IVA and Car Finance: What Happens to Your Car?

You may be able to keep a car during an IVA, but it depends on the type of finance, the vehicle value, whether the car is essential, and whether the monthly payment is affordable. Do not stop car finance payments without advice because the finance company may have rights over the vehicle.

Car finance is one of the most important details to disclose before an IVA proposal is drafted.

Is Car Finance Included in an IVA?

Many car finance agreements are secured or linked to the vehicle. Hire purchase, PCP and lease agreements are usually treated differently from unsecured credit cards or loans. If you want to keep the car, the ongoing finance payment may need to be allowed as an essential expense rather than written into the IVA.

Your adviser should check:

• the finance type
• the outstanding balance
• the monthly payment
• the vehicle value
• whether there is equity
• whether the car is needed for work, caring, disability or essential travel
• whether the agreement has insolvency clauses

Can You Keep Your Car in an IVA?

You are more likely to keep the car if:

• it is needed for work or essential family travel
• the payment is reasonable compared with your income
• there is no cheaper practical alternative
• the finance company allows the agreement to continue
• the IVA budget remains affordable after the car payment

A high-value car, unaffordable finance or a non-essential second vehicle may be challenged by creditors.

PCP, Hire Purchase and Lease Cars

The legal detail is agreement-specific. Ask for written advice before entering an IVA.

Buying or Replacing a Car During an IVA

Most IVAs restrict new borrowing, commonly requiring supervisor permission for credit above a set amount. If your car breaks down during the IVA, speak to your supervisor before applying for finance.

Possible routes may include:

• using savings allowed within your budget
• a modest replacement agreed by the supervisor
• help from family where no new debt is created
• a variation if transport costs change significantly

Do not take out new finance first and ask later. That can put the IVA at risk.

What if You Cannot Afford the Car Payment?

If the car finance is pushing the IVA budget beyond what you can afford, compare options before signing:

• surrendering the vehicle and using public transport
• replacing it with a cheaper car if possible
• asking whether any shortfall would be included as an unsecured debt
• choosing a DMP if keeping flexibility matters more
• considering a DRO or bankruptcy if no payment plan is realistic

Questions to Ask Before an IVA

1. Is my car finance secured, unsecured, PCP, HP or lease?
2. Can the finance company end the agreement because of insolvency?
3. Is the monthly payment allowed in my IVA budget?
4. What happens to any balloon payment?
5. Can I replace the car during the IVA?
6. Would a DMP or DRO handle this better?

Frequently Asked Questions

Can I keep my car finance in an IVA?

You may be able to keep car finance in an IVA if the vehicle is needed and the payment is affordable, but the finance agreement and lender terms must be checked before the IVA is proposed.

Is PCP included in an IVA?

PCP is usually linked to the vehicle and needs separate review. If you keep the car, the ongoing payment may be treated as an essential cost rather than included like unsecured debt.

Can I get new car finance during an IVA?

New borrowing is usually restricted during an IVA. Speak to your supervisor before applying for replacement car finance.

Sources checked

• GOV.UK: Individual Voluntary Arrangements for IVA basics and creditor treatment.
• GOV.UK: IVA Protocol 2025 for protocol IVA rules and borrowing restrictions.
• Citizens Advice IVA guidance for practical pre-IVA checks.