What Happens If I Default on My Car Loan?
Defaulting on a car loan can lead to late fees, a dip in your credit, legal action and even vehicle repossession.
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With auto loan and lease balances on the rise, and the sharp increase in the general cost of living, it’s no wonder auto loan delinquency rates have risen by more than 50% since 2010 and remain high. Failing to make car payments for a period of time can lead to auto loan default.
Subprime borrowers have been hit particularly hard, with more than 6% of this group behind 60 days or more on their auto payments in the last half of 2025. As of October, the percentage hit 6.65%, the highest on record according to Fitch Ratings data.
Why are more people defaulting on car loans?
Borrowers are struggling in part due to the rise in car purchase prices and monthly auto loan payments, along with overall increased living expenses. For many borrowers, it’s difficult to remain current on their auto loans, when they’re struggling to pay for food, housing, clothing and other necessities.
In addition, an increasing number of borrowers have become upside-down on their auto loans, meaning they owe more than the current value of their cars. Owing more than a car is worth can make selling it to get out from under too-high car payments more difficult.
Many auto lenders are willing to work with struggling borrowers to get payments under control by adjusting the due date, payment amount, loan duration or other loan terms — but the key is to reach out before you’re underwater on your loan.
What happens if you default on an auto loan?
When you default on a loan, it means you’ve failed to make your monthly payments to the lender per your loan terms. Usually, an auto loan is considered delinquent after one missed payment. Then the account is in default after 30 to 90 days of no payments, depending on the lender. Note that auto lenders typically offer a 10- to 15-day grace period from the payment due date during which you won't be charged late fees or face other consequences for missing a payment.
Here’s what you can expect with a car loan default.
You’ll incur late fees
When you miss an auto loan payment or make a late payment, you’re typically required to pay a late fee. Late fees vary by lender, loan terms and state, but most lenders charge 5% of the payment amount missed or a flat fee of $25 to $50. Depending on the state where you live, there may be laws that limit the amount a lender is allowed to charge or the length of grace period they must provide before you’re charged a fee.
Your loan terms will include how much you’ll be charged for a late or missed payment.
Your credit score will take a hit
Most lenders report late or missed payments to the three major credit bureaus after 30 days from the due date, so your delinquency will be recorded on your credit report. Payment history is the most significant factor in determining your credit score — it accounts for 35% of your FICO score. A missed payment on your credit reports will negatively impact your credit score. Additionally, a delinquency can stay on your credit report for seven years.
A lower credit score can affect your ability to get a loan or receive lower interest rates in the future.
Your car could get repossessed
When you get a car loan, the vehicle acts as collateral for the loan. This means that if you default on the loan, a lender can repossess your vehicle.
Lenders can repossess a vehicle after only one missed payment, but most wait until at least 60 days of no payments. Repossession rules and timelines vary by lender and state laws. For example, some states require a warning before a repossession, while others do not.
After your car has been repossessed, the lender can sell it. If the lender sells your car for less than what you owe on it, you may be on the hook for the difference, as well as repossession and early termination fees.
Having a vehicle repossessed damages your credit scores and will remain on your report for seven years.
Your loan could be sent to collections
If you still owe money after your car is repossessed, the lender may turn your loan over to a collections agency that will try to get back what you owe. You may receive emails, phone calls and letters — and possibly even have your wages garnished or a lien placed on your home until you pay the outstanding balance. In rare cases, your lender could also sue you for the amount you owe.
Like repossession, collections will remain on your credit report for seven years and can affect your ability to get a loan down the line.
What to do before you default on a car loan
If you can’t afford to make your car loan payment due to hardship, see if your lender offers an auto loan hardship program. Most lenders offer assistance in the form of deferment, payment plans and more.
Keep in mind that lenders want to collect what they’re owed and will typically work with borrowers who communicate early.