Can You Pause Car Finance Payments?

Managing your finance

You can pause payments only if your lender grants a payment holiday; there's no automatic right to one. Lenders consider it case by case, usually for short-term difficulty.

Worked example

You pause a £300 monthly payment for three months, which defers £900. Interest keeps accruing on your whole outstanding balance over the pause, not just the £900, and the lender typically extends the term by three months or spreads the £900 across the remaining payments. Total interest on the agreement rises, and your final payment date moves back.

You can sometimes pause car finance payments through a payment holiday, but only if your lender agrees. It isn't an automatic right, and interest usually keeps building on the amount you pause. Lenders are most likely to agree if you're in temporary financial difficulty.

A pause can give you breathing space, but it isn't free. The missed amount is deferred, not waived, and the lender usually extends the term or raises the remaining payments, so the total amount payable goes up. The rest of this page covers how a pause works, what it costs and how to ask for one.

Can you pause car finance payments?

You can pause payments only if your lender grants a payment holiday; there's no automatic right to one. Lenders consider it case by case, usually for short-term difficulty.

Under FCA rules (CONC 5), lenders must treat customers in financial difficulty fairly, which can include a payment holiday or reduced payments. Ask early, before you miss a payment, and explain your situation clearly. Lenders are far more flexible with borrowers who contact them in advance than those who go quiet.

A payment holiday is a negotiated agreement, not a statutory right. That distinguishes it from voluntary termination (a right under the Consumer Credit Act 1974) or the 14-day cooling-off period (also statutory). The lender decides whether to offer a holiday, for how long and on what terms, so the strength of your case matters.

How a payment holiday works

A payment holiday lets you skip or reduce payments for an agreed period, with the missed amount added back to your balance afterwards. Interest usually keeps building during the pause.

Because the finance still accrues interest, a pause typically means slightly higher payments later or a longer term. The lender may extend the agreement by the length of the holiday, increase the remaining monthly payments, or add the missed amount as a lump sum at the end. Get the exact terms in writing before agreeing, and check how it changes your total on the settlement calculator.

Typical payment holidays run for one to three months. Longer pauses are rarer and usually reserved for serious hardship. Whatever the length, the key question is what happens to the missed amount. If it's deferred rather than waived (and it almost always is), you'll pay it back one way or another.

Worked example: the cost of a pause

What a pause costs you

Pausing payments adds interest and can extend your term, so you pay a little more overall, and it may show on your credit file. The relief you get now is paid for later through a higher total amount payable.

Ask the lender whether the holiday will be reported to credit reference agencies and how it affects your total. A formal, agreed pause is far better than simply missing payments (see what to do after a missed payment). Some lenders agreed during the pandemic not to report agreed holidays as missed payments, but that doesn't automatically carry over to new holidays, so confirm it in writing.

The cost is rarely huge for a short pause, but it's not zero. Interest keeps running on everything you still owe, not just the paused payments, so the extra depends on your balance, your APR and how far into the term you are. The worked numbers below show a three-month pause on a £20,000 deal adding about £85 near the end of the term and nearer £390 a year in. Weigh that against the relief the pause gives you.

It's a deferral, not a discount

A payment holiday doesn't reduce what you owe; it moves it later in the agreement. Interest usually keeps accruing, so you pay more in the end through a higher total amount payable.

What a pause really costs: the numbers

On a standard £20,000 HP agreement, a three-month payment holiday adds roughly £85 to £390 in interest, more the earlier in the term you take it, and pushes your final payment back by three months. The remaining monthly payments rise slightly, and the total amount payable rises.

Take the worked deal: £20,000 car, £2,000 deposit, 48 months at 9.9% APR, roughly £452 a month and about £23,697 total payable. If you pause three payments a year in (£1,356 deferred), interest keeps accruing on the unpaid balance during those months. The lender then either extends the term by three months or spreads the £1,356 plus accrued interest across your remaining payments.

The exact extra depends on how the lender structures the catch-up and how far into the term you pause. A pause in month 12 costs more in lifetime interest than one in month 40, because the deferred amount accrues interest for longer. Ask the lender for the revised total amount payable in writing before you agree. That single number tells you the true cost of the pause.

Three-month pause on a £20,000 / 48-month / 9.9% HP — illustrative
Outcome	Without pause	With a 3-month pause
Monthly payment	£452	≈ £463 after the pause
Term	48 months	51 months
Deferred amount	—	≈ £1,356
Extra interest (illustrative)	—	≈ £390 (pause in month 13)
Total amount payable	≈ £23,697	≈ £24,086

Read the catch-up clause

Before agreeing, ask exactly how the lender reclaims the deferred amount: a longer term, higher remaining payments, or a lump sum at the end. Each hits your monthly budget differently, and the option with the lowest monthly payment doesn't always give the lowest total amount payable over the whole agreement.

