What to do if your financed car is stolen
If your financed car is stolen, your finance agreement does not automatically end. You should report the theft to the police, contact your insurer and notify your finance provider as soon as possible. You will usually need to continue making your agreed repayments while the insurance claim is being processed.
If the car is not recovered, your insurer may make a settlement payment towards the outstanding finance. If the payout is less than the amount you owe, you may be responsible for the shortfall. This guide explains what to do if your financed car is stolen, how insurance settlements affect outstanding finance, what happens if the car is recovered and how GAP insurance may help with an eligible shortfall.
Yes. If your financed car is stolen, your finance agreement does not automatically end and the outstanding balance remains payable.
Your finance agreement is a contract between you and the lender, and the theft of the vehicle does not end it. Monthly repayments must continue until the agreement is settled, even if the car is gone. The only thing that clears the outstanding balance is either the insurance payout being applied to it or you paying it off directly.
This catches many people off guard. The assumption is often that once the car is gone, the debt is gone. It is not. The lender will continue to expect repayments while the insurance claim is being processed, which can take several weeks or longer.
If you are an AutoMoney Trust customer and your car has been stolen, contact us as soon as possible through the existing customers page. We can discuss your options and what to expect during the claims process.
If your financed car has been stolen, report the theft immediately and keep both your insurer and finance provider informed.
The order of steps matters. Following them in sequence keeps the process as straightforward as possible:
If the car is not recovered, the insurer will usually declare it a total loss and pay out the current market value of the vehicle. That payout goes to clear the outstanding finance balance first, because the lender has a financial interest in the vehicle that takes priority.
The insurance payout is greater than the outstanding finance balance, you receive the difference. If the payout is less than what you still owe, you are left with a shortfall that you are responsible for paying to the lender. This shortfall is one of the most common financial problems that follows a car theft.
If your insurance payout is lower than the outstanding finance balance, you may be responsible for paying the difference. This difference is known as a finance shortfall.
Cars depreciate in value faster than many finance agreements pay down the outstanding balance, particularly in the early years of an HP deal. If your car is stolen two or three years into a five-year agreement, there is a real chance the market value of the car is lower than the balance still owed.
In this situation, you owe the lender the difference between the insurance payout and the remaining balance. This amount is due even though you no longer have the car. The lender is not obligated to write it off.
Your options at this point are:
GAP insurance (Guaranteed Asset Protection) is specifically designed to cover the shortfall between an insurance payout and the amount still owed on a finance agreement. If your car is stolen or written off and your standard motor insurance pays out less than the outstanding finance balance, GAP insurance covers the difference.
There are different types of GAP cover. Finance GAP specifically covers the gap between the insurance payout and the outstanding finance balance. Return to Invoice GAP covers the gap between the payout and the original purchase price. Check your policy to understand exactly what yours covers.
GAP insurance is usually purchased at the time of taking out the finance and runs for the duration of the agreement or a fixed term. If you do not currently have GAP cover and you are early in your finance agreement, it is worth considering, as the shortfall risk is highest in the first few years when the outstanding balance is still large relative to the car's depreciated value.
The person responsible for the vehicle should report the theft to the police; you should also notify your finance provider because they have a financial interest in the vehicle.
The finance provider may contact you for updates during the claims process and will need to be informed once the insurer declares a total loss.
If you stop making payments and the car has not been formally reported as stolen by you, the lender may take steps to locate the vehicle as part of a default process. The two situations, theft and default, are handled very differently, which is why reporting the theft immediately and keeping your lender informed is the right approach.
If the car is recovered before the insurer declares a total loss, the situation depends on the condition of the vehicle. If it is recovered undamaged or with minor damage that can be repaired, the insurer may close the claim and return the car to you. Your finance agreement continues as normal.
If the car is recovered in a damaged state and the repair cost exceeds a certain percentage of the vehicle's value (typically 50 to 70 percent depending on the insurer), the insurer may still write it off as uneconomical to repair. In that case, the total loss process applies as above.
If the car is recovered after the insurer has already paid out and taken ownership of the vehicle, it belongs to the insurer. You cannot claim it back once the settlement has been made.
If your financed car is stolen and your insurance does not cover the loss, you may remain responsible for the outstanding finance without receiving an insurance settlement towards it.
Comprehensive insurance is a standard requirement under most hire purchase agreements. If you were driving without valid insurance or on a policy that did not cover theft, you are in breach of your finance agreement in addition to having no cover for the loss.
