The short answer is yes. If you have a loan or line of credit secured by your vehicle, a finance company can repossess your vehicle if you default on your payments. This applies to both new and used vehicles. It’s important to understand how repossession works and what steps a finance company can take if you don’t make your payments. Knowing this information can help you take steps to avoid repossession.

What is Repossession?

Repossession is the process of a lender taking back property that was used as collateral for a loan or line of credit. When you get a loan from a finance company to buy a car, the finance company holds the title to your car until you pay off the loan. If you fail to make your payments, the finance company can take the car back. This is referred to as repossession.

Repossession Process

When you default on your loan, the finance company will send a letter giving you notice of the default and a chance to remedy the situation. You will usually have a certain amount of time to make the payments and bring the loan current. If you don’t do this, the finance company has the right to take the car. The repossession process usually begins with a repossession agent coming to your home or place of business to take the car. The agent may or may not have a court order. In some states, the agent must have a court order. The agent will usually either tow the car or drive it away.

What Happens After Repossession?

After the car has been repossessed, the finance company will sell it at a public auction. The proceeds from the sale will be used to pay off the loan, plus any fees and costs associated with the repossession and sale. Any remaining balance is considered a deficiency balance and you are still responsible for paying it. The finance company may also report the repossession to the credit bureaus, which can have a negative effect on your credit score.

What to Do if Your Car is Repossessed

If your car has been repossessed, the first thing you should do is contact the finance company to find out what you need to do to get the car back. You may be able to reinstate the loan or make arrangements to pay off the balance. You will also want to make sure you know how much you owe and what fees and costs have been added to the balance. Be sure to get all of this information in writing.

How to Avoid Repossession

If you are having trouble making your car payments, contact your lender right away. Many lenders are willing to work with you to make arrangements to get caught up on your payments. You may be able to negotiate a lower payment, extend the loan term, or make other arrangements to get caught up. Don’t wait until the lender has started the repossession process. The sooner you contact the lender, the better.

Conclusion

Repossession is a serious matter and should be avoided if at all possible. The best way to avoid repossession is to make your payments on time and keep your loan in good standing. If you find yourself in a difficult financial situation, contact your lender as soon as possible to make arrangements to get caught up. Knowing what to expect in the event of a repossession can help you take steps to avoid this scenario.