What Happens when a Car is Repossessed?


Owning a car is a luxury, and it can also take a big amount from your paycheck each month. Therefore, if you have other major financial obligations, such as mortgage and student loans, it can be a struggle to pay for your car on time. Auto loans that become delinquent can lead to ruining your credit and having your car repossessed. Repossession by the bank or lender is like the final chapter of a novel, and there’s not much a car owner can do.

If you are thinking of buying a car via auto loan soon, there are many things that you need to learn, and one of those is repossession. If in case something happens and you can no longer pay your car monthly, it can be repossessed. So, what happens after that? If you want to know, read on as we are going to give you more information on what happens when a car is repossessed.

What is Repossession?

In repossession, a leasing company or a bank takes away a vehicle from a borrower who is behind on payments. This usually happens without any warning. They can send a driver to get the car, or it can be taken away using a tow truck. There are also some cases where lenders can disable your car by remote control, so you won’t be able to use it until you clear things up.

Most of the time, borrowers receive notifications, emails, or calls that they are behind on payments. Lenders also often inform borrowers about the consequences if they do not pay their dues. However, they might not tell the borrower exactly when they are going to get the vehicle.

When you take out an auto loan, you will sign a legal agreement to make the required payments on-time every month. If you do not fulfill the agreement, your lender can repossess your car and sell it in an auction. Also, keep in mind that they can take back your car, whether you are at home, at work, or anywhere else.

The laws that govern repossessed cars differ by state. In some states, lenders are not required to give you notice of their intent to repossess your car. It means that you can wake up one day and find an empty parking space instead of your car.

Car Owner’s Rights

Lenders might have the right to take a car from the borrower, but the borrower also has rights. Here are some of them:

Private Property

Lenders can re-claim a vehicle that is parked on private property. However, state laws generally restrict them from breaching the peace while doing so. This means that lenders or repossession agents do not have the rights to damage your property to access the vehicle. They are not allowed to destroy any locks to get into your garage, nor can they use physical force when taking your car.

Sales Price

If your car has been re-claimed and sold, the lender should sell it for a commercially reasonable price. It does not need to be the highest price possible, but they should do something to get reasonablemarket price out of the car. It’s because the sales proceeds will go toward paying off your debt. It will be unfair to repossess the car and give it away to somebody else for a very low price.

What are the Things You Can Do After a Car is Repossessed?

If your car has been repossessed, here are some of the things that you can do:

Talk to your lender

If your car has been repossessed, hiding from that problem will not solve it. What you should do is contact your lender as soon as possible and know why your car was repossessed. There might be a different reason other than missing your payments. Keep in mind that cars can also be repossessed for not having enough insurance or maybe due to an administrative error on their end. You can give your lender a quick phone call to clarify the situation, and they can also give you options to resolve the issue.

Review your finances

If your car has been repossessed because you missed your payments, you will need to review your finances before doing anything to get your car back. Try to look at your budget and see if you can realistically afford to continue paying for a car and other car expenses, such as insurance and gas.

Know your rights

Like what we’ve mentioned earlier, you also have certain rights when your car is repossessed. Even though you’re in an emotional state after having your car repossessed, it is important to remember that you have rights, which are those we’ve mentioned before. And if ever you think your rights have been violated, you need to contact a lawyer and your lender immediately.

Know your options

When your car has been repossessed, there are a few different options that you can choose from:

  • You can pay off your loan in full, which is the most straightforward way to get your car back. This is not the best option for most people, but you can also consider asking a friend or family member for help to pay off your balance. Just make a clear arrangement to pay them back over time.
  • You also have the option to agree on a payment plan. Your lender may be willing to set up a new payment plan of you can catch up on the months you missed. You just need to prove that you can meet your monthly obligation going forward.
  • Another option is to let the vehicle go. There are times that it is best to just walk away if your finances are already tense. If you let your vehicle go, your lender will send it to auction to help cover part of the cost. However, remember that you still owe your lender additional money after the car is sold. For example, if your lender sold the car for $20,000, but your loan balance is $25,000, you still owe your lender $5,000.
  • Lastly, you can also file for bankruptcy before your car goes to auction. This is not recommended, but you can file for bankruptcy to temporarily prevent the sale of your car. This can give you some time to find enough money to pay off your loan. However, this is not an option if the only reason for filing bankruptcy is the repossessed car. Keep in mind that bankruptcy has long-standing financial consequences, which can affect your credit poorly.


Having your car repossessed is one of the traumatic events that car owners may experience. If it happens to you, you need to treat it as a learning experience and start improving your finances. But as they say, prevention is better. Therefore, before opting for an auto loan, ask yourself first if you are financially stable to pay for a car monthly, together with other car expenses and other utility bills you need to spend on.

We hope the information we shared here helped you further understand what happens when a car is repossessed, and as well as the options available to resolve the issue.

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