What Happens When Your Car Is Repossessed?

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What Happens When Your Car Is Repossessed

Taking out a loan for a car is a bit like buying your car from the lender over time. If you aren’t able to make those payments, your lender repossesses the car. Here are steps to help avoid repossession in the first place, what you can do after the fact, and things you should be aware of throughout the process. 

What is car repossession?

When you take out an auto loan, you sign a contract with your bank or lender promising to make your monthly payments. If you violate that contract by missing your payments, the lender has the right to take your car from you. 

Do you still owe money after a repossession?

After a car is repossessed, the lender will typically sell it at auction. If the money they get for the car is less than the amount you had left on your loan, you still owe the difference. That’s known as a “deficiency.”

4 steps you can take after a repossession

Once your car is repossessed, don’t panic. Think practically and take some time to make sure your bases are covered and you can move forward. 

1. Review your rights as a borrower

Even after your car has been repossessed, you still have rights. For instance, your personal items left in the car still belong to you. 

2. Contact your lender

Contact your lender as quickly as possible. You may be able to work out a repayment plan or revise your lease to get your car back. If not, you’ll still have details to work out with the lender like retrieving your personal items and paying off the loan.

3. Plan for alternative transportation

Because you no longer have a car, you’ll have to figure out how you’re going to get around town. Make sure you have profiles with both Uber and Lyft, and check each before taking a trip to see which is offering the better rates for the ride you need. It’s also a good idea to see whether you can carpool with friends on your way to work or while running errands. 

4. Work on improving your finances

If your car was repossessed, you’re likely having trouble with other bills, too. Create a budget and stick to it, tracking all of your earnings and spending. Consider picking up some side work to earn extra cash. Use credit cards responsibly, and be mindful about paying on time to help build your credit score back up. 

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How to get your car back after repossession?

Don’t lose hope if your car is repossessed. You can still get the car back by negotiating with your lender. If you’re having trouble making payments, contact your lender and ask whether you can revise your payment schedule and get the money to it a little late. Many lenders would rather go this route than repossess your car.

Precautions to take to avoid repossession

If you are at risk of having your car repossessed, take steps ahead of time to avoid it. 

1. Make your car loan payments on time 

The most basic thing to do to avoid repossession is to pay your loan back on time. If you aren’t missing payments or paying your loan late, you won’t be at risk of repossession. 

2. Maintain an open but recorded communication with your lender 

If you’re in a bind, contact your lender for possible payment delays. You should keep records of all of your communications to protect you from any payment disputes, saving any emails and logging any calls made to the lender.

3. Keep your car insurance up to date 

Some lenders have stipulations in their contracts that mandate an insurance policy. If you don’t keep your insurance up to date, your car can be repossessed. Make sure to keep track of your insurance payments to avoid repossession. 

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4. Consider selling or trading your car

If you are having difficulty making your payments, selling your car or trading it in for a more affordable vehicle can help you avoid repossession and reduce your overall debt burden.

5. Do not ignore a repossession notice

Lenders do not actually have to give notice before repossessing your car. If they do send you one, take it seriously. Call your lender right away to work out a payment plan and avoid repossession.

6. Seek professional advice

If you’re under threat of repossession, reach out to a financial adviser or credit counselor to see how you can move money around to help pay off your loan. They may also be able to work out a new loan agreement that fits your needs better. 

Don’t let car repossession catch you off guard

You can take steps to avoid car repossession, like contacting your lender to negotiate a different payment plan. If your car is repossessed, you should contact your lender anyway and work to pay off the rest of your loan balance and potentially get your car back.


Can I negotiate a payment plan to avoid repossession?

If you’re having trouble making payments on your loan, consider refinancing or modifying your loan to avoid repossession.  

Will I be responsible for damage to my car during repossession?

The repossession agency is responsible for damage to your car.

Will repossession affect my ability to get a car loan in the future?

Will repossession affect my ability to get a car loan in the future?

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