What Happens If You Miss a Car Loan Payment in NZ?
Life does not always go to plan. A job loss, an injury, a relationship ending or a run of big bills can make it hard to keep up with your car loan, and missing a car payment can feel stressful.
The good news is that New Zealand law gives you real protections, and lenders would much rather work something out than repossess a car. This guide explains what happens if you miss a car loan repayment, how a hardship application works, how repossession works, and what to do first.
The Short Answer
If you miss a car loan payment, your lender will usually charge a late fee and contact you. If payments keep falling behind, it can affect your credit report and, as a last resort, the lender can repossess the car after giving you formal notice.
The most important thing is to contact your lender early. If something you could not have foreseen has affected your income, you can make a free hardship application to change your repayments. Apply before you fall too far behind, as you generally cannot apply once you are two months in default.
What to Do in Three Steps
Call Your Lender
Talk to your lender as soon as you know a payment is at risk, ideally before it is missed.
Ask About Hardship
If your situation has changed unexpectedly, ask to make a hardship application.
Get Free Help
A free financial mentor can help you build a budget and talk to your lender.
What Happens When You Miss a Payment
| Stage | What can happen |
|---|---|
| Payment missed | Your lender may charge a late or dishonour fee and will usually contact you |
| Payments keep falling behind | Late payments can be recorded in your repayment history, which stays on your credit report for 2 years |
| 30 days or more overdue | An overdue amount of $125 or more can be listed as a default, which stays on your credit report for 5 years |
| Repossession warning notice | The lender must give you at least 15 days to fix the default before repossessing (unless the car is at risk) |
| Car repossessed | A post-repossession notice must be sent within 14 days |
| Before the car is sold | The lender must wait at least 15 days after that notice, and you can still pay the arrears or pay out the loan |
| After the sale | You get a statement of account within 7 days, and any shortfall plus costs is still owed |
A general guide to the process under the Credit Contracts and Consumer Finance Act 2003 and the Credit Reporting Privacy Code 2020. Your loan contract sets out the exact fees and steps that apply to you.
How a Hardship Application Works
Under the Credit Contracts and Consumer Finance Act, you can apply to your lender for a hardship change if something you could not reasonably have foreseen, such as illness, injury, losing your job, the end of a relationship or the death of a partner, means you cannot keep up your repayments, but you could if the loan was changed.
Your lender can agree to:
- Extend the loan term so each repayment is smaller.
- Pause repayments for a set period, often called a payment holiday.
- A mix of both.
The lender cannot charge a fee for the application and cannot increase your interest rate, although a longer term or a payment holiday usually means you pay more interest overall. They must acknowledge your application within 5 working days and usually decide within 20 working days. If they decline, they must tell you why in writing.
While your application is being considered, the lender cannot send a repossession warning notice or repossess the car, unless the car is at risk. The Financial Markets Authority explains the full rules.
When You Cannot Apply for Hardship
Timing matters. You generally cannot make a hardship application if:
- You have been in default for two months or more.
- You have missed four or more repayments in a row.
- It has been two weeks or more since you received a repossession warning notice.
- It was reasonably foreseeable when you took out the loan that you could not meet the repayments.
Even if you cannot make a formal hardship application, it is still worth talking to your lender. Many will consider other arrangements if you are upfront about your situation.
How Repossession Works
Repossession is a last resort, and lenders must follow strict rules. In most cases they must first send a repossession warning notice to you and any guarantor, giving you at least 15 days to fix the default. They can only skip that notice if they have reasonable grounds to believe the car is at risk of being damaged, hidden or removed.
A lender or their agent can only enter your home to repossess a car between 6am and 9pm, Monday to Saturday, and not on a Sunday or public holiday, unless you agree in writing. Within 14 days of repossession, they must send you a post-repossession notice, and they must wait at least 15 days after that before selling the car. Until it is sold, you can still get it back by paying the arrears or paying out the loan.
The sale must get the best price reasonably possible, and you will receive a statement of account within 7 days of the sale. If the car sells for less than you owe, you are still responsible for the shortfall and the costs of repossession and sale, so repossession rarely clears the debt.
How Missed Payments Affect Your Credit
Your lender can report your repayment history to credit reporting agencies. Late payments can stay on your credit report for 2 years. If an overdue amount of $125 or more is at least 30 days late and the lender has asked you to pay, it can be listed as a default, which stays on your file for 5 years, even after you pay it.
That can make future borrowing harder or more expensive, which is another reason to act early. Our guide to what credit score you need for car finance explains how lenders read your file.
Other Options to Consider
Catch Up Quickly
If it was a one-off, paying the missed amount as soon as you can limits fees and credit damage.
Rework Your Budget
A free financial mentor can help you find room in your budget and talk to your lender with you.
Check Your Cover
If you took out payment protection or redundancy cover with your loan, check whether you can claim.
Trade Down
Swapping to a cheaper car can lower your repayments, even if you still owe money on your current loan.
Sell Before It Gets Worse
Selling the car yourself usually gets a better price than a repossession sale, with your lender's agreement.
Make a Complaint
If you cannot sort it out with your lender, their dispute resolution scheme can help for free.
Free Help Is Available
MoneyTalks is a free, confidential helpline that can answer money questions and connect you with a local financial mentor. Call 0800 345 123 or text 4029.
Every lender must belong to an independent dispute resolution scheme, and it is free for you to use. If you are unhappy with how your lender has handled your situation, complain to the lender first, then to their scheme. Your loan documents name the scheme your lender belongs to.
Can We Help?
At 4Guys Autobarn we arrange car finance through a range of lenders, but your loan is with the lender, so they are the people to talk to about missed payments or hardship. If changing cars would help your budget, we can talk you through trading in a car with an existing loan or selling your car.
Visit us at 20 Arthur Porter Drive in Hamilton, open seven days, or call (07) 849 0083. If you are planning your next car, try our car finance calculator and see what your car repayments will be before you commit. Our car finance FAQs answer more common questions.
Frequently Asked Questions
- Your lender will usually charge a late or dishonour fee and get in touch. One missed payment that you quickly catch up on is rarely serious, but late payments can be recorded on your credit report, so contact your lender straight away.
- Repossession is a last resort. In most cases the lender must first send a repossession warning notice giving you at least 15 days to fix the default. They cannot repossess while a hardship application or a written complaint about enforcement is still being decided.
- A hardship application is a request to your lender to change your loan because something you could not have foreseen, like illness, injury, job loss or a relationship ending, means you cannot keep up your repayments. The lender cannot charge a fee for it.
- The lender can extend the loan term to lower your repayments, give you a payment holiday for a set time, or do both. They cannot increase your interest rate, but the changes may increase the total amount you pay over the loan.
- The lender must acknowledge it in writing within 5 working days and usually make a decision within 20 working days. If they need more information, they must ask for it in writing within 10 working days.
- You generally cannot apply if you have been in default for two months or more, have missed four or more payments in a row, or it has been two weeks or more since you received a repossession warning notice. That is why it pays to act early.
- It can. Late payments can show in your repayment history for 2 years, and an overdue amount of $125 or more that is 30 days late can be listed as a default for 5 years. Catching up quickly limits the damage.
- Usually, yes. After the car is sold, the sale price goes towards the loan and costs. If it sells for less than you owe, you are still responsible for the shortfall.
- MoneyTalks is a free, confidential helpline on 0800 345 123 that can connect you with a local financial mentor. If you cannot resolve a problem with your lender, you can complain to their free dispute resolution scheme.
