Car repossession is a serious concern for vehicle owners who fall behind on their auto loan payments. Many people worry about the timeline and process of repossession, particularly, how long until they can repo your car. It’s essential to understand your rights and the steps lenders can take when you default on your car loan. This guide will clarify the repossession process and offer advice on avoiding it.
Repossession Laws and Your Rights
One of the most unsettling aspects of car repossession is that there’s no legal requirement for lenders to provide advance notice before repossessing your vehicle. This means you might be unaware that repossession is imminent until it actually happens. Lenders can initiate repossession as soon as you default on your loan, although most will typically wait until you are significantly behind on payments. The exact timeframe can vary depending on your lender and the specifics of your loan agreement.
While lenders have the right to repossess your car, they cannot break the law or breach the peace during the process. This means a repossession agent:
- Cannot commit any crimes, like trespassing or damaging property.
- Cannot use abusive or threatening language.
- Cannot enter your home without permission.
- Cannot take your car if you physically resist. However, resisting is not advisable as it could lead to further legal complications.
Where can they repo your car from? Legally, your car can be towed from various locations, including:
- Public streets and parking lots: Repossession agents frequently seize vehicles from public spaces.
- Private parking lots: They can also repossess your car from private lots, such as those at your workplace or apartment complex.
- Your driveway: A repossession can even occur in your driveway, provided that no other vehicle needs to be moved to access it. However, they cannot repossess your car from a closed garage.
What Happens After Repossession?
After your vehicle is repossessed, the lender will proceed with selling it to recoup their losses. What happens next depends on how much of your loan you’ve already paid off.
If you’ve paid more than 60% of the loan:
- The lender must sell your car within 90 days of repossession.
- You are legally entitled to receive notification of the sale’s time and location.
- Unless you sign a post-default agreement allowing the lender to keep the car as full payment, a sale must occur.
If you’ve paid less than 60% of the loan:
- The lender has the option to keep the car as payment for the debt or sell it.
- You must receive written notice from the lender outlining their decision.
- If the lender decides to keep the vehicle, you have 21 days to object in writing and demand a sale.
Regardless of the percentage paid, the proceeds from the sale are used to cover:
- The outstanding balance of your car loan.
- The costs associated with the repossession process.
- Sale-related expenses.
If the sale generates surplus funds after covering these costs, the remaining amount is returned to you. However, it’s more common that the sale price doesn’t cover the full loan amount and associated costs. In such cases, you will be responsible for the deficiency balance, and the lender can sue you to recover the remaining debt, including repossession fees, auction costs, and legal fees.
Getting Your Car Back After Repossession (Redemption)
You have a right to redeem your repossessed vehicle. This means you can get your car back by paying the outstanding loan balance, plus repossession and associated costs. You can typically redeem your car until it is sold, or within 21 days of receiving notice that the lender intends to keep it.
The exact cost of redemption will be detailed in your loan contract and will likely include:
- The total remaining balance on the loan.
- Repossession fees.
- Attorney’s fees (if applicable).
- Storage fees.
Redemption can be expensive, but it might be a viable option if you can quickly secure funds to cover these costs and want to keep your vehicle.
How to Avoid Car Repossession
Preventing repossession is always preferable to dealing with its consequences. Here are proactive steps you can take if you’re struggling to make car payments:
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Contact your lender immediately: Open communication is crucial. As soon as you anticipate difficulty in making a payment, reach out to your lender. Explain your situation honestly. Lenders may be willing to work with you, especially if you have a good payment history. They might offer options like deferring a payment or modifying your loan terms. Always get any agreed-upon changes in writing. Negotiating early is key, as it becomes much harder once your loan is turned over to a debt collector.
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Consider refinancing: Refinancing your auto loan could result in a lower interest rate or a longer loan term, both of which can reduce your monthly payments. While a longer term means paying more interest overall, it can provide immediate relief and help you avoid repossession. Shop around for refinance options with your current lender and other financial institutions.
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Sell your car: Evaluate your car’s market value using resources like Edmunds, Kelley Blue Book, or NADAguides. If your car is worth more than what you owe on the loan, selling it and using the proceeds to pay off the debt is a sensible option. Check your loan agreement for prepayment penalties before paying off your loan early.
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Re-evaluate your budget and seek help: Thoroughly examine your finances. Can you cut back on non-essential expenses to free up funds for your car payment? Explore potential assistance programs that could help with groceries, utilities, or other essential needs, freeing up cash for your car. Consider credit counseling for professional guidance on managing your finances and debt.
Even if you choose to voluntarily return your vehicle (voluntary repossession), you will still be responsible for any deficiency balance on the loan and repossession costs. Furthermore, both late payments and repossession can negatively impact your credit report. Taking proactive steps is the best way to maintain control of your vehicle and financial well-being.
