What to Do If You Can't Make Auto Loan or Lease Payments During Coronavirus Pandemic: How Automakers & Finance Companies Are Helping Customers Money Finances
Joey Prince, who owns an auto detailing business near Las Vegas, says that he and his wife saw their income go to zero as the coronavirus pandemic prompted governors around the country to issue stay-at-home orders. The family has three cars financed through different lenders, and although the lenders did not approach him with deferment options, they were helpful when he requested relief. They each offered him several months of payment deferments.
“We decided to take the deferment, but we’re making interest-only payments to keep the overall balance from increasing,” he told Consumer Reports. “That way we can put the extra money toward food and other necessities.”
The pandemic, which quickly put the brakes on the U.S. economy, has left many families like the Princes suddenly short on income. Automakers and their financing companies already have begun offering options to those customers, including payment deferrals and late-fee waivers on existing financing. In some cases, they’re even dangling deferred first payments on new vehicles in front of prospective customers.
What to Do
If you have a loan or lease that you’re having trouble paying right now, call your bank or leasing company and try to negotiate an accommodation.
Ask for Deferment: For a traditional car loan, ask for a deferment. Most institutions are approaching this on a case-by-case basis, and they’re generally working with customers affected by the pandemic, our reporting has found. Keep in mind that you will still owe the money, and the interest will continue to accrue, so the sooner you can get back to paying, the better. A slow economy can be bad for used car sales, too, which means selling your car may get you less than what you owe on it.
“Nobody wants anyone to default on their car loan,” says Stephanie Brinley, an analyst at IHS Markit, a firm that tracks the automotive industry. “It's not good for the automaker. It’s not good for the lender. It’s not good for the customer.”
Lease Cars: For a leased vehicle, a deferment means extra months of payment (and not necessarily extra mileage). It can be very difficult to get out of a lease, although lease transfers – getting someone else to assume the lease – are possible. But it could be difficult to find a recipient during an economic downturn. Some companies, such as Swap-a-Lease, work to match prospective customers interested in taking over leases from financially stressed leaseholders.
According to data compiled by IHS Markit, car sales in the U.S. were down 38 percent in March. The firm’s analysts predict that April will be worse, with not much relief before the beginning of May. Consumer confidence will be a determining factor in how fast people start buying cars again once the shelter-in-place orders have been rescinded.
Check for Specific Offers
Not everyone’s circumstances will be the same, and each financing company has a different way of helping customers.
GM Financial, for example, is waiving late fees incurred between March 1 and April 30, and advising customers that it’s better to make payments behind schedule and avoid racking up interest on a loan by taking a deferment. Kia Motors Finance is allowing up to 90 days of payment deferment. Automakers from Honda to Lexus have offered to assess potential deferrals and payment extensions on a case-by-case basis.
To read the full story, visit ConsumerReports.com.
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