With furloughs, pay cuts and layoffs mounting, a lot of people are struggling to make their monthly car payments. If that’s your situation, there’s one thing you should absolutely do: Speak up.
Let your auto lender know before you have to miss a payment.
Many auto finance companies, including those run by automakers, are offering assistance to customers in financial trouble due to coronavirus shutdowns.
“It does feel like there’s a lot of help out there if you choose to accept it or try to look into it,” said Jessica Caldwell, an analyst with Edmunds.com.
Some automakers, such as Volkswagen and Hyundai, are even advertising payment deferral programs. Under these programs, new car buyers can put off making payments for the first few months, and current owners who have lost their jobs due to the cononavirus can ask to skip payments for up to three months.
“This is something that we would typically do anyway if a customer needed it,” said Duncan Movassaghi, executive vice president for sales and marketing at Volkswagen of America. “But obviously what we’ve seen in the last six weeks to eight is a real spike in terms of customers needing help.”
Volkswagen Credit, VW’s auto loan arm, typically gets about 4,000 calls a day from its 700,000 customers. “As we came into this period, it peaked at about 13,000 a day, so it more than tripled,” Movassaghi said.
It has settled down to about 6,000 calls a day, he said, and the company has now processed more than 60,000 loan deferrals and lease extensions.
To prove job loss, owners need to provide the same paperwork they used to get unemployment insurance payments such as a dismissal notice from their employer, a VW spokesman said.
Just keep in mind: Even though you don’t need to make a payment for up to 90 days, all the payments must be made eventually and interest charges will still accrue even as payments are postponed.
A number of independent auto lenders, ones not affiliated with any specific automaker, are also offering loan deferral programs.
Ally Financial, for instance, is offering payment deferrals for up to 120 days without additional fees – although, again, interest will accrue. Other lenders are also offering payment deferral plans for customers who request it.
“It’s not as if they’re giving you free money,” said Caldwell. “They’re just being understanding, more so, of people’s situations.”
If they can, some customers may want to pay just the interest on their loans, even as payments are put off. That will at least keep interest from building up during the deferral period, said Chuck Bell, programs director for the advocacy division of Consumer Reports.
Besides being helpful for customers, said Bell, these deferral programs are also good for lenders because the alternative would be to repossess a car. Given current economic conditions and the state of auto sales, lenders would have a hard time recouping their money if they try to sell a car they’ve repossessed. As the world begins to recover from the coronavirus crisis, auto lenders and their automaker partners would much rather have your business than your car.