Car Repossessions
What is repossession?
Auto repossession is when you lose your car because the creditor (the person you owe the money for the purchase of the car) comes and physically takes it from you. Repossession happens when you fall behind in your payments. The company who financed the car, the bank or the car dealer, may come take it if you do not make your payments on time.
When can they repossess?
Read your contract carefully. It spells out what your rights are when you fail to make a payment ("default" on your payment). There may be a grace period written into the contract, but there may not. Most repossession happen when the payment is not made on time. In many contracts the creditor has the right to repo after only one 30 day payment is missed. Fortunately most will not act on it that quickly… but the option is there.
Your car may also be repossessed if the creditor, the bank, or car dealer, has reason to believe you are about to run away with the vehicle, or because you have not taken out insurance on the car and the contract requires that you do so.
How can they repossess?
A breach of the peace is when the person repossessing the car engages in any sort of disorderly conduct or destruction of property. For example, even though they can take your car out of your driveway, they cannot take it from a locked garage where they would have to break the lock to get to it. Even though they can take it from the gas station while you are paying for your gas, they cannot drag you out of the car to take it.
What happens after my car is repossessed?
After the car is taken, you may be able to work something out with the creditor to have the car returned to you. This will involve not only catching up your payments, but most companies will have a repossession fee that will be tacked on.
If you are unable to pay, and are unable to negotiate a new agreement with the creditor, then the following steps are likely to happen:
Under the law, the creditor must notify you in writing that the car will be sold to pay off the contract you signed. This notice also gives you the chance to "redeem" the property. This means that you have the chance to get the car back if you are able to come up with the rest of the contract price in full. If you cannot redeem the car, it will be sold.
The sale can be a private sale or a public sale; the notice will tell you which type it will be. After the car is sold, you will probably be sent a bill for a deficiency.
About Deficiencies
A deficiency is the difference between what you owed on the car when it was repossessed and what it brought at the sale. Most sales on repossessions result in deficiencies, sometimes in the thousands of dollars. Here's how it works:
Voluntary and Involuntary Repossessions
An involuntary repossession is one in which the creditor has to send someone out to find and repossess your car. This can result in extra expense for you in the end.
A voluntary repossession is one in which you take the car back on your own. While this will save you the repossession fees, it does not change your legal liability under your contract. You signed a contract to purchase a car for a set amount, and that amount is what you will be expected to pay. A common misconception is that a voluntary repo somehow looks better… it doesn’t. They don’t want the car! They want the money that you promised to pay!
Some Tips
o If there is something wrong with the car, and you decide you have made a bad deal, do not simply take the car back to the lot and leave it there. This will be a voluntary repossession and the deficiency problem discussed above will still exist. Every state has their own laws regarding buying new cars… used cars… “as is”…and lemon laws. Get some legal advice about your rights under your contract before you take such a step.
o If you find you cannot make your payments, see if you can negotiate with the creditor, or find someone to just take over the payments before you get in danger of repossession.