What will happen to my Car in an IVA?

What will happen to my Car in an IVA?

You will usually be allowed to keep your car if you start an IVA. However you need to be aware of the implications particularly if your vehicle is on finance.

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Is my car at risk if I do an IVA?

You will normally be able to keep your car if you start an Individual Voluntary Arrangement (IVA). What happens if your car is on Hire Purchase (HP)? To find out more please visit: http://beatmydebt.com/individual-voluntary-arrangement-frequently-asked-questions/what-will-happen-to-my-car-in-an-iva

Can you keep your Car if you start an IVA?

Owning a car is not generally an issue if you start an IVA. Given you need it you should be able to keep your vehicle as long its value is not excessive.

A sufficient amount for running costs can be included in your Living Expenses Budget. When completing this budget you will need to include amounts to cover things like annual servicing as well as fuel and insurance.

If you have pay monthly car insurance when it comes to renew you will normally have to stay with the same insurer. A different insurer is unlikely to give you a pay monthly deal as you will fail their credit check.

If your vehicle is worth more than the debt you owe it is unlikely that your creditors will agree with your IVA proposal without you replacing it with something less valuable.

What happens if your car is on HP?

A car HP agreement is a secured debt. As such it cannot be included in an IVA. Given you need the car you will be allowed to keep the agreement running. You can include a specific budget for this in your living expenses.

The only time you may not be allowed to maintain an HP agreement is if the payments are unreasonably high. There might be an issue if the amount you are paying towards your car each month is more than you are offering to pay into your IVA.

Before starting your application you should contact your HP company to inform them of your plan. Most will not be concerned about you starting the Arrangement as long as you maintain the payments.

If your HP agreement finishes during your IVA the money you save must be added to the Arrangement. As a result the amount you repay to your creditors increases. It does not reduce the length of the the IVA itself.

What if your Car is on a Lease Agreement?

A car lease agreement is treated in the same way as HP. You should be allowed to continue making the payments during your IVA as long as they are not unreasonably high. However you may face problems when the lease period ends.

The issue is you do not own the vehicle. If you want to keep it you have to pay a lump sum known as a balloon payment. However you will not have the cash available to do this unless you can borrow it from a friend or relative.

One solution may be to refinance the amount owing on the car. Alternatively you could hand back the vehicle and look to take a new one on a new agreement.

Because your credit rating is poor you will only be able to get vehicle finance from a sub prime lender. They will be more expensive. As such you may have to choose a cheaper vehicle so that the monthly payments remain within your budget.

When can you include Car Finance Debt in an IVA?

If you want to keep a vehicle which is on finance the monthly payments have to be maintained. As such in normal circumstances the debt cannot be included in an IVA.

However you may have decided that you no longer want the vehicle. Perhaps it is worth less than the finance outstanding and so is not worth paying for. Alternatively the ongoing monthly payments may simply be more than you can afford.

In these circumstances you can stop the payments and ask the finance company to repossess the car. An estimate of the debt that will still be outstanding after it is collected and sold can be added to your Arrangement.

Your finance company may tell you that you are not allowed to break the finance agreement and they cannot take the vehicle back. In these circumstances you simply stop paying. You can be sure they will collect it soon enough.

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8 thoughts on “What will happen to my Car in an IVA?

  1. Sharon says:


    I have a car on finance and i want to keep the car… i am thinking about iva to clear all my other debts… can i get iva with a car on finance? will i loose my car? i want to carry on paying the car finance…

    1. Hi Sharon

      As highlighted in the article above if you have a car on finance this can be kept out of an IVA. You can included all your other unsecured debts but leave the car finance out and keep paying it so you can keep the car. You would need to include a sufficient amount in your living expenses budget to enable you to do this.

      Given a monthly payment IVA will normally last for 5-6 years it is likely your car finance will come to an end during the Arrangement. If it is a PCP (lease) then you will have to return the car at that time.

      Normally you would then look to get a new car with a new finance agreement. However your credit rating will be poor because of your IVA and so this is likely to be difficult. As such you need to plan for this in advance so you do not struggle to get a car when the finance ends.

  2. Shannon says:

    Hi my partner is in an Iva and has a car on finance. His parents have 3000 pounds saved up and want to pay off the rest of the car finance. He would then like to part exchange his car for another one.

    Once the finances is paid off the car is his. However the IVA company has said they still would need to know what cars he is getting and have the rights to deny this happening. Is this right?

    Once the finance is paid off it is his car. The car he is looking at is so much cheaper to run. The current car is losing value so by the time the IVA is up the car isn’t going to be worth anything..

    1. Hi Shannon

      There are a number of things to consider here. Normally an IVA company will have no objection to a third party paying off a car finance during the arrangement as it means the IVA payments will go up.

      The reason for this is that an amount to cover the car finance payment would normally be included in the IVA living expenses budget. As such if the outstanding finance is paid off your partner would no longer have to continue paying the monthly payment. This amount will therefore be freed up and would have to be added to his IVA payment.

      Having said that the car is an asset. If your partner were to simply sell it during an IVA the money he recievd from it would in theory be a windfall. As such he would have to tell his IVA company about the sale and the amount raised would have to be paid into the Arrangement.

      That said given he needs a car the IVA company should have no objection to him part exchanging it for another vehicle as long as he does not make anything out of the sale. However they are within their rights to be kept informed about the transaction so they can satisfy themselves that he is not making anything.

  3. Simon says:

    I have a car on HP. Will I be able to keep it if I start an IVA? The reason is I have £2000 of my own money deposited when I purchased it. There are 14 payments left of £106 each. Then the car is mine. It is currently worth 3.5k.

    1. Hi Simon

      Given the value of the car is not excessive you should be allowed to keep it if you start an IVA. You will be allowed to include a monthly amount of £106 in your living expenses budget to cover the ongoing payments.

      The only thing you would need to do is first check with the finance company that they would be OK with you being in an IVA is as long as you maintain the payments. Most will be fine but some can have an issue and demand the return of the car. As such best to know this before you start any application.

      The other point to note is that when your HP payments end and you own the car your IVA payments will then go up by the £106/mth. You can’t expect to save this cash.

  4. Jamie says:


    I have 2 cars one is worth about 2000 and the other is worth less than 1000. I use mine for work and my wife uses hers for school runs as we have 4 kids. We are on the verge of splitting up and considering an iva as she doesn’t want me there and I cant afford to pay the bills on my own as tax credits paid them? Will I lose the cars??

    1. Hi Jamie

      If you do an IVA there is no need to worry. You can keep both the cars. You would only have to worry if one of the cars was much more expensive. Generally speaking you can keep a car worth up to £8k-£10k if you need it. As such your vehicles would be no issue at all.

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