Facing financial difficulties can be stressful, and when it comes to your car, the stakes are high. If you’re struggling with car payments or have issues with your auto insurance, you might be wondering, “how does your car get repo’d?” Vehicle repossession is a serious matter where the loan company takes back your car due to a breach of your loan agreement. Understanding the process and your rights is crucial to navigating this challenging situation.
Reasons Your Car Can Be Repossessed
The primary reasons for car repossession are typically linked to violations of your car loan agreement. Here are the most common triggers:
Falling Behind on Car Payments
The most frequent cause of repossession is falling behind on your car payments. Lenders provide a grace period, but persistent late payments or defaulting on your loan will put you at high risk. The number of missed payments before repossession can vary depending on your loan agreement and state laws, but it’s often sooner than you might think.
Lack of Auto Insurance
Maintaining auto insurance is usually a requirement of your car loan. If your insurance lapses or you cancel your policy, the loan company can consider this a breach of contract. Lenders need to protect their investment, and uninsured vehicles pose a higher risk. Therefore, lack of insurance is another way your car can get repo’d.
The Car Repossession Process: What to Expect
One of the unsettling aspects of vehicle repossession is that, in many cases, the loan company is not legally obligated to warn you before they take your car. They can repossess your vehicle as soon as you are in default according to your loan agreement.
Confirming the Repossession
If you suspect your car has been repossessed, your first step should be to contact your local police department. This will help you confirm that your vehicle was indeed repossessed and not stolen or towed for other reasons.
Contacting Your Finance Company
Once confirmed, immediately call your finance company. They can provide you with details about the repossession, the amount you owe, and the steps required to potentially get your car back.
Getting Your Car Back After Repossession
Retrieving your vehicle after repossession is time-sensitive and requires immediate action.
Reinstatement or Redemption
To get your car back, you will generally need to reinstate the loan by making up all the past due payments, including late fees, repossession fees, and storage costs. In some cases, depending on your loan agreement and state laws, you may be required to redeem the car by paying off the entire outstanding loan balance.
Proof of Insurance and Valid License
You will also need to provide proof of current auto insurance and a valid driver’s license to demonstrate your compliance with the loan terms and legal driving requirements.
Recovering Personal Property Left in the Car
What happens to your belongings left inside the repossessed vehicle?
Notice of Personal Items
Within 48 hours of the repossession, the repossession company is legally required to send you a list of the personal items found in your car and instructions on how to retrieve them.
Retrieving Your Belongings
You will need to contact the repossession agent and likely pay storage fees to get your personal property back. Be aware of the timeframe: if you don’t claim your belongings within 60 days, the repossession company can legally dispose of them.
Notices You Are Entitled To Receive
Even though a pre-repossession warning isn’t always mandatory, you are entitled to certain notices after the repossession.
Notice of Intent to Sell Vehicle
Within 60 days after repossession, and at least 15 days before the car is sold at auction, the loan company must send you a Notice of Intent to Sell Vehicle. This crucial document contains key information, including:
- Sale Date: Indicates that your car will be sold no sooner than 15 days from the date of the notice.
- Amount to Reinstate or Redeem: Details exactly how much you need to pay to get your car back before the sale. The notice must explain why full balance payment is required if that’s the case.
- Payment and Pickup Information: Provides instructions on where to make payment and where to pick up your vehicle if you choose to reinstate or redeem.
- Right to Delay Sale: Informs you of your right to request a 10-day extension to delay the sale, giving you more time to arrange payment. The notice must include a form to request this extension.
- Deficiency Balance Warning: States that you will be held responsible for any remaining balance if the car sells for less than what you owe on the loan, plus repossession and sale expenses.
Post-Sale Information
After the vehicle is sold, you have the right to request, in writing, information about the sale price and the costs associated with selling the car. The finance company has 45 days to provide you with an itemized statement.
When Can a Loan Company Refuse to Return Your Car?
Even if you can pay the required amount, there are specific circumstances where the loan company can legally refuse to return your car:
- Loan Application Fraud: If you provided false information on your credit application.
- Obstructing Repossession: If you hid the car to avoid repossession or threatened the repossessor.
- Vehicle Abuse: If you intentionally damaged or trashed the car, threatened to destroy it, or used it in a crime.
- Repeat Repossession: If your car has been repossessed multiple times: twice in the last 12 months, or three times since you originally bought it.
Voluntary Repossession: Another Option
If you know you can no longer afford your car payments or simply want to give up the vehicle, you can consider voluntary repossession. This involves returning the car to the dealer or finance company yourself.
While seemingly less confrontational, voluntary repossession still has negative consequences. It will still damage your credit score, and you will still be responsible for any outstanding balance and fees associated with your loan agreement.
What Happens After the Car is Sold at Auction?
After your repossessed vehicle is sold, usually at auction, the proceeds are applied to your outstanding loan balance and the costs of repossession and sale.
Deficiency Balance
Unfortunately, repossessed cars often sell for less than the remaining loan balance. In this case, you will receive a letter from the finance company outlining an itemized bill, including the original balance, fees, sale expenses, and the amount credited from the sale. The remaining amount is called a deficiency balance, which you are legally obligated to pay.
Seeking Help and Understanding Your Options
Navigating vehicle repossession can be complex and emotionally draining. If you are facing financial hardship and worried about car repossession, it’s crucial to:
- Communicate with Your Lender: Reach out to your loan company as soon as possible to discuss your situation. They might be willing to work with you on a modified payment plan or other solutions to avoid repossession.
- Understand Your Loan Agreement and State Laws: Familiarize yourself with the terms of your car loan and the repossession laws in your state to understand your rights and obligations.
- Seek Professional Advice: Consider consulting with a financial advisor or credit counselor who can provide personalized guidance and help you explore your options.
Understanding “how does your car get repo’d” is the first step in taking control of a difficult situation. By being informed and proactive, you can navigate the repossession process, understand your rights, and work towards the best possible outcome.
