Having your car taken can be stressful, but you can potentially get your car back after a title repossession. Strategies for getting your car back include paying amounts past due, paying down the loan in full, and buying the car at auction.
Learn more about getting your car back and how to avoid vehicle repossession.
- The most common reason for car repossession is failure to make loan payments.
- Defaults on car loans can stay on your credit report for up to seven years.
- Options to get your car back include paying overdue payments and buying the car at auction.
- You can avoid a car repossession by making all your payments on time and ensuring you can afford a car before you buy it.
Why Has My Car Been Repossessed?
Repossession laws vary by state. Car loan agreements typically outline the reasons why a car may be repossessed. The main reasons for a car repossession include not carrying required car insurance and failure to make loan payments as agreed in the contract.
In many cases, cars are repossessed because the loan holder didn’t make payments. Your car can potentially be repossessed even after just one missed payment. It can also be repossessed if you violate other terms in the contract.
Depending on the laws in your state, you may forfeit your rights to your car if you are found guilty of trying to actively prevent a legal repossession, such as by hiding, destroying, or damaging the car.
If you believe your car has been repossessed unlawfully, you can contact your state Department of Motor Vehicles (DMV) or Office of Commissioner of Financial Regulation, or similarly named agencies.
Conditions for a repossession may vary depending on whether you have an auto loan, car lease, or car title loan, or if you have declared bankruptcy. Let’s look at these scenarios in more detail.
Auto Loan Repossession
When you have an auto loan, you physically possess the car, but the lender is listed as the owner on the car title until you pay the loan in full. If you stop making payments—in some cases, even if you miss only one payment—the lender has the legal right to repossess the vehicle.
Car Lease Repossession
With a car lease, you are essentially renting the car from the auto dealer for a specific period of time. As with an auto loan, if you don’t make payments, the dealer can repossess the vehicle.
Car Title Loan Repossession
With a car title loan, you take out a lump sum of money and use your car title as collateral. Once the loan is paid off, the lender returns the car title to the owner. If the owner fails to make payments on the loan, the lender has the legal right to repossess the vehicle.
Your vehicle is considered an asset, so it can be seized by the bankruptcy court and sold to pay off your debts. There are some circumstances in which you could keep your vehicle, so it’s important to discuss these with a bankruptcy attorney.
How to Get Your Car Back After Repossession
Even after your car is repossessed, there are options for you to reclaim it.
First, you’ll want to talk to your lender and ask why it was repossessed. Often, if your lender plans to repossess your vehicle, you will have plenty of notice. After all, they typically send notifications by phone and/or mail stating why repossession could be forthcoming, such as a failure to provide proof of insurance or make payments as agreed.
Second, find out your options to get your car back. When talking with your lender, find out what you can do to rectify the situation and get your car back. It could be a matter of sending a copy of your insurance policy to the lender. Or you may have to pay all past-due amounts plus any fees and late charges.
Options for working with your lender to get your car back may include reinstatement, redemption, and buying your car back at auction. Let’s look in more detail about those strategies.
With reinstatement, you pay back all past-due amounts plus any fees and other charges to bring the existing loan up-to-date and reinstate it. If necessary, negotiate new payment terms, interest rate, and length of loan to refinance the car loan.
With redemption, you pay off the entire loan balance plus any fees and other charges. The redemption period is usually short-lived. If the borrower doesn’t redeem the vehicle within that time period, the lender can sell the car.
Buying the Car at the Lender’s Auction
If there is no reinstatement or redemption, the lender can sell the car at auction. The borrower can bid on the car to purchase it, possibly paying less at auction than through redemption or reinstatement.
A risk to this option is losing out on the car to a higher bidder. Also, if the lender sells the car at auction for an amount less than the loan, you could have to pay the difference, known as the deficiency amount.
How to Avoid Repossession
The best approach to repossession of your vehicle is to avoid repossession altogether. There are several ways to avoid this situation.
Talk with Your Lender
If you are struggling to pay your car payments, talk with your lender to discuss options. It’s possible that your lender could renegotiate the loan, lowering your monthly payment and extending the loan term. The downside to this approach is you could pay more in interest over the loan term.
Your lender could also provide a longer grace period for you to make your monthly payments. This means you have more time to make your payment before it’s considered late, triggering a late charge or default proceedings.
Or, your lender could agree to a deferment on the loan. This means you wouldn’t have to make car payments for a specific time period as agreed to between the lender and you. A grace period or deferment could give you the time you need to boost your finances so that making car payments going forward won’t be a financial hardship.
Grace Period vs. Deferment
With a grace period, the lender extends the time you have to make payments before you have to pay a late fee or enter default. With deferment, you don’t have to make car payments for a specific period of time.
How many loan payments can I miss before repossession?
This varies by loan, but the exact number should be included in the loan agreement.
How does repossession affect my credit score?
Repossession itself does not affect your credit score. But if your repossession is a result of the fact that you have missed payments and defaulted on the loan, your credit score will likely decline. A significant portion of your credit score is based on your payment history.
How does defaulting on an auto loan affect my credit score?
The initial harm to your credit score begins with the missed payments. Each missed payment will lower your credit score. By the time your loan is in default and your vehicle has been repossessed, your credit score will likely have undergone a significant hit. A default can stay on your credit report for seven years, so it could take quite a while to rebuild your credit and boost your credit score.
What is a voluntary repossession?
You notify your lender that you can no longer pay the auto loan as agreed and plan to return the vehicle. The lender will sell the vehicle, and, if necessary, you will pay any deficiency balance if the vehicle is sold for less than the loan amount.
How soon can I get my repossessed car back?
It depends on how you resolve the repossession. Trying to reinstate or redeem your auto loan typically has to happen within a short time period, such as about two weeks, so you could have your car back soon after it’s repossessed. You may have to wait longer, perhaps several months, if the car is sold at auction due to the time of the auction process.
The Bottom Line
Having your car repossessed is never a good situation, but you have options for getting your car back. These include paying off the loan or reviving the existing car loan within a couple weeks of the repossession. It’s possible that you also could purchase the car at auction.
Of course, if you don’t have the financial means to take advantage of these options, you may not be able to get your car back. It’s important to discuss this situation with your lender and perhaps a financial advisor to find the best resolution.