Facing car repossession can be a stressful and confusing experience. If you’ve fallen behind on your car payments or are uninsured, the lender has the legal right to repossess your vehicle. Acting quickly and understanding your options is crucial to potentially getting your car back or mitigating the financial fallout. This guide from Car Repair Online outlines the steps you should take if your car is repossessed.
Understanding Car Repossession
Vehicle repossession, often referred to as “repo,” occurs when you breach your car loan agreement. The most common reasons for repossession are defaulting on payments or failing to maintain auto insurance as required by your loan terms. It’s important to understand that lenders in many jurisdictions are not legally obligated to warn you before they repossess your vehicle. This means it can happen without prior notice, emphasizing the need for swift action once you realize your car has been taken.
What to Do Before Repossession: Prevention is Key
Ideally, preventing repossession is the best course of action. If you anticipate or are already struggling to make your car payments, take these proactive steps:
Communicate with Your Lender
Don’t wait until repossession is imminent. Contact your loan company immediately to discuss your financial difficulties. Lenders may be willing to work with you to create a new, more manageable payment plan. This could involve temporarily reducing your monthly payments or adjusting the loan term. Another option to explore is refinancing your auto loan. Refinancing with a different lender might secure you a lower interest rate and thus, lower monthly payments.
Consider Selling Your Car
If you foresee long-term difficulty in affording your car payments, consider selling your car voluntarily. Selling your car yourself, rather than waiting for repossession and auction, typically yields a higher return. This extra money can be used to pay off your loan balance and potentially reduce the financial repercussions of default.
Car Repo: What Happens After?
If repossession has already occurred, here’s what you need to do:
Confirm the Repossession
First, verify that your vehicle has indeed been repossessed and hasn’t been stolen or towed for a different reason. Contact your local police department to confirm if a repossession was officially recorded.
Contact Your Lender Immediately
Your next crucial step is to contact your finance company as soon as possible. They can provide you with detailed information about the repossession process and your options for retrieving your vehicle. Typically, to get your car back, you will need to “reinstate” the loan. This usually involves paying all past-due payments, late fees, repossession costs, and storage fees. In some cases, depending on your loan agreement, you might be required to pay off the entire outstanding loan balance. You will also need to prove that you have current auto insurance and a valid driver’s license.
Getting Your Personal Belongings Back
After repossession, the repossession company is legally required to send you a list of personal items that were inside your car. This list should be provided within 48 hours of the repossession, along with instructions on how to retrieve your belongings. Be aware that you will likely have to pay storage fees to get your personal property back. There’s a limited window to claim your possessions; if you don’t pick them up within 60 days, the repossession company can legally dispose of them.
Understanding Your Rights: Notices You Should Receive
You are entitled to certain notices from your lender after repossession. Within 60 days after the repossession and at least 15 days before your car is sold at auction, the loan company must send you a “Notice of Intent to Sell Vehicle.” This important document contains key information, including:
- Confirmation that your car will be sold after a specified date (at least 15 days from the notice date).
- The exact amount you need to pay to get your car back before the sale. The notice should clearly state if you are required to pay the full loan balance for reinstatement and explain why, if applicable.
- Details on where to make payments and retrieve your vehicle.
- Information about your right to request a 10-day delay of the sale, giving you extra time to gather funds for reinstatement. The notice must include a form for requesting this extension.
- A clear statement that you will be held responsible for any “deficiency balance” if the car sells for less than what you still owe on the loan, plus repossession and sale expenses.
After the sale, you have the right to request, in writing, information about the sale price of your car and the costs associated with the sale.
When Can a Lender Refuse to Return Your Car?
While lenders generally must allow you to reinstate your loan and get your car back, there are specific circumstances where they can legally refuse to return your vehicle, even if you offer to pay the outstanding amount. These situations include:
- Providing fraudulent information on your credit application.
- Hiding the car to prevent repossession or threatening the repossession agent.
- Intentionally damaging the car, threatening to destroy it, or using it in the commission of a crime.
- If your car has been repossessed previously within a specific timeframe (e.g., twice in 12 months or three times since the loan origination), as stipulated in your loan agreement or by state law.
Voluntary Repossession: An Alternative?
If you know you cannot afford your car payments and wish to avoid the repossession process, you might consider “voluntary repossession.” This involves voluntarily returning the vehicle to the dealer or finance company. While it might seem like a less negative option, it’s crucial to understand that voluntary repossession still has significant negative consequences. You will still be responsible for any outstanding balance after the car is sold at auction, along with repossession and sale-related fees, and it will negatively impact your credit score, similar to an involuntary repossession.
After the Car is Sold: Deficiency Balance
Following the sale of your repossessed vehicle, you will likely receive a letter from the finance company. This letter will contain an itemized statement detailing the remaining amount you owe. This “deficiency balance” includes the original loan balance, accrued interest, repossession expenses, and auction costs, minus the amount the car sold for at auction. You have the right to request this itemized statement for up to one year after the sale, and the finance company is legally obligated to provide it within 45 days of your request.
Seeking Professional Help
Navigating car repossession can be complex. If you are facing repossession or have had your car repossessed, it’s advisable to seek professional help. Contact consumer protection agencies or legal aid services in your area. They can provide guidance on your rights and options and potentially assist you in negotiating with your lender.
References:
- Civil Code Sections 2983.3
- County of Los Angeles Department of Consumer and Business Affairs. Last change: Feb. 20, 2014
