Car Repossessions on the Rise — Are You in Danger of Losing Your Ride?
Written by
David Nadelle
Edited by
Cory Dudak
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It’s only inevitable that as more Americans fall behind on their monthly car payments, the more they’ll get their vehicles repossessed.
A recent study by Fitch Ratings found that more subprime borrowers were 60 days or more behind on their car payments than at any other time on record. After a couple of down years, vehicle repossessions are up by 20.4%, according to Cox Automotive.
During the pandemic, Americans received stimulus funds to spend on themselves and their cars. Subsequently, less people were missing their payments. However, when the free government money dried up, more people started to default on their auto payments and repossessions began to upturn.
Inflation, the cost of cars in general, and the borrowing rates being charged to buy them are causing an increase in delinquencies with no end in sight. While still less than pre-pandemic numbers, Cox Automotive estimated that 1.5 million vehicles will be seized by the end of 2023, up from 1.2 million in 2022.
According to Kelley Blue Book, the average price for a new car rose slightly in October (to $47,936), but prices have eased in 2023. The new car loan rate for September was 7.4% compared to the average rate of 6.9% at the beginning of 2023. The percentage of car owners that pay at least $1,000 a month jumped to 17.1% in the second quarter of 2023.
With a rise in delinquencies comes a rise in repos. In fact, The Auto Wire reported that lenders seem to be going after non-payers with unexpected gusto, offering incentives for repossessions and hinting that some are using bounties. For example, it was reported that Wells Fargo Auto is giving repossession agencies an extra $500 per vehicle to rope in car owners who have strayed off the payment path.
For many having a difficult time keeping up with payments, repossession can occur as soon as you default on your loan. Typically, you would need to be hiding from your lender’s messages and have an account at least 60 days past due for a creditor to begin the repossession process.
However, as the Federal Trade Commission notes, once you default, lenders in many states can repossess your vehicle “at any time, without notice, and come onto your property to take it.” Fortunately, most lenders want your money — not your car — and wouldn’t normally repossess it after one missed payment.
As is the case with any relationship — even a strictly financial one with a creditor — early communication is the key to solving any changes or payment concerns. In these fickle economic times, losing a car is a burden many Americans can do without, as is the loan default and credit hit on your record.
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