Three month freeze on car repayments
By Sarah Wood | 24th April 2020
Britain's financial watchdog has confirmed there will be a three-month repayment freeze for customers with auto finance leases, goods bought on high-cost credit, and pawnbroker credit during the coronavirus pandemic.
The Financial Conduct Authority (FCA) said it will be introducing the package of measures to support consumer credit customers facing payment difficulties due to COVID-19, as reported by Reuters.
Payday lending firms that offer short-term loans at a high interest rate, will be able to provide a one month interest-free payment freeze with no additional interest.
This is good news for anyone who has bought a car in recent years, as 91 per cent of cars are bought on finance, equivalent to 2.4 million cars in 2018 - 64 per cent of which were used cars.
James Fairclough, CEO of AA Cars, said: "The millions of drivers with car finance deals will be greatly reassured to know the FCA has their back.
"In effect these guidelines mean that anyone who is worried about keeping up with their repayments because their income has been impacted by the Covid crisis will be entitled to a three-month payment holiday.
"Crucially, the FCA's measures ensure every customer will be treated the same, whoever their lender is, and whatever type of finance plan they are on.
"The recommendation that consumers be allowed to keep their car where possible will also be particularly valuable for key workers who still rely on their vehicle to get to work.
"However it's important to note that lenders will not make special arrangements automatically. The onus is on drivers to contact their lender before they run into difficulty. Call centres are understandably busy at present, but many providers are offering payment holiday request forms online.
"Past experience shows that when faced with financial difficulties, some consumers simply stop making repayments on their finance deals. This is best avoided, as it can harm your credit rating. If you are struggling, contact your lender to ask for a payment holiday - don't just miss a scheduled payment.
"For its part, the FCA must ensure consumers get the message that in the current climate there is no shame whatsoever in experiencing financial stress; and that if they anticipate struggling with repayments, the right course of action is always to contact their lender sooner rather than later."
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