There has been a lot of helpful guidance during the Coronavirus crisis about how you may be able to freeze or have “holidays” from big ticket expenses such as mortgages or credit cards, but what about car lease payments?

For many households in the UK, two car lease payments combined could surpass the mortgage as the biggest outgoing in a month. Worse still – many of us are not even able to use our cars at the moment. Some people may be grateful for the ability to sneak under the mileage limit at the end of the lease, or for the reduction in cost of fuel (volume required and price per gallon), but ultimately having something so costly and temporarily useless might be soul-destroying for many.

If you are in a financially stable position, or are currently able to meet your car finance payments, it is best to leave them be. There is no benefit to freezing payments at this time unless you are unable to make them.

If you cannot pay all your bills, have squeezed your budget as best you can and after paying for the basics of food and shelter you do not have enough to pay your car finance payments, contact the creditor(s) of the car finance as soon as you can, prior to missing any payments if possible, and explain your situation.

This way, you can work with them, and some options could be:

(a) Utilising a “Deferred Payment Option” which may be in your agreement and allow you to trigger a payment deferral;

(b) Requesting in writing to skip a payment (sometimes know as a hardship request);

(c) Agreeing to temporarily reduce the payment amount per month until your financial situation improves (note this could lengthen your agreement time which is not ideal).

All these options will likely add to the overall cost of the finance, either with additional interest and/or administration fees. It is not a good idea to ask for these unless you are truly in financial difficulty.

You could also look to hand the vehicle back if the agreement allows, for example on most hire purchase or conditional sale agreements, if you have paid more than half of the payments under the agreement you can hand the vehicle back and have nothing else to pay. This is called voluntary termination. For personal contract purchase, sometimes there is still something to pay even if you hand the car back early. Review your agreement and speak to the provider about your options. Yes you have no car – but you have no payment to make each month too.

If you own the car and have a bank loan against it, you could consider selling it to pay off the bank loan. Although this means you have no car, you could swap it for a cheaper car and reduce your monthly payment or even better – get a car debt free.

Whatever you do, do not purposefully skip a payment. It affects your credit score and more importantly, causes distress and complications later to try and rectify. Always engage with your creditor during times of hardship – many have specialist teams set up to support people finding it difficult to make payments.

Irrespective of whether you are going through a time of hardship, we suggest having a game-plan to get out of car finance forever. Ditching Debt is within first stage of The Financielle Playbook: Survive – all forms of car finance are eradicated here. We would recommend putting in place a plan to buy a low cost reliable car for cash for whenever you plan to exit your car finance – but make sure you exit in conjunction with

your creditor, following the processes set out in the agreement.

Take care.