Vehicle Repossession Options Before and After it’s Repossessed

Black honda civic car on tow truck getting repossessed.Many drivers may not fully understand the concept of financing a vehicle. The reality is that you don’t own the financed car, truck, SUV, motorcycle, or other vehicle outright until your loan is paid off. Until then, a missed auto loan payment may give the creditor the right to repossess your vehicle.

Some jurisdictions allow creditors to seize vehicles as soon as you’ve officially missed a single payment. Other jurisdictions are more lenient and may require the creditor to work with you to find other options or at least wait longer before taking any action. Either way, it is helpful to know your options so your vehicle is not repossessed. Here’s a summary of vehicle repossession laws by state.

Types of Vehicle Repossession

Contrary to what most people think, there isn’t a major difference between a voluntary and involuntary repossession (repo). Whether you return the car to the institution on your own (voluntary) or they come and take it from you (involuntary), the repo will still affect your credit the same.

Additionally, you will still be responsible for any money owed after they sell the vehicle to someone else. However, there are usually significantly fewer fees involved with a voluntary repossession, and other lenders may be willing to lend to you sooner.

What to Do Before the Repossession Process Begins

If you have an automobile and are having trouble making this month’s payment, now is the time to act. Call your creditor to explain the situation. Be brief; don’t give them your life story over the phone but do tell them you’re having difficulty making the payment.

In general, creditors have two things they can do for you if you qualify: change your payment date or allow you to skip the payment. Acting quickly is key and contacting the lender as soon as you realize you’re going to have trouble making your payment is the best time to explore all your options with them.

a. Change the Vehicle’s Monthly Loan Payment Date

Changing your payment date may give you an extra week or month to come up with the money needed. Not all creditors offer this kind of financial relief, however. Some allow borrowers to change their payment dates and corresponding deadlines, but the change doesn’t affect their upcoming bill.

Either way, it’s a good idea to call the lender to discuss your payment options.

b. Skip a Car Payment or Two

Depending on where you live and what policies the creditor has, you may be eligible to skip one or more payments. Each skipped payment extends your loan by that same number of months.

Sometimes this is offered with no questions asked. In other situations, you may have to prove financial hardship. Having a death in the family or being seriously injured are some issues that are commonly understood and accepted by most lenders.

However, not all financial institutions provide this type of respite.

c. Refinance the Auto Loan

Although this isn’t likely an option for most people already having trouble making an auto payment, it is something worth looking into.

Individuals with good credit and a high interest rate loan may be eligible to refinance their current car loan for a lower interest rate. This can lower the monthly payment amount and extend the upcoming payment’s due date.

Even if you’re not able to obtain a lower interest rate, refinancing may still be beneficial by allowing you to lower your payments by extending the loan length, and giving you more time until your next payment is due. You may end up paying more in the long run, but that could be a better option than having your vehicle repossessed.

Options After a Vehicle is Repossessed

Avoiding repossession is generally the best route, but it’s not always possible, even after skipping a month or two of payments. A repossessed car isn’t the end of the world, though. You still have options of either getting the vehicle back or calling it a loss and relieving yourself of the stress of buying something you can’t afford by paying off the remaining loan balance.

1. Buy Back the Repossessed Vehicle

You likely have the right to know the time and date a repossessed vehicle will be sold again. Creditors often sell these automobiles as quickly as possible to offset the costs of no longer receiving your monthly payment and before it decreases more in value. If desired, you should be able to place bids on the vehicle just like anyone else.

Buying back the vehicle usually isn’t always a financially responsible action to take. If you wish to take this route, consider speaking to an auto expert or other trusted advisor to help separate the actual and sentimental values of the car, truck or SUV.

2. Repay the Auto Loan

Despite not having the car anymore, you are typically still responsible for paying back the loan in full. When the creditor sells the car, the final sales price goes toward what you pay. For example, if you owed $5,000 more, and the car sold for $3,000 at auction, you’re still $2,000 in debt with them.

In addition, you may be liable for all fees associated with repossessing and auctioning the vehicle, plus early contract termination fees. These fees can amount to hundreds, and possibly thousands of dollars.

Getting Back Personal Property Left in a Repossessed Vehicle

Your personal property, such as mobile phones, clothing, or spare cash, is still yours, even if it’s in a repossessed vehicle. You have every right to these items, and they can’t be sold to repay your loan.

Contact whoever repossessed the car to get these items back. Ideally, they’ll contact you, but there’s little incentive for them to be quick about this. If some items are missing, or you’re having difficulty getting the items returned, seek legal advice.

Final Thoughts on Dealing with a Potential Vehicle Repossession

Speaking to your creditor to arrange a payment plan that works for you is the best method of avoiding repossession. Barring that, filing bankruptcy will also halt the repo process, but its effects are devastating to your credit.

Once repossession has taken place, there’s usually not much to do besides roll with the punches, unless you have the ability to repay the loan in full before the vehicle is sold. Understandably, this option is quite attractive to creditors since there’s no downside for them.

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Posted on July 15, 2022 by in Auto Loan Refinancing

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