In this situation, the outstanding finance balance remains due in full. You have no insurance payout to apply to it and you no longer have the vehicle. This is one of the most severe financial outcomes possible and underlines why maintaining comprehensive insurance throughout a finance agreement is not optional.
For more on insurance requirements under a hire purchase agreement, see: You'll need comprehensive insurance.
Once the finance is settled following a theft, you may want to finance a replacement vehicle. If the insurance payout cleared the outstanding balance and left you with a surplus, that can serve as a deposit on a new agreement, though AutoMoney Trust does not require a deposit.
AutoMoney Trust offers hire purchase from £4,000 to £25,000 over 36 to 84 months. We consider applications from people with poor credit, and the initial check is a soft search that will not affect your credit file. Start your application on our apply for car finance page.
If you want to understand what monthly payments might look like before you apply, use our car finance calculator to run different scenarios.
Yes, if you finance your car with AutoMoney Trust, you'll need to maintain fully comprehensive insurance for the entire duration of your hire purchase agreement. This is because the vehicle remains the property of AutoMoney Trust until you've made your final repayment and ownership transfers to you.
Comprehensive car insurance provides protection against a range of situations, including accidental damage, theft, fire and third-party claims. Keeping the vehicle insured for the full duration of your agreement helps protect both you and the lender by ensuring the car remains covered throughout the finance term.
When budgeting for a financed car, it is important to consider insurance as part of your overall running costs. Fully comprehensive cover is often more expensive than third party or third party fire and theft insurance, so make sure you include this alongside your monthly finance payments, fuel, servicing, and other vehicle expenses.
Some drivers also consider GAP insurance, which can help cover the difference between your insurer's settlement value if the vehicle is written off and the remaining balance on your car finance agreement when the outstanding balance may be higher than the vehicle's market value.
With an AutoMoney Trust hire purchase agreement, legal ownership of the car transfers to you only after you have made all of your monthly payments and paid the £10 option to purchase fee at the end of the agreement. Until then, the vehicle remains the property of AutoMoney Trust.
Although you won't legally own the car during the finance term, you are responsible for its day-to-day running costs, including vehicle tax, insurance, MOT, servicing, and maintenance. As the finance provider owns the vehicle until the agreement is complete, you cannot normally sell, transfer ownership of, or make significant modifications to the car without our permission.
It is also important to keep up with your car finance payments, as missed payments could lead to arrears and, in some circumstances, the vehicle may be at risk of repossession if the agreement is not brought back up to date.
Once you have made your final monthly payment and paid the option to purchase fee, legal ownership transfers to you, and the car becomes fully yours with no further finance obligations.
Yes, your car is likely to lose value during the finance agreement. Most cars depreciate over time, meaning they gradually lose value as they age. For most used cars, depreciation continues throughout a Hire Purchase agreement, so the vehicle is typically worth less at the end of the finance term than when it was purchased.
Depreciation is important because the total amount payable on a car finance agreement includes the amount borrowed, interest, and any applicable fees. As a result, the total amount you repay over the agreement may be higher than the vehicle's market value by the time your finance ends.
Depreciation can also increase the risk of negative equity. If you decide to settle your car finance early or sell the vehicle before your agreement has ended, the car's current market value may be lower than the outstanding finance balance. In this situation, you may need to pay the difference before the agreement can be settled.
The rate at which a car depreciates depends on several factors, including its age, mileage, condition, service history, brand, model, and market demand. Keeping your vehicle well maintained and within reasonable mileage can help preserve its value over time, although depreciation cannot be avoided completely.
Some drivers also choose to take out GAP insurance, which may help cover the difference between an insurer's payout if the vehicle is written off and the remaining balance on the car finance agreement. This can provide additional financial protection particularly during the earlier years of a hire purchase agreement, when the outstanding finance may be higher than the vehicle's market value.
Car finance can affect your credit score positively or negatively depending on how you manage your agreement. Making regular, on-time payments can help build a positive credit history and demonstrate responsible borrowing, while late or missed payments can negatively affect your credit score and make it more difficult or expensive to access credit in the future.
If payments are not made on time, they may be reported to credit reference agencies, which can lower your credit score and make future borrowing more difficult or potentially more expensive.
When you apply for car finance, a lender may carry out a hard credit search, which appears on your credit file and can cause a small, temporary change to your credit score. This is a normal part of the application process and helps lenders assess whether finance is affordable and suitable for you.
For more information about how applications are assessed, read our guide on Credit Checks for Car Finance.
