What If You Can't Afford Your Car?

“I’m afraid I’ll miss a payment … then lose the car … and wreck my credit. What do I do now?”

If you’re in this predicament, you’re not alone. I’m hearing from more and more people who bought a car they thought was manageable—then life changed: job loss, medical bills, inflation, or just a household budget that got tighter. Often, by the time you reach out, you’re already on the edge. But that doesn’t mean you’re out of options.  Many people overpaid for vehicles during Covid and the microchip shortage that followed, when cars were very short in supply.

Here’s a roadmap to help you get your footing back. The earlier you act, the more control you retain.

1. Face the Reality — Don’t Hope It Will Fix Itself

When payments become a pressure point, denial is the worst place to hide. Missing one payment may be survivable; missing several can spiral quickly.

• Assess your full budget. Start with hard numbers: take-home pay, fixed obligations (rent, utilities, insurance, food) and then see how much room you have—or how large the shortfall is.
• Prioritize auto costs. The car is more than just a monthly note: there’s insurance, fuel, maintenance, registration. If you can’t cover everything, focus first on keeping your wheels rolling (because mobility often equals income).
• Avoid “kicking the can.” If you think you can catch up later by skimping somewhere else, it often doesn’t play out. The longer you wait, the fewer options you have.

2. Try to Boost Income / Cut Other Costs

Before negotiating with your lender, do everything you can on your own to reduce the shortfall. It gives you leverage and breathing room.

• Side gigs or part-time work. Even temporary or weekend work (rideshare, freelance, tutoring, gig apps) can help cover one or two payments.
• Sell or rent underused assets. Tools, electronics, garage items, even unused parking or storage spaces.
• Slash discretionary spending. Subscriptions, streaming, dining out, gym memberships—those cuts help.
• Ask for help from friends/family (carefully). A small zero- or low-interest loan from someone you trust may buy time.

If these efforts close the gap even partially, it strengthens your position when you talk to your lender.

3. Talk to Your Lender — Sooner Rather Than Later

This is the most critical step—and the one most people avoid until it’s too late. Lenders generally dislike default and repossession more than missing a payment, so early communication improves your odds of assistance.

• Explain your situation candidly. Be proactive, not reactive. Lenders are more receptive if you're honest about a temporary hardship vs. waiting until you're weeks behind.
• Ask about hardship programs. Some lenders offer deferred payments, payment “holidays,” or short-term forbearance.
• Try refinancing or modifying the loan. This depends heavily on your credit profile and how far behind you already are—but it can sometimes turn an unaffordable note into something you can manage.
• Get everything in writing. If they agree to defer or change terms, make sure it’s documented.
• Don’t assume a voluntary repossession is safer. It’s a myth that letting the car go (“voluntary surrender”) is better for your credit. Repossession or surrender can lead to deficit judgments (you might owe the difference after auction), and both will damage your credit.

Pro tip: Once you default, options shrink. If you’re only one payment behind, the lender may be more flexible. After two or three payments, many paths close off.

4. Know Where You Stand — Equity, Payoff, Real Value

You need to understand two key numbers:

• Your payoff amount. This is what you owe to satisfy the loan today (including interest, fees, penalties).
• Your vehicle’s current market value. Ask a dealer for the true value or click SELL A CAR at the top of CarPro.com for a real bid.

Once you have those numbers:

• If your car is worth more than what you owe (positive equity), you have better options: selling, trading down, or consignment.
• If you’re underwater (you owe more than it’s worth), options narrow—but they’re not zero.

Compare what you owe to what you could realistically recover. That difference will drive your strategy.

5. Explore Alternative Strategies

Depending on your equity and time horizon, here are some paths:

• Sell privately — You might get more than dealer trade-in, reducing the shortfall.
• Trade down — Move to a cheaper car with lower payments. In some cases lenders may let you roll negative equity into a new loan (not always ideal).
• Consign your car — Some services sell the car for you, like RetailMyRide.com, aiming for a higher sale price than wholesale trade-in.
• Voluntary repossession — This should be a last resort, not a “plan.” Repossession and subsequent deficiency judgments can haunt your credit and finances for years.

Each of these comes with trade-offs—loss of mobility, credit damage, tax implications, or remaining debt after a sale.

6. Plan for What Happens After a Default or Repossession

If you can’t avoid default, at least control the fallout:

• Get organized. Keep records of all communication, notices, bills, court papers.
• Watch for a deficiency claim. After repossession, the lender will auction the car. If sale proceeds don’t cover what you owed (including fees), they may pursue a deficiency judgment.
• Understand your rights. Each state has deadlines and rules—statute of limitations, debt collection practices, rights to redeem (buy back), etc.
• Rebuild your credit. Once the storm passes, work on building positive accounts, paying down other debt, avoiding high-interest “rescue” loans.

7. Don’t Overlook Your Emotional and Mental Health

Financial stress can wreck sleep, relationships, and morale. Do this:

• Talk to someone — whether a friend, counselor, or financial coach.
• Reframe it as a project, not a failure. Many people recover from this.
• Be methodical and patient. The process may take months; persistence matters.

8. When to Walk Away From “Hope”

If you’re months behind, calls are piling in, and you’ve exhausted all your cash and income tweaks, then stepping away (while extremely painful) may be unavoidable. But:

• Don’t dodge the lender.
• Don’t ghost the problem.
• Explore options like bankruptcy (only as a last resort and with advice) or legal counsel.

9. Lessons to Carry Forward

When (and yes—you may recover and get on better footing), here’s what to do differently next time:

• Don’t finance more car than 15% (or less) of your take-home pay.
• Always leave a buffer for emergencies (job loss, repairs, medical).
• Buy cars built to last, with lower depreciation and maintenance.
• Revisit your budget every year (or after major life changes).

Bottom Line

Not being able to make a car payment is terrifying. But if you start early, stay honest, negotiate fiercely, and know your numbers, you dramatically improve your odds of minimizing financial damage. The moment you feel the squeeze—start acting. Don’t wait until the repo truck shows up.