Missing a car lease payment can cause problems that go well beyond simply incurring a late fee. Depending on how late your payment is or how many times you’ve missed payments, you might end up losing the car, losing the opportunity to extend the lease, having the missed payment reported to the three credit-reporting agencies and having your credit score lowered.
The good news is, missing a lease payment on your vehicle doesn’t automatically trigger these (or any other) problems. Even if your lessor gets aggressive, you can take steps to fight back. Reviewing what happens if you miss a car lease payment will help you avoid the multiple problems it can trigger.
A Late Fee Might Trigger
If you are late with a lease payment, you might simply get a courtesy contact from your lessor and get a chance to make the payment. You may or may not have to pay a late fee, based on how late your payment is. Many lenders have a grace period and won’t ding you for a late payment that isn’t more than 30 days late.
If you’re late, some companies automatically charge a fee. That’s how they make much of their profit and you won’t be able to negotiate. If you call customer service, the customer service representative might be able to waive your late fee if it’s the first time you’ve ever been late with a payment or if you haven’t missed or been late with a payment during the past year.
You Might Damage Your Credit
If you are late with a lease payment and don’t respond to your lessor’s contacts, the company might report the missed payment to one or more of the three credit-reporting agencies, Equifax, Experian and TransUnion. If this happens, the late payment goes on your credit history, which will most likely lower your credit score and damage your ability to get credit in the future.
Even if you can get future credit, you might get lower limits and pay higher interest rates. Your payment history is the single biggest factor affecting your credit score, explains the main credit-scoring company, myFICO, so try to avoid late or missed payments, if possible.
The Car Might Be Repossessed
Depending on how late your payment is and if you’ve missed more than one payment, the lessor might attempt to repossess your car. If you are going to struggle to make your payments in the future, you might be able to terminate the lease early, but you’ll most likely need to pay an early termination fee.
Don’t panic if you get a repossession notice soon after you miss a payment. It often takes time for creditors to get restitution based on state and federal laws, so many creditors begin an eviction or repossession process immediately following a late or missed payment.
They can always stop the process once you make your payment, but if they wait 30 days or more, then they have to start the clock at that time. Typically, lessors won’t try to repossess after only one late or missed payment.
The good news is, auto lenders and dealers don’t want to repossess vehicles if they don’t have to. They want your money and future payments and will almost always work with you to help you keep your car.
Your lender might let you tack a missed payment onto the end of your lease, deferring the payment. You might also be able to take advantage of the right to “cure” the situation, based on your state’s consumer protection laws, according to the Consumer Financial Protection Bureau.
Steve Milano has written more than 1,000 pieces of personal finance and frugal living articles for dozens of websites, including Motley Fool, Zacks, Bankrate, Quickbooks, SmartyCents, Knew Money, Don't Waste Your Money and Credit Card Ideas, as well as his own websites.