How to stop car repossession in the UK?

Before we explain your options for handling any remaining car finance, you must be clear on what happens to your car when it gets repossessed. When the finance company repossesses your vehicle, they don't like to hang onto it for too long. It’s of no use to them, and they want their cold, hard cash, meaning they will likely auction the vehicle.

An auction of a repossessed vehicle is nearly always guaranteed to get you less than what you would have been able to get from a private sale (i.e. when you sell it yourself). This is not ideal, but it’s not always a problem unless... the sell price is insufficient to cover your remaining finance on the car.

Let's say that after selling your vehicle, there is £7,000 left to pay on the finance.

First, you need to know and understand that the vehicle has been repossessed and sold. This means the finance, previously secured to an asset (the car), is no longer secured to anything. It has now become an unsecured debt. 

Unsecured debt can make car finance companies uncomfortable because they lack control over how they will get their money back. When this happens, they will look for the best way to recover the outstanding debt.

As mentioned above, when you have remaining car finance left after repossession, you now have an unsecured debt, which finance companies like to avoid at all costs. So now what happens?

Well, one way they like to try to get their money back is by securing the debt (the remaining car finance) to another major asset. The most realistic asset would be a property—if you’re a property owner. You need to understand that this is always seen as a last resort.

As stated by the Financial Conduct Authority, the finance company or whoever is representing them must try to recover the money or reach a reasonable agreement with you before any legal action is taken.

To ease the pressure of the situation, you'll need to communicate with the finance company to let them know your circumstances. Please don't ignore the problem, as this could worsen your situation. Your risk of legal action will be much higher if you are not communicating with the finance company. They will just let the time pass until they can make the move to get their money back through the court system.

It's important to understand that the finance company will not overlook the issue. When money is at stake, companies are relentless in their efforts to recover it. This understanding will prepare you for the steps you need to take.

The most prudent course of action is to negotiate a payment agreement or a settlement with the finance company. This can prevent any legal action, such as a County Court Judgment (CCJ)) or a Charging Order, which you should strive to avoid if possible.

If you do not own a property, it puts the finance company in a difficult situation. It may be easier for you, but it won’t help them. They will likely employ a solicitor if they want to go the legal route, but they must also decide if the juice is worth the squeeze.

 Again, they must make every attempt to reach an agreement with you, but if they cannot, things become tricky.

How tricky, you might be thinking? Well, the finance company has a few options, none of which they are guaranteed to take. Let’s go through them below.

The finance company could decide to pay a solicitor to obtain a County Court Judgment (CCJ) against you (the debtor), but what happens after that? There is no asset to attach the debt to, so what other possible recovery options could they take?

• Attachment of earnings - This is when money is taken from your wage every time you get paid to pay the remaining debt. There are a few issues with this. The amount of effort the finance company will take to get all this in place for minimal monthly repayments may seem pointless. The other problem is that if you have a low income, the time it will take for the whole debt to be paid off could be very long.

• Instruct bailiffs - A finance company could choose the bailiff route to get their money back, but that's another cost.  Let’s think about this realistically for a second. How likely is it that through seizing your goods to sell at an auction, the finance company will recover all the money they need to cover your remaining finance plus the costs associated with hiring the bailiff in the first place? In the majority of cases, the answer is not very likely. Remember, auctions typically generate lower amounts from the sale of goods, so the finance company’s return would probably not cover the associated debt and costs. Not to mention that the bailiff may be refused entry by the debtor (you), so the whole exercise could be a waste of time.

The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.