What If I Can't Afford My Lease Payments? Your Options

If you can't afford your lease payments, contact your finance provider before you miss one. Under FCA rules they must consider forbearance - reduced payments, a short deferral, a restructured agreement or early termination. Free, confidential debt advice is available too. Doing nothing is the only option that always makes things worse.

What are my options if I can't afford my payments?

You have four broad routes: get temporary help from your funder, restructure the agreement so the monthly cost drops, exit the lease early and accept a settlement charge, or get free debt advice and use the protections available to you. Which one fits depends on whether the squeeze is short-term or permanent.

That distinction matters more than anything else on this page. A three-month gap between jobs is a different problem from a permanent drop in income, and funders treat them differently. Be honest with yourself about which one you're in before you pick up the phone - it shapes what you should ask for.

One more thing worth saying plainly: a lease payment is a contractual debt, but it isn't usually a priority debt in the way rent, mortgage and council tax are. If you're choosing between keeping a roof over your head and keeping a car, the housing costs come first. Any decent debt adviser will tell you the same.

What happens if I miss a payment?

Who should I contact first - the broker or the funder?

Contact the finance company named on your agreement. They own the vehicle, they collect the payments and they alone can agree a change to the contract. Your broker can help you understand the paperwork and talk through the options, but they can't grant a payment holiday or waive a charge on the funder's behalf.

Find the funder's name on your credit agreement or your direct debit reference - it'll be a name like Lex Autolease, Santander Consumer, ALD or a manufacturer's own finance arm. Most have a dedicated financial support or customer care team, and those teams are separate from ordinary collections. Say the words "I'm having difficulty paying" early in the call. That phrase triggers a different process.

Then call us too. We can't change the agreement, but we've had these conversations with funders many times and we can tell you what that particular funder tends to allow - which saves you guessing.

What help can a finance company actually offer?

Funders can offer a range of forbearance measures: reduced or token payments for a period, a short deferral, an extended term, a revised payment date, or an agreed early termination. According to the FCA's Consumer Credit sourcebook (CONC 7.3), firms must treat customers in or approaching arrears with forbearance and due consideration, taking individual circumstances into account.

None of these is an entitlement. A funder assesses each case, usually by going through your income and expenditure. Under the FCA's rules that assessment has to be done objectively - which in practice means using recognised spending guidelines rather than an arbitrary judgement about what you can afford.

Extending the term is the most under-used of these, and often the most useful. Adding months spreads the remaining cost over a longer period, so the monthly figure falls. It works best when the car still suits you and the problem is purely the size of the payment. Our guide to extending your lease at the end covers how funders handle this.

Can I just hand the car back early?

You can ask to end the lease early, but on Personal Contract Hire it isn't free and there's no automatic statutory right to walk away. Funders typically charge a proportion of the rentals remaining - around half is common, though it varies by funder and by contract. Check your own agreement for the exact wording.

Here's where a lot of confusion starts. The well-known "once you've paid 50% you can hand it back" rule is voluntary termination under the Consumer Credit Act 1974, and it applies to Hire Purchase and Personal Contract Purchase - both of which are credit agreements to buy a car. As the BVRLA explains in its consumer guidance, early termination may not be available on contract hire at all, and where it is, the cost can be higher than the 50% figure people expect.

There is a lesser-known provision, section 101 of the same Act, giving a right to end certain regulated consumer hire agreements after 18 months. But it doesn't apply where payments exceed £1,500 a year - that's £125 a month - which rules out the overwhelming majority of car leases. Don't build a plan around it without checking.

An illustrative example: a lease with 20 monthly rentals of £300 left to run has £6,000 of remaining rentals. At a 50% early termination basis that's a £3,000 settlement. Round numbers used purely to show the shape of the calculation - your funder's formula and figure will differ.

You'll also still be responsible for excess mileage and for any damage beyond BVRLA fair wear and tear standards, assessed when the vehicle is collected. Our full guide on how to end a car lease early and what it costs walks through the calculation and the handback inspection.

