What If My Car Is Repossessed?

When you choose to finance a car purchase with an auto loan, the financial institution who provided you with the loan still owns the it until you make your final payment and obtain a release of lien letter from them. If you stop making the payments, you default on the auto loan and the financial institution may choose to take their property back.

Terms for Car Repossession

The terms for repossessing differ based on the type of loan agreement you originally signed. Some financial institutions may consider you in default if you are a couple of days late with a payment. If you are having problems making your car payments, it is better to call the lender and discuss the options prior to a visit from the repo man. A simple conversation with the lender could buy you time if you can explain your situation in a way that makes sense. After all, owning a depreciating asset is not ideal for your lender either.

Legal Rights In an Auto Repossession

When an owner defaults on their car loan and the lender repossesses your vehicle, it is up to the owner to investigate their legal rights based on the state they live in as there are no federal laws governing the repossession business. Depending on where you live, the bank may notify you within a certain number of days when your car will be sold. If during that time you come up with the money of the loan plus the additional expenses incurred by the financial institution for repossession, you may be able to reactive your loan and or buy your car back.

If you cannot buy your car back or get your loan reinstated, the bank will have the legal right to sell of your vehicle which may trigger off a deficiency judgment. If the car is sold at auction for less than your contract balance, the financial institution can seek a legal judgment against you forcing you to pay the loss difference. If the car sells for more at auction than the contract balance plus additional expenses, you are entitled to a refund of the profit.