What Happens When a Car is Repossessed?

If you finance or lease a car in Phoenix, you don’t own it – at least not technically – and if you stop making payments, the vehicle can be repossessed. If you’re in danger of having your car repossessed, and you can’t defer your payment, you may be wondering “what happens when a car gets repoed?” Essentially, when a car is repossessed the bank or leasing company comes and takes the vehicle back from the borrower. A car is repossessed when on-time, in-full payments aren’t being made. Typically, involuntary repossession is done without warning, and a driver or tow truck will be sent to pick up the vehicle. Read more about what happens when a car is repossessed below, and find out how to prevent it from happening.

What Are My Rights If My Car is Repossessed?

When a car is repossessed you may be wondering what your rights are. In the terms and conditions of the contract, repossession is outlined as the lender or leasing company’s right if payments are not made in full or on time. When you signed the contract and took possession of the vehicle, you agreed to these terms. However, Mesa drivers have some rights of their own, including:

• You must be notified by the bank when your car will be sold at auction. Before the car is sold, you may be able to purchase the vehicle for the amount owed, as well as repossession and storage fees.
• Depending on the lender, it’s sometimes possible to reinstate the auto loan if you pay the amount you’re behind on, as well as repossession expenses.

Before you reclaim your car though, it may be a good idea to go over your expenses. Sometimes, unexpected bills or an emergency can make us fall behind on our payments. Go over your monthly budget and make sure that continuing to pay for a car loan or lease is your best option.

Voluntary vs. Involuntary Repossession

When you think “what happens when a car is repossessed?” you might think that all repossessions are involuntary and that lenders won’t want to give you your car back. The truth is, a lot of repossessions are done voluntarily. Voluntary repossession is when you call your lender or leasing company and tell them to repossess the car because you can no longer make payments. Although your credit will still be affected, voluntary repossession is a better alternative than not paying your bills and waiting for your vehicle to be repossessed.

What is Deficiency Balance?

A deficiency balance is the loan amount left over on the car. When your car is repossessed, the bank may be able to sell the car for more than what’s owed on your auto loan. If that happens, you’re entitled to the difference. However, if the car sells for less than what is owed, the lender may go to court and get a deficiency judgment against you. At this point, you’ll be held responsible for paying what’s left on the loan.

How Long Does Repossession Stay on a Credit Report?

When a car is repossessed, either voluntarily or involuntarily, your credit score will be negatively affected. The repossession of a car will stay on your credit for seven years after the original delinquency date. The repossession will continue to affect your credit score during those seven years, but the impact wanes over time. However, if you have bad credit but you’re able to continue making your car loan payment, that could help improve your credit score over time. If you apply for an auto loan less than a year after a car repossession in Surprise, though, the lender will deny it outright.

Get Expert Advice from Cactus Jack's Auto

If you’re asking yourself, “My car was repossessed — what happens next?” or you have more questions about what happens when a car gets repoed, contact us at Cactus Jack's Auto! Our finance center may be able to help you take out an installment loan to cover the cost of your outstanding loan balance and get your car back. We’ve helped drivers in Glendale find their new car and build a lending plan that will allow them to keep it.