most state laws require that lenders notify you of their efforts to repossess their property, as they must act within certain limitations to retrieve their assets. Your lender will also inform the credit bureaus of your delinquency and default, further damaging your credit score and report. 

Defaulting on an auto loan can make it extremely difficult to obtain another, even up to seven years down the road. Losing 100 or more credit score points can put you well below the credit score you need to buy a car and avoid defaulting again. While you can buy a car with no credit, the terms of these subprime loans tend to put you at a financial disadvantage. 

Grace periods vary between lenders. However, most grace periods for car payments extend 10 to 15 calendar days beyond the original payment due date. Again, this information should be listed in your loan agreement, but you can also contact your lender and ask for specifics. 

Similar to overdraft protection, grace periods typically exist for emergencies and isolated incidents rather than regular use. If you rely on grace periods to make car payments, consider reevaluating your finances to find a more appropriate solution. 

Paying more than your monthly car payment can help you pay off a car loan faster. However, if you can’t afford your monthly car payments in the first place, you may want to consider the following: 

• Is it a matter of remembering your car payment due date, and if so, what automatic reminders or payments can you initiate? 
• Can you refinance your car loan for a lower interest rate or longer terms? 
• Does your lender allow payment plans or deferment? 
• Can you call upon someone close to you to take on car payments until you get back on your feet? 
• What spending can you reduce to contribute more of your paycheck toward your car loan payments? 
• Would you benefit from credit counseling?

Alternatively, a car subscription from FINN can help you better manage your car budget and keep you behind the wheel of a vehicle. You won’t have to worry about figuring out how long you can get a car loan for or how much time you have after a payment is past due to pay it without incurring fees or legal action. FINN’s monthly fee includes practically every car-related expense except fuel and car washes. FINN will even deliver your new subscription straight to your front door.