How to Renegotiate Auto Financing

There are two options for financing an automobile: Purchase financing in which the consumer takes out a loan to purchase the vehicle, and lease financing, where the consumer leases the vehicle for a predetermined term. In the former instance, the consumer incurs the depreciation of the vehicle and must cover any repairs or maintenance not included in the purchase--while in the latter, a consumer is shielded from depreciation, and leasing often includes maintenance but has limitations on mileage.

In either case, a consumer may renegotiate their form of financing by requesting a change of terms, temporary suspension of payments, or both.

Instructions

1

Determine the value of the vehicle. The value of a vehicle can be determined by visiting auto value websites or by reading schedule books that establish value based on make, model, year, mileage, condition and ratings comparability to class and trim models.

Because cars always decrease in value through wear and tear depreciation, the vehicle will not be worth the price you originally negotiated before securing purchase financing or lease financing. In the event you cannot successfully renegotiate the financing, selling the vehicle may be an option.

2

Contact the lender. Lenders should be contacted as soon as the vehicle owner is aware that present or near future circumstances will not allow them to keep current on their lease or auto loan. (Consumers should note that most lease or purchase financing institutions will not renegotiate a lease or auto loan that is current but will have options once payments fall in arrears.)

3

Renegotiate the financing. Your lender may have options for accommodating your particular situation. Most financing institutions have "hardship" option that allows a lessee or borrower to miss up to three payments and defer those payments to the end of the financing term. For leased vehicles, a "market adjustment" option might be available. In instances where a lease was recently taken and the market fluctuates downward, the lease financier can readjust the lease amount to be in-line with the new market value. Another option may be to extend the term of the lease or finance loan. Extending the term will mean a longer commitment, but will also lower the monthly obligation of the consumer.

4

Refinance the vehicle or terminate the lease early. Purchase finance consumers should seek to refinance the vehicle for a better interest rate, thereby lowering their monthly payment obligation. Lease consumers may inquire as to early lease termination. Early lease termination will include early termination fees and may also appear as a repossession on the consumer's credit report because it is a form of repossession.