When facing a vehicle repossession, you typically have two options: give the car up voluntarily or face an involuntary repossession. Both result in your car being taken back by the lender, but the choice to give up the vehicle for voluntary repossession is up to you.
Voluntary repos have a lot of benefits over waiting for someone to tow away your vehicle, such as the fact that you're surrendering your car on your terms, and can make sure the timing is right for you.
Repossession, whether voluntary or not isn't something you want to encounter, but if you have the choice don't wait for the surprise of finding your car has been towed while you're at work or in the grocery store.
Difference Between Voluntary And Involuntary Repo
The truth is that voluntary and involuntary repossessions have very small but important differences. The process stays the same, but there are some hidden benefits to giving up the car yourself.
Voluntary repossession is exactly what it sounds like, you give the car back to the dealer or lender. Choosing to give up your car won’t get you out of the damage caused by repossession, but a voluntary repo can take some of the stress out of the process.
Voluntarily giving up the vehicle shows the lender you’re willing to work with them. It typically also results in fewer fees, since the lender won't have to spend money on a recovery company to tow the car. But the biggest benefit to voluntary repo may be avoiding finding your vehicle gone unexpectedly.
If you don’t take the vehicle in yourself, an involuntary repossession occurs. This means that the repo man will show up at any given time or place to seize the vehicle without warning.
Is Voluntary Surrender Better Than Repossession?
You want to take every available action as soon as you realize making your car payment is becoming a hassle. Don't wait until the point comes where it's too late to do anything and a repossession – be it voluntary or involuntary – is inevitable.
The number one thing you need to do is contact the lender as soon as possible. Explain your situation and maybe the two of you can work out a revised payment plan. Ask about a possible payment extension or if you can refinance the loan to extend the term and lower your payments. If getting caught up on payments isn't possible, you may also want to investigate your equity situation. If you have equity in your car, selling it or trading it in are two options worth exploring. Having your vehicle repossessed should be a last resort option.
Impact of Repossession on Your Credit
Repossession, voluntary or not, sticks around for up to seven years, and it can drastically lower your credit score. The exact loss of points is dependent on your current credit history and score, but you could lose around 100 points or more after a repo is reported.
One of the harshest side effects of having a recent repossession on your credit reports is that most subprime and traditional auto lenders typically don’t approve you for financing for up to 12 months after it's reported. After a year has passed, your lending opportunities start to open back up again, provided you haven’t had any other major delinquencies reported.
The good news is all things on your credit reports lose some of their potency over time. With each passing year, repossession has less impact on your overall credit score.
But, if a voluntary repo sticks around for the same amount of time as a traditional repossession, why not just wait for the repo man and keep the car as long as possible?
There are four main benefits to surrendering your car compared to waiting for the recovery company to tow it away, as you can see below.
Benefits of a Voluntary Repossession
- Control – A voluntary repossession gives you control. You can notify your lender that you’re voluntarily returning the vehicle to the dealership, remove your possessions, and plan your next steps on your own time.
- Convenience – If you wait for the recovery company to pick up your car, they could come pretty much anytime or anywhere: your workplace, your home, or even while you’re out shopping. If the recovery company picks up your vehicle with your personal belongings in it, you must find a time to go to where the vehicle is being stored and recover your possessions, since they aren’t obligated to send them to you.
- Save money – Another benefit to surrendering your car yourself is that you don’t have to pay the lender the recovery company fees. When a lender hires a repo company, you’re responsible for paying the bill. If you skip this step, it’s one less fee to worry about.
- Looks better – When it comes to your future credit opportunities, a voluntary repossession can look better to future auto lenders than a traditional one. It could be viewed as accepting the fact that you could no longer keep the car, and instead of waiting for a repo company to come, you took control of the situation instead of dragging out the process.
How Can I Rebuild My Credit?
There are many ways to rebuild your credit after something like a repossession mars your credit score. One of the simplest ways to achieve this is by paying all your bills on time and in full. Another good plan is to use a service such as Experian Boost to report bills you already pay each month. The more consistent you are, the more your score can grow.
Try these basics to give your credit score a lift:
- Bring all past-due accounts up to date
- Payoff outstanding debts
- See if you can report your payments of rent, or other large loans
- Get a car loan
What Are My Auto Loan Options After Repossession?
As we mentioned earlier, most auto lenders don’t consider borrowers financing if they have a repossession that’s less than a year old. However, there are dealerships that may be willing to work with you.
Buy here pay here (BHPH) dealerships may skip the credit check, meaning your recent repo wouldn’t impact your eligibility for a car loan. These dealers use in-house financing and handle all car buying and financing themselves. In terms of vehicle options, used cars are what you’re limited to.
Be aware that BHPH dealers that skip the credit check typically assign higher than average interest rates to make up for the fact that they don’t examine your credit history or score. You may also have to plan for a 20% down payment at a BHPH dealership, which is another way to make up for the lack of a credit check.
While BHPH dealerships can have some downsides, if you can’t afford to purchase a vehicle with cash, these dealers could be your answer to a car while you wait for the repossession to loosen its grip on your credit score. We have more tips on how to ease into car buying after a repossession here.
The Bottom Line
Auto Credit Express helps people facing credit issues, such as a prior repossession, find auto financing. We work with a nationwide network of dealers who have lenders available to work with people in various stages of bad credit. Get started today by filling out our free auto loan request form.
