What Happens To Car Finance In An IVA

Car finance is a secured debt. This means you do not include it in your IVA. As long as you maintain the monthly payments, it should not be affected. You will be able to keep your car.

Key takeaways

• If your finance agreement finishes during your IVA, you will may have to add the monthly payment to your IVA payment. This situation is most common with HP agreements which mean you own the car once you have made your final payment.  

• Where you must hand your car back to the finance company when your agreement ends, you will normally need to get a new car. In these circumstances, you may be able to keep your monthly payment and put it towards a new agreement.

• It’s possible to start a new car finance agreement during an IVA. However, you will usually need to use a subprime lender. These types of lenders specialize in providing car finance to people with poor credit ratings such as those in an IVA.

• An IVA can write off outstanding car finance debt. However, to achieve this, you have to hand back your car to the lender if you have not already done so. 

Everything you need to know about car finance and an IVA is provided in this guide including how to get car finance during your Arrangement.

Includes our case study about Charlotte. Charlotte started an IVA in November 2025. She has kept her car and is continuing to pay her finance agreement with Moneyway

What Happens To Car Finance In An IVA – Contents:

How is your car finance affected if you start an IVA?

The good news is that if you start an IVA, it will not normally affect your car finance agreement.

In most cases, you leave this type of credit out of the Arrangement. You can keep paying it and keep your car. You include the monthly payment in your agreed living expenses budget.

The reason you can treat car finance in this way is because it is secured against your car. Were you to stop making the payments and include the debt in your IVA, the finance company would likely repossess your vehicle.

When could car finance be a problem if you want to get an IVA?

There are some circumstances where you may not be able to continue paying your car finance if you want to start an IVA. The main ones are:

1 – Your monthly payments are unreasonably high

Your IVA proposal might be rejected if your finance payments are significantly higher than your proposed monthly IVA payment. Where this is the case, you may need to consider returning your vehicle and getting a cheaper one before starting an IVA.

2 – Where your car finance company will cancel the agreement if you start an IVA

This scenario is unlikely. However, some car finance companies treat starting an IVA as a breach of their agreement. You should speak to your car finance company and check they are happy to maintain the agreement before you start your IVA.

What happens if your finance agreement ends during your IVA?

This is a very common because your monthly payment IVA will normally last 5-6 years.

As such, it is likely that your car finance agreement will come to an end during this time.

Your options when this happens depend on whether yours is an HP or PCP agreement.

HP (Hire Purchase) is where the car is yours to keep once the agreement finishes. PCP (Personal Contract Purchase) is where you hand the car back to the finance company at the end of the agreement.

HP Car Finance Agreements

As far as an IVA is concerned, this is the simplest scenario.

Once your HP agreement ends, you keep your car. You just have to add the car payments you were making to your remaining IVA payments.

For example: If your IVA payment is £150/mth and your HP was £120/mth, after it ends, your IVA payment will increase by £120/mth to £270/mth.

PCP Car Finance Agreements

Where you have a PCP agreement, you hand the vehicle back to the lease company at the end.

You now need to get a replacement car.

The good news is that your IVA Company will normally allow you to keep the monthly budget you were using to pay for your car. You can use this to make the monthly payments on a new car finance agreement.

The problem is that your options for getting new car finance will be restricted to subprime lenders. This is because your credit rating is poor.

Depending on the type of lender you used previously, this may mean you have to get a cheaper car to ensure your monthly payments stay the same.

Car Finance In An IVA Case Study: Charlotte’s story

We assisted Charlotte with her IVA which was agreed in Nov 25. The total debt she included in her IVA was approximately £25,000.

In addition to her IVA debts, she had had a car on HP with Moneyway. She kept this out of the Arrangement.

Charlotte’s monthly car finance payments were £256/mth with 55 months remaining. She included this amount in her IVA living expenses budget to ensure she had sufficient money to cover the payments each month.

Charlotte offered an IVA payment of £275/mth which her creditors accepted.

Charlotte’s car payment will finish in the last year of her IVA. At that time the car will be hers. She will however add what she was paying (£256/mth) to her remaining IVA payments.

Can you get car finance if you are in an IVA?

It is possible to get car finance during your IVA. This is regarless of the fact you will have a poor credit score.

That said, due to the credit score issue, it is likely that the mainstream finance companies will be unwilling to lend to you. However, there are still some lenders who will offer you finance options. These are known as subprime lenders.

Examples of some of the subprime lenders you could approach for car finance during your IVA are:

• Motonovo
• CA Auto Finance
• Blue Motor Finance
• Car Finance 247
• Zuto

Subprime finance companies deal with people who have poor credit ratings and are therefore perceived as higher risk.

That said, you need to be aware that these companies relatively high rates of interest. This will mean that your resulting monthly payments on any car finance deal you are offered are likely to be higher than the ones you were paying previously.

You must get agreement from your IVA Company before taking on a new car finance agreement during your IVA. To find out more, please contact our team today.

Is it possible to write off car finance debt with an IVA?

You can write off car finance debt with an IVA. However, you can only do so if you no longer have the car or agree to hand it back to the lender.

Once you have given back the car, any shortfall debt you still owe to the lender after they sell it can be included and written off in your IVA.

This means, if you no longer have your car but the finance company are still chasing you for money, you can include this debt.

In the same way, if you no longer need your vehicle or have decided that the payments are too high, you can stop paying and allow the finance company to repossess the vehicle.

Any shortfall debt you still owe to them after they sell it can be included in your IVA application.

If you are struggling to pay your car finance payments but want to keep the vehicle an IVA may still help. It allows you to reduce your other debt payments thus freeing up the cash you need for the car. Get in touch with our experts today for IVA Advice.