How to Handle Car Maintenance and Repairs When Facing Auto Loan Default

Falling behind on your car payments can be scary. You may be worried about your credit score or even losing your vehicle. But even if you’re facing auto loan default, you still need to keep up with maintenance and repairs to keep your car running safely.

The good news is, there are things you can do to take care of your car while also getting your payments back on track. Here’s what you need to know about handling car maintenance and repairs during this difficult financial time.

Communicate with Your Lender

The first step is to contact your auto loan lender and explain your situation. Let them know you’re having trouble making payments but want to work out a solution. Many lenders are willing to make arrangements, such as temporarily reducing or deferring payments, to avoid default.

Be honest about your financial circumstances — for example, if you lost your job or had unexpected medical bills. Provide documentation if required. Lenders want to get repaid, so they have an incentive to work with borrowers who are communicating openly and making an effort.

You may also ask about hardship programs or loan modifications. For example, extending the repayment term from 60 to 72 months will lower your monthly payment. Just keep in mind that you’ll pay more interest over the life of the loan.

Prioritize Essential Repairs

While you’re working on getting current with your lender, you also need to keep your car in safe working order. But stick to only essential maintenance and repairs during this time — things like oil changes, new brake pads or battery replacement.

Push back or skip discretionary expenses like premium sound systems or cosmetic upgrades. You need to conserve cash for items that impact drivability and safety.

Also be diligent about DIY maintenance like checking fluids, tire pressure and filters. This can save you money since you won’t pay labor costs.

Ask Your Mechanic About Payment Plans

What if an essential repair pops up that you just can’t afford, like a failed transmission? First call around to compare quotes from different mechanics. Often independent shops offer lower rates than dealerships.

Before you schedule the work, ask if the shop is willing to accept payments over time. For example, you may be able to pay $200 per month for a few months until the $800 transmission rebuild is paid off. This can make a big repair feel more manageable.

Use a Credit Card Strategically

Another option is to charge the repair to a credit card, then pay it off slowly. This route only works if you have available credit — don’t max out cards or miss payments.

A credit card is also useful for smaller, unexpected issues like a flat tire or dead battery. Just be sure to pay off the balance promptly.

Consider an Auto Repair Loan

There are companies like RepairPal and AutoMD that offer loans specifically for car repairs, which may have lower interest rates than credit cards. You provide details about the repair and your income, and could get approved for several thousand dollars.

The loan is paid directly to the repair shop, and you repay the lender in fixed monthly installments like a regular auto loan. Be sure to compare all terms and fees first.

Sell Unnecessary Items

Try to come up with extra cash any way you can to cover emergency repairs. Comb through your home and garage for valuables or household goods you no longer need and sell them online or at consignment shops.

You can also save money by temporarily cutting back on non-essential spending like dining out, movies or vacations. Every dollar helps when you’re strapped for cash.

Ask Friends or Family for Help

Don’t be afraid to lean on your support system. Let people know you’re going through financial hardship but need help with an urgent car repair. Offer to repay them over time once you’re back on your feet.

Just be sure to draw up a simple agreement putting terms in writing. This avoids potential misunderstandings and protects your relationships.

Explore Repair Assistance Programs

Some nonprofit organizations provide car repair help for struggling families. For example, Wheels for Wishes offers vehicle maintenance grants for low-income households. Research groups near you to find out if you qualify for assistance.

Your local United Way chapter may also be able to connect you with social service agencies or charities that help with auto repairs.

Consider Public Transportation

If your car breaks down and you can’t afford to fix it, using public transit may be your best option, at least temporarily. This avoids the costs of repairs, fuel, insurance and loan payments.

Look into options like buses, subways, light rail and carpooling. You may also qualify for discounted fares based on income.

Let the Lender Repossess the Car

Voluntary repossession should be a last resort, but it may be better than continuing to miss payments. Your credit will still take a hit, but you can avoid additional late fees and deficiency judgments.

The lender will sell the car and deduct the proceeds from your remaining loan balance. However, you may owe taxes on the forgiven debt if it’s more than $600.

Consider All Options Before Defaulting

Defaulting on your auto loan can make life much more difficult. Your credit score will plummet, making it hard to qualify for financing in the future. You may also face collection calls, lawsuits or wage garnishment.

Do everything possible to avoid default, even if it means extending the loan term or selling the vehicle. And remember to stay in close contact with your lender — they want to get paid, so they’ll often work with you.

Facing financial hardship is stressful, but taking strategic steps to manage your auto loan default can help you weather the storm. With time and effort, you can get your payments back on track while keeping your car running safely.