When a payment holiday is the right call

A payment holiday suits temporary difficulty with a clear end in sight, such as a job change, a short illness or a one-off bill. It's less suited to long-term affordability problems.

If you know your income will recover in a month or two, a payment holiday bridges the gap cleanly. If the problem is structural (the car is just too expensive for your ongoing budget), a holiday only delays the problem. For structural problems, look at lowering your payments permanently or ending the agreement instead.

Alternatives to pausing payments

If the problem is long-term rather than a brief blip, lowering your payments or ending the agreement may serve you better than a short pause. A pause only delays the issue.

Look at lowering your payments for lasting options, or, if the car is no longer affordable, voluntary termination once you've paid 50% of the total amount payable under sections 99 and 100 of the Consumer Credit Act 1974. Free debt advice from StepChange, National Debtline or Citizens Advice can help you pick.

Lower the monthly permanently by refinancing to a longer term or lower APR.
Switch to a cheaper car to shrink the balance.
Use voluntary termination once you've paid 50% of the total amount payable.
Apply for Breathing Space, which gives up to 60 days' protection from creditors while you get free debt advice.

How to ask for a payment holiday

Contact your lender before you miss a payment, explain your situation, and ask specifically for a payment holiday or reduced-payment plan. Follow these steps.

Lenders have dedicated teams for customers in difficulty, trained to find workable solutions. Approach the conversation as a problem to solve together rather than a request for a favour, because the lender would rather agree a plan than repossess the car.

Call the lender's customer services or financial-difficulty team.
Explain the cause and how long you expect the difficulty to last.
Ask for a payment holiday, a reduced payment, or a combination.
Get the terms in writing: the length, what happens to the missed amount, and any credit-file reporting.
Confirm in writing that you accept, and keep a copy.

Your rights during difficulty

Even without a statutory right to a payment holiday, you have strong protections when you're in financial difficulty. The FCA's rules require lenders to help.

Under FCA CONC 5, lenders must treat customers in financial difficulty fairly, give you reasonable time to get advice, consider reduced payments or a holiday, suspend or reduce interest and charges where appropriate, and not start repossession while you're meeting an agreed plan. If they fail any of these, you can complain (see how to complain).

Two further safety nets sit alongside the FCA rules. Breathing Space (the Debt Respite Scheme in England and Wales) gives you up to 60 days of legal protection from creditor action while you get free debt advice, and a debt adviser has to start it for you. On hire purchase and conditional sale agreements, which is how most car finance is written, it covers only the arrears you already have: interest and charges on those arrears are frozen, but interest on the rest of the balance can continue and your regular payments still fall due, so it isn't a payment holiday. And the car itself may be protected goods under the Consumer Credit Act 1974 once you've paid one third of the total amount payable, meaning the lender needs a court order to repossess it rather than collecting it unilaterally.

Don't wait until you've missed a payment

FCA rules reward borrowers who ask for help early. A lender is far more likely to offer a clean, unreported pause if you call before the payment is due than if you go silent and miss it. Early contact also keeps your options open: Breathing Space, reduced payments and voluntary termination all work best while you're talking to the lender, not once you're in arrears.

Frequently asked

Can you pause car finance payments?

You can pause car finance payments only if your lender agrees to a payment holiday; it's not an automatic right. Lenders are most likely to agree if you're in temporary financial difficulty, and under FCA rules they must treat you fairly and consider a holiday or reduced payments.

How does a car finance payment holiday work?

A car finance payment holiday lets you skip or reduce payments for an agreed period, with the missed amount added back to your balance afterwards. Interest usually keeps building during the pause, so you typically pay a little more or take longer to clear the finance. Get the terms in writing.

Does a payment holiday affect your credit score?

A payment holiday can affect your credit score if the lender reports it to credit reference agencies. Ask your lender whether the holiday will be reported and get the answer in writing. Either way, a formal agreed pause is far better for your credit than simply missing payments without telling the lender.

Is pausing payments a good idea?

Pausing payments helps for short-term difficulty with a clear end in sight, but it's a deferral, not a discount. Interest keeps accruing, so you pay more overall. For long-term money problems, lowering your payments permanently or ending the agreement may be a better fix.

Is a car finance payment holiday a legal right?

A car finance payment holiday is not a legal right. Unlike voluntary termination (which is statutory under the Consumer Credit Act 1974), it is at the lender's discretion. However, FCA rules require lenders to treat customers in difficulty fairly and consider options including a holiday or reduced payments.