What about passing it to someone else? On most PCH agreements you can't - the contract is personal to you and funders rarely permit a novation. It's worth understanding why before you pin hopes on it, which is covered in our guide to transferring a lease to someone else.

Cheaper ways to keep the car on the drive

Before you decide the lease has to go, strip out the costs around it. Insurance, fuel, maintenance packages and mileage settings all sit alongside the rental, and several can be reduced without touching the agreement at all. In our experience this closes the gap for a fair number of people.

Where the savings usually hide

• Insurance: shop the renewal rather than letting it auto-renew, and check whether a higher voluntary excess or a telematics policy suits you.
• Mileage: if you're driving far less than you contracted for, some funders will reduce the agreed annual mileage mid-term and lower the rental. It isn't universal, but it's free to ask - see changing your mileage mid-lease.
• Second vehicle: if there are two cars in the household and one is owned outright, selling the owned car raises cash without breaking a contract. We offer a free instant valuation if you want to sell a car.
• Payment date: a simple shift to align with payday costs nothing and prevents bounced direct debits.

Is it worth switching to a cheaper car mid-lease?

Sometimes, but only when the sums work. You'd pay the early termination charge on the current agreement and then start paying for a new one - so a genuinely cheaper replacement has to save enough each month to justify that upfront hit. If you're twelve months from the end of a term, it rarely stacks up. Two years out, with a big drop in monthly cost, it can.

Where can I get free debt advice?

Free, confidential and impartial debt advice is available from not-for-profit organisations including StepChange, Citizens Advice, National Debtline and the government-backed MoneyHelper service. You never need to pay for debt advice. FCA rules require lenders to point customers in arrears towards these services, and using one is a strength in a funder's eyes, not a red flag.

England and Wales also have the Debt Respite Scheme, better known as Breathing Space. As set out on GOV.UK, a standard breathing space gives up to 60 days during which most creditors must pause enforcement action and freeze interest and charges on qualifying debts, giving you time to get advice and put a plan together. It's accessed through a debt adviser rather than applied for directly, and there's a separate route for people receiving mental health crisis treatment. Similar statutory protections exist in Scotland through the Debt Arrangement Scheme.

What does all this do to my credit file?

An agreed arrangement is recorded on your credit file, and lenders can see it - but it is far less damaging than missed payments, a default or a terminated agreement. Talking to your funder early and sticking to what you agree is the single best thing you can do to limit the damage.

Roughly in order of severity: a changed payment date has no effect at all; a formally agreed extension made before you fall behind is usually neutral; an arrangement to pay is visible and may affect future applications; a missed payment marker sits on your file for six years; and a default or a terminated agreement with a balance outstanding is the most serious of the lot.

Some people put off calling because they're worried about the record. Understandable, but backwards - the record gets worse while you wait, not better.

Your next steps: a simple checklist

Work through these in order. The whole sequence takes an afternoon, and most of it is free.

1. Find your agreement. Note the funder's name, your agreement number, the monthly rental, the end date and the early termination clause.
2. Work out your position. List income and essential outgoings. You need a realistic figure for what you can pay each month - a number you'll actually be able to keep to.
3. Decide short-term or permanent. This determines what you ask for.
4. Call the funder's financial support team. Say you're having difficulty paying. Ask specifically about reduced payments, deferral, term extension and a written early termination figure.
5. Get the offer in writing before you agree, including what happens to any shortfall and how it will be reported to credit reference agencies.
6. Get free debt advice if the car is one of several pressures, and ask about Breathing Space.
7. Cut the surrounding costs - insurance, mileage, a second vehicle.
8. Talk to us about what a cheaper replacement would cost, so you're comparing real numbers rather than assumptions.

If the funder isn't treating you fairly, you can complain to them first and then refer the matter to the Financial Ombudsman Service if you're not satisfied. Our own complaints procedure sets out how that works on our side.

Frequently Asked Questions

Written by the team at First Vehicle Leasing. We're an FCA authorised and regulated leasing broker and a BVRLA member, arranging personal and business vehicle leases across the UK for over 25 years. If you're worried about your payments, call our team on 0333 003 3325 - we'd rather have an early conversation than a difficult one later.