If a Service Member is Stationed Overseas
Receiving Permanent Change of Station (PCS) orders to an overseas location is a significant event for any service member. Amidst the logistics of moving your life and family across the globe, a major question often arises: what should you do about your current auto loan? This is a common concern for military personnel, and thankfully, you have several viable options and important legal protections. The key is to act proactively rather than waiting until the last minute. Whether you decide to ship your vehicle, sell it, or place it in storage, understanding your choices and your rights under federal law is the first step toward a smooth transition. The Servicemembers Civil Relief Act (SCRA) provides specific safeguards that can ease the financial pressures associated with your vehicle loan during this time. By exploring your options and communicating with your lender early, you can make an informed decision that best suits your financial and personal needs while you serve abroad.
Navigating an auto loan during an overseas PCS move requires careful planning, but it is entirely manageable. Your primary choices include shipping the vehicle to your new duty station, selling it to resolve the loan, or placing it into long-term storage. Each path has its own set of considerations regarding cost, convenience, and logistics. Crucially, federal laws like the SCRA offer powerful protections, such as interest rate caps and safeguards against repossession, designed specifically for these situations. Open and early communication with your lender is essential to explore all available arrangements.
Navigating Your Auto Loan with Overseas PCS Orders
For members of the armed forces, a Permanent Change of Station (PCS) is a routine part of life. However, when those orders point to an overseas assignment, the complexity increases significantly. One of the most pressing financial questions involves managing an existing auto loan. Leaving the country for an extended period does not automatically pause or cancel your payment obligations. Failing to address the loan can lead to default, which can severely damage your credit and create legal complications. Fortunately, service members have several clear paths forward and are supported by robust legal protections designed to prevent financial hardship while on active duty. Making the right choice depends on your specific financial situation, the terms of your loan, your destination, and your long-term plans.
The most important first step is to avoid making assumptions. Do not assume your lender will automatically know about your orders or that payments can simply stop. Proactive communication is your strongest tool. Lenders, especially those in communities with a large military presence, are often familiar with these scenarios. To learn more about how we handle these unique situations, visit our financing area or explore our financing frequently asked questions.
Your Three Main Options for the Vehicle
When you receive your overseas orders, you generally have three primary options for the vehicle itself. The choice you make will directly influence how you handle the associated loan.
- Ship the Vehicle to Your New Duty Station: In many cases, the military will pay to ship one privately owned vehicle (POV) to your overseas post. This can be an excellent option if you want the convenience of having your own car abroad. However, you must research potential complications. Some countries have strict emissions or modification standards that your vehicle might not meet. You will also need to arrange for local insurance and registration. The loan payments would continue as usual, but you would make them from your overseas location.
- Sell or Trade-In the Vehicle: For many service members, selling the vehicle is the simplest solution. It eliminates the monthly payment, insurance costs, and storage fees, freeing up cash flow. You can sell it privately or trade it in at a dealership. If you owe more on the loan than the car is worth (known as being "upside-down"), you will need to pay the difference to the lender to close the loan and transfer the title. To see what your vehicle might be worth, you can use our online tool to value my trade.
- Place the Vehicle in Long-Term Storage: If you plan to return to the same area after your tour or want to keep the car for other reasons, storage is a valid choice. You can use a commercial storage facility or leave it with a trusted friend or family member. If you choose this route, you must continue making your loan payments on time. You will also need to maintain insurance on the vehicle, though you may be able to reduce it to a comprehensive-only policy, often called a "storage" policy.
Understanding the Servicemembers Civil Relief Act (SCRA)
The Servicemembers Civil Relief Act (SCRA) is a federal law that provides a wide range of financial and legal protections to active-duty service members, including those in the National Guard and reserves when called to active duty. This law is your most powerful asset when dealing with a car loan during a deployment or overseas PCS.
One of the most significant protections under the SCRA is the interest rate cap. For any debts, including auto loans, that were incurred *before* you entered active duty, you can request that the interest rate be lowered to a maximum of 6% for the duration of your active service. The lender must forgive any interest above that 6% rate, not just defer it. To invoke this right, you must provide your lender with a written notice and a copy of your military orders. It is important to note this generally applies to those who entered into a loan as a civilian and were then called to active duty, but it is always wise to check the specifics with your lender.
The SCRA also provides protection against non-judicial repossession. A lender cannot repossess your vehicle during your period of military service without first obtaining a court order. This gives you an opportunity to appear in court and explain your situation to a judge, who can delay the proceedings or adjust the loan obligations based on your service.
Communicating With Your Buy Here Pay Here Lender
If you have a loan through a Buy Here Pay Here (BHPH) dealership, the process is largely the same, but your relationship with the lender is much more direct. You are not dealing with a large, anonymous bank; you are working with the dealership where you purchased the car. This can often be an advantage. Reputable BHPH dealers who serve military communities understand the realities of PCS moves and deployments.
As soon as you receive your orders, you should contact us or your specific lender. Provide them with a copy of your official orders. Discuss your plans for the vehicle—whether you intend to sell, store, or ship it. Your lender wants to work with you to find a solution. A permanent change of station is a qualifying event for many types of assistance, and we are committed to supporting our military customers. Open dialogue can prevent misunderstandings and help you maintain a positive payment history, even while you are serving thousands of miles away.
Can I just stop paying my car loan if I am deployed overseas?
No, you cannot. Your loan obligation continues even when you are stationed overseas. Stopping payments will lead to default, negative credit reporting, and potential legal action. You must proactively contact your lender to make arrangements based on your specific situation.
Does the SCRA forgive my auto loan debt?
No, the SCRA does not forgive debt. It provides protections, such as capping interest rates at 6% on pre-service loans and requiring a court order for repossession. The principal and interest (at the capped rate) must still be paid according to your agreement with the lender.
What happens if I sell my car for less than I owe on the loan?
This situation is known as having negative equity. If you sell the vehicle for less than the outstanding loan balance, you are responsible for paying the difference to the lender. This amount, called a deficiency balance, must be paid in full before the lender will release the lien and transfer the title to the new owner.
Do I need to keep insurance on a car I put in long-term storage?
Yes, absolutely. Your loan agreement requires you to maintain continuous insurance coverage on the vehicle, as it is the collateral for the loan. You may be able to reduce your coverage to comprehensive-only (a "storage" policy), which is typically cheaper than full coverage but still protects against theft, fire, and other non-collision damage.
How do I prove to my lender that I have overseas orders?
You will need to provide your lender with a copy of your official military orders. These documents serve as legal proof of your active-duty status and your assignment to an overseas location. This is the primary document required to invoke your rights under the SCRA or to make special payment arrangements.