How long can a car finance payment holiday last?

A car finance payment holiday typically lasts one to three months, with longer pauses reserved for serious hardship. Whatever the length, the missed amount is almost always deferred rather than waived, so you'll pay it back through higher remaining payments, a longer term, or a lump sum at the end.

How much extra does a payment holiday cost in interest?

On a £20,000 HP over 48 months at 9.9% APR, pausing three payments of about £452 each a year into the agreement adds roughly £390 in interest if the lender extends the term by three months and spreads the catch-up, which takes the remaining payments to about £463. That takes the total amount payable from about £23,697 to around £24,086. The same pause near the end of the term costs far less (about £85 at month 40). The exact figure depends on when in the term you pause and how the lender structures the catch-up, so get the revised total in writing before agreeing.

What is Breathing Space and how does it help with car finance?

Breathing Space (the Debt Respite Scheme in England and Wales) gives you up to 60 days of legal protection from creditor action while you get free debt advice. Interest and charges are frozen on the debts it covers, but on hire purchase and conditional sale car finance it covers only the arrears you already owe when it starts: your regular payments still fall due and interest on the rest of the balance can continue. The lender can't refuse it, but a debt adviser has to check you're eligible and start it, and it buys time to find a lasting solution rather than pausing the agreement.

Can the lender repossess the car while I'm on a payment holiday?

A lender must not start repossession while you're on a formal, agreed payment holiday and keeping to its terms; FCA rules forbid it while you're meeting an agreed plan. Once you've paid one third of the total amount payable, the car also becomes protected goods under the Consumer Credit Act 1974, so the lender needs a court order to take it back. The danger is an informal pause the lender hasn't agreed to; always get the arrangement in writing.

Is a payment holiday better than voluntary termination?

A payment holiday and voluntary termination solve different problems. A payment holiday is for short-term difficulty when you want to keep the car: it bridges a brief gap but adds interest. Voluntary termination ends the agreement and hands the car back once you've paid 50% of the total amount payable under the Consumer Credit Act 1974, capping your loss. Our view: if the problem is temporary, try a holiday first; if the car is unaffordable long-term, VT may be the cleaner exit.

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Managing your finance

You can pause payments only if your lender grants a payment holiday; there's no automatic right to one. Lenders consider it case by case, usually for short-term difficulty.

Worked example

Can you pause car finance payments?

You can pause payments only if your lender grants a payment holiday; there's no automatic right to one. Lenders consider it case by case, usually for short-term difficulty.

How a payment holiday works

A payment holiday lets you skip or reduce payments for an agreed period, with the missed amount added back to your balance afterwards. Interest usually keeps building during the pause.

Worked example: the cost of a pause

What a pause costs you

It's a deferral, not a discount

A payment holiday doesn't reduce what you owe; it moves it later in the agreement. Interest usually keeps accruing, so you pay more in the end through a higher total amount payable.

What a pause really costs: the numbers

Three-month pause on a £20,000 / 48-month / 9.9% HP — illustrative
Outcome	Without pause	With a 3-month pause
Monthly payment	£452	≈ £463 after the pause
Term	48 months	51 months
Deferred amount	—	≈ £1,356
Extra interest (illustrative)	—	≈ £390 (pause in month 13)
Total amount payable	≈ £23,697	≈ £24,086

Read the catch-up clause

When a payment holiday is the right call

A payment holiday suits temporary difficulty with a clear end in sight, such as a job change, a short illness or a one-off bill. It's less suited to long-term affordability problems.

Alternatives to pausing payments

If the problem is long-term rather than a brief blip, lowering your payments or ending the agreement may serve you better than a short pause. A pause only delays the issue.

Lower the monthly permanently by refinancing to a longer term or lower APR.
Switch to a cheaper car to shrink the balance.
Use voluntary termination once you've paid 50% of the total amount payable.
Apply for Breathing Space, which gives up to 60 days' protection from creditors while you get free debt advice.

How to ask for a payment holiday

Contact your lender before you miss a payment, explain your situation, and ask specifically for a payment holiday or reduced-payment plan. Follow these steps.

Call the lender's customer services or financial-difficulty team.
Explain the cause and how long you expect the difficulty to last.
Ask for a payment holiday, a reduced payment, or a combination.
Get the terms in writing: the length, what happens to the missed amount, and any credit-file reporting.
Confirm in writing that you accept, and keep a copy.

Your rights during difficulty

Even without a statutory right to a payment holiday, you have strong protections when you're in financial difficulty. The FCA's rules require lenders to help.