Like most things in life, auto loans come with rules, and if you don't play by them, you're going to have consequences to deal with. The No. 1 rule for financing a car is simple: make your payments on time or face a repossession.
What Is a Car Repossession?
When your vehicle gets towed away, it's probably the result of a repo. A repossession happens when you default on your auto loan, usually from missing one or more payments. If you haven't worked out a deferment plan with your lender, they contact a recovery company to come and collect your car.
Depending on your auto loan contract, your vehicle could be repossessed after only one missed or late payment. The amount of time you're given after a missed due date varies by lender. Sometimes, lenders aren't required to let you know if they're coming for your car. This can make it extra difficult if you're not expecting someone to come and take your vehicle while you’re going about your day.
The Repo Process
A repossession doesn't just happen; there's a process that you go through, but it can vary from state to state. In many cases, your lender is required to contact you in writing with the intention to send someone out to collect your car. In some states, your lender is even required to give you a chance to stop the repo by catching up on the payments; this is called a right to cure – but it isn't required, or even available everywhere.
Whether you're prepared for your vehicle to be repo'd or not, there are certain rules that have to be followed by both you and the recovery company. For instance, a repo specialist can't just break into your locked garage and take your car, but you also can't hide your vehicle from them on purpose. Your lender must also follow the rules when it comes to working with you and selling your car – they can't resell it for $50 if it's worth $5,000, for instance.
If a recovery company threatens you with force, or threatens you in general, it's called breaching the peace, and it's not allowed. Taking your vehicle from a closed or locked garage isn’t allowed either. However, since a car you're financing has the lender listed on the lien, the vehicle is collateral, and can be taken from any public or private lot, street, yard, or driveway by their chosen repo specialist.
Once the recovery company is in possession of your car, it typically goes into a storage yard until the lender takes possession of it. Any personal items left in the vehicle must be returned to you from the recovery specialist. As for the lender, they're most likely to sell the car at auction. You're required to be informed by mail as to the time, date, and location of the auction, and are allowed to come bid on the vehicle in order to get it back.
No matter who wins the auction, if the car sells for less than you owe the lender, you're still responsible for paying the lender the remaining balance of your loan, plus any repossession and storage fees.
If all of this repossession stuff sounds like more than you want to handle, then you're not alone. Most people aren't thrilled when they find they can't pay for a vehicle they need. But a repo doesn't have to be the way things shake out.
If you know, or at least suspect, that something's got to give when it comes to your budget, one of the first things you should do is contact your lender. Lenders would prefer to avoid a repossession just as much as you. So, if your lender can work with you, they probably will. They can't help if they don't know there's an issue, though.
In some cases, a lender may be able to offer you a deferment, where your payment due date is pushed back by a month or more. The payment(s) don't go away, they're typically just moved to the end of your loan. Your lender may even have other options, but you have to call them to find out.
Additionally, if you know that your budget is changing, but you haven't fallen behind yet, you may be able to look into refinancing as an option to make your monthly auto loan payment more affordable without losing the car you love.
Getting a More Affordable Vehicle
If you weren't able to hold off the recovery service from hauling away your vehicle, or you want a more affordable option before it comes to the repo man being called, you're most likely going to need a subprime lender. These lenders specialize in helping people with credit challenges.
You can find subprime lenders at special finance dealerships, and Auto Credit Express has gathered a nationwide network of them. Let us point you toward a local dealer so you can skip the hassle of trying to stay two steps ahead of the repo man! Just fill out our fast, free, and zero-obligation car loan request form, and we'll get right to work for you!