Most people don't like to think about the possibility of a vehicle being repossessed, but it happens to a lot of good-intentioned drivers who have, for whatever reason, suddenly discovered that they could no longer make their payments. What should you expect if your car becomes the object of repossession?
The Vehicle Repossession Procedure
If you are substantially late with your vehicle payments, your creditor may choose to exercise their right to take possession of the car, or "repossess" it. The specific rules about when a vehicle may be repossessed and how that car can be disposed of afterwards vary from state to state. So, be sure to research your state's laws regarding repossession in order to verify that your rights are being protected.
In most states, a creditor may choose to repossess your vehicle the minute that you are in default. While this technically means that you could lose your car after missing one payment, most creditors will give you a little more time to get current. This is because: A) Most lending institutions want to keep you as a customer and B) Repossessing a car can be expensive.
This being said, with all creditors, there is a limit to how many payments you can miss before your car is taken. However, in many states, when the lender does repossess your vehicle, they must do so without committing a "breach of the peace." This means that they may not use physical force, threats of force, and they may not remove your car from a closed garage without obtaining your permission.
If you live in a state that enforces the "breach of the peace" law, and the lender violates this law in the process of seizing your vehicle, you may be entitled to compensation for harm that is done to either you or your property.
What Happens to a Repossessed Car?
Even if you're vehicle is seized due to payment default, you may have an opportunity to get the car back. However, your chances for reclaiming the vehicle will be largely dictated by which state you live in because these laws define what the lender may do with the car once it has been repossessed.
- The lender might sell the car publicly or privately. In some states, the creditor is obligated to let you know exactly what will happen to the car. If the vehicle is to be sold privately, they must disclose the proposed sale date so that you have the opportunity to reinstate your loan or redeem the car (see below) before ownership is officially transferred. Or, if the car is to be auctioned off publicly, you will be informed as to when the auction will take place so that you may participate in the bidding if you wish.
- You may have the opportunity to redeem the vehicle or reinstate your loan. If you are allowed to "redeem" your car, you will be expected to pay the full amount that you owe, including past due payments, and all expenses connected with the repossession (storage, preparation for sale and attorney fees). If, on the other hand, you’re permitted to "reinstate" the loan, you will simply pay the amount you are behind on the loan, along with the repossession costs.
- Bidding on your car at auction may not be the best solution. While you might have the opportunity to bid on/buy the vehicle at auction, it is unlikely that you will save any money by doing so. This is because in most states, and in most cases, the lender will be able to charge you the difference between what you pay at auction and what you still owe on the car.
Of course, you could end up being responsible for this amount anyway, even if someone else purchases the car at auction. This is one of the many reasons why having your vehicle repossessed should be avoided - You may end up paying for a car that you no longer own, and your credit will be significantly damaged for years
Recovery from Repossession
If you do have a documented repossession on your credit report, and you need to buy a car, truck or SUV, Drivers Lane can help. Even if your credit is severely damaged because of this or for any other reason, we can connect you with a dealer who works with the kinds of lenders who are qualified to handle your situation. You may even be able to obtain financing with little or no money down.
Just fill out our fast and secure online application to get started today.