Car loans are one of the most common debts service members carry into active duty—and one of the most overlooked for SCRA benefits.

If you have an auto loan from before your service, you're entitled to both interest rate caps and powerful repossession protection.

The 6% Rate Cap on Auto Loans

Like other pre-service debts, auto loans are capped at 6% interest under SCRA.

Who Qualifies

  • The loan must have been originated before active duty
  • Applies to new and used car loans
  • Includes motorcycle loans, RV loans, and other vehicle financing
  • Works on both bank loans and dealer financing

The Savings Add Up

Example: $25,000 auto loan at 9% for 60 months

Monthly payment at 9%: $519

Monthly payment at 6%: $483

Monthly savings: $36

Total savings over loan term: $2,160

Repossession Protection

This is where SCRA really shines for auto loans. Lenders cannot repossess your vehicle without a court order while you're on active duty.

What This Means

  • No "self-help" repossession (tow truck showing up at night)
  • Lender must go to court and prove your military service doesn't affect your ability to pay
  • Court can stay (delay) the repossession
  • Protection extends for the duration of active duty

Why This Matters

If you fall behind on payments due to deployment, PCS, or any other reason related to service, your lender can't simply take your car. They have to go through the legal process, giving you time to:

  • Catch up on payments
  • Negotiate a modified payment plan
  • Sell the vehicle yourself (often better than repossession)
  • Work out a voluntary surrender on your terms

How to Claim Auto Loan SCRA Benefits

For the Rate Cap:

  1. Contact your auto lender's customer service
  2. Request SCRA interest rate reduction
  3. Provide copy of military orders
  4. Request retroactive refund of excess interest
  5. Verify on next statement

For Repossession Protection:

If you're at risk of repossession:

  1. Notify your lender in writing that you're on active duty
  2. Provide copy of your military orders
  3. Cite SCRA protection (50 U.S.C. § 3952)
  4. Request to work out payment arrangements

Auto Lease Termination

Different from auto loans, auto leases can be terminated early under SCRA when you receive:

  • PCS orders outside the continental US
  • Deployment orders for 180+ days
  • Orders to enter active duty (Guard/Reserve activation)

To terminate an auto lease:

  1. Provide written notice with copy of orders
  2. Return the vehicle within 15 days of notice
  3. Pay any lease obligations through the return date
  4. No early termination penalties

Getting Retroactive Refunds

If your lender has been charging more than 6% since you went on active duty, you're entitled to a refund of the excess.

Calculate your refund:

  1. Determine your original interest rate
  2. Calculate interest paid since active duty date
  3. Calculate what you would have paid at 6%
  4. The difference is your refund

Request this refund in writing along with your rate cap request.

Common Auto Lender Issues

"We don't participate in SCRA"
SCRA is federal law, not a voluntary program. All lenders must comply.

"Your rate is already competitive"
If it's above 6%, it's not competitive enough. The law is the law.

"You're current on payments, so you don't qualify"
Payment status is irrelevant. The rate cap applies to all qualifying debts.

"We need your commanding officer to verify"
Your orders are sufficient. Lenders can verify through DMDC if they wish.

Special Situations

Co-Signed Loans

If a non-military person co-signed your auto loan, the SCRA protections still apply to your obligation. The co-signer may have separate protections depending on circumstances.

Refinanced Loans

If you refinanced your auto loan while on active duty, the new loan may not qualify for SCRA since it was originated during service. Be careful before refinancing.

Vehicles Purchased at Duty Station

Vehicles purchased after you're already on active duty don't qualify for the rate cap—the loan originated during service, not before.

Protect Your Transportation

Your vehicle is often essential for getting to work, managing family responsibilities, and maintaining readiness. SCRA protections ensure that serving your country doesn't mean losing your transportation.

Know your rights and use them.