Having a vehicle repossessed puts you in a difficult spot, particularly if you need the car to get to work, school, stores, or anywhere else. Fortunately, it’s possible to get your vehicle back after a car repossession. If you’re vehicle’s been repossessed and you’d like to get it back, or you’re at risk of a car repossession and want to prepare, here’s what you need to know.
Why a Car Repossession Happens
Generally speaking, a car repossession only occurs if you violate the terms of your auto loan. In most cases, that means failing to make your required payments, as that causes you to default on the loan. However, in some states, not having sufficient vehicle insurance may also trigger repossessions, even if you’ve made all of your payments on time.
How to Prevent a Car Repossession
If you’re at risk of a vehicle repossession, but one hasn’t occurred yet, preventing it from happening is potentially an option. Contact your lender immediately to discuss the issue. If missed payments are the reason for the car repossession, you might be able to negotiate better terms or qualify for a program that gives you more time to make up any missed payments.
For vehicle repossessions relating to insufficient insurance, you’ll need to find a car insurance provider and get a policy that meets the terms of the loan. Speak with your lender to determine precisely what coverage is required. Then, shop around for insurance that offers a compatible policy. Finally, once you have the policy, contact the lender again to provide them with your new coverage details.
How to Retrieve Your Vehicle After Repossession
Contact Your Lender
If your car has already been repossessed, the first step you’ll need to take is to contact your lender. Find out why the vehicle repossession occurred, as well as whether retrieval is an option.
After a repossession, lenders may prepare to auction the car. However, some states have mandated reinstatement or redemption periods, limiting how quickly a lender can move forward with an auction. As a result, you may have time to get your vehicle back without having to deal with the auction process, depending on how long you wait before reaching out and whether you can pursue alternative solutions.
In other cases, a lender may resell the car instead of auctioning it. Again, there is commonly a minimum waiting period before the lender can move forward with reselling, so ask about the timeline during the call.
Do Some Research
What options are available for getting your car back may vary by state. As a result, after speaking with your lender, it’s wise to research local laws regarding repossessed vehicles. That way, you’ll know whether what the lender stated aligns with any relevant legislation in your area.
In most cases, you can perform a simple online search to get an overview of applicable state laws. Simply search for “vehicle repossession [your state]” as a starting point. Alternatively, you may be able to reach out to your state’s attorney general’s office or a local consumer advocacy group for information.
Reinstate the Auto Loan
In specific states, reinstating the loan is a potential option. With this approach, you’d need to pay the entire past due amount along with any repossession-related fees, such as storage and towing costs, within a specific time period.
If reinstatement is available in your state, the lender will outline a timeline for providing them with the required funds and the dollar amount needed. In most cases, the timeframe is relatively short, usually coming with a deadline that’s 10 to 20 days after the date of repossession.
Whether a reinstatement is worth pursuing depends on your financial situation. Acquiring the needed cash is potentially challenging, particularly if you were already struggling to make the monthly payments. However, it’s worth considering if gathering up the money is an option.
Redeem the Auto Loan
Redeeming the auto loan involves paying off any missed payments and the remaining balance in full, as well as covering any repossession-related fees. In many cases, this requires significantly more funds than a reinstatement, as you’ll need to cover the entire balance due. However, if you pay in cash, it also means the vehicle is formally yours in the end, which is beneficial.
If you want to pursue this option after a car repossession, ask the lender for the pay-off amount, including any repossession-related fees. Additionally, find out the timeline for the redemption, letting you know when you’d need to provide the lender with the funds to get your car back this way.
Buy Your Car at Auction
If the lender decides to auction off your vehicle, you can attempt to buy it back then. Buying a car at an auction is relatively simple, but there are some costs involved.
First, you’ll need to register for the auction, and that usually comes with a fee. When you register, you also need to show that you have enough money to potentially participate. That could include providing a credit card number and a letter of guarantee from your bank or bringing cash to the event, depending on what the auction accepts.
Once you register and arrive on-site, you’ll get a numbered paddle. The auctioneer will present a vehicle – discussing its features and the starting price – and open it up to bidding. The auctioneer will then state new prices, and those who are willing to pay the indicated amount raise their paddle to make their bid. That process continues until no further bids come in, making the last bid the purchase price for the associated bidder.
Raise Your Paddle
When your car comes up, you’ll raise your paddle to correspond with the amounts you’re willing to pay. Just keep in mind that you’ll need to cover the entire cost at the end of the auction, as well as a buyer’s premium – which is typically about 10 percent of the bid price – so don’t place a bid that you can’t support financially.
The process is similar for online auctions; you just don’t have to deal with a paddle. Instead, when the auction goes live on the designated, it will show an initial price. Bidders can then submit offers over a specific time period.
Some online auctions show the updated price based on the submitted bids, giving others a chance to outbid the current leader. Others use a sealed-bid process, where the bid amounts aren’t displayed, essentially encouraging all participants to submit their best offer from the beginning.
Regardless, immediate payment is typically required for online auctions, too. As a result, you need to ensure you can cover the purchase price and any buyer fees.
Will You Owe Money After an Auction If You Don’t Buy the Car Back?
It’s important to note that having the vehicle go to auction doesn’t mean you’re immediately clear of the original loan. Whether the loan is complete after the sale primarily depends on the auction price.
If the amount the car sold for at auction meets or exceeds what’s left on your loan, then you won’t typically owe any money to the lender. However, if the auction sale price is less than the remaining balance of your loan, you are typically responsible for the difference.
For example, let’s say that the remaining loan balance and any required fees is $5,000 in total. If the vehicle sells for $5,000 or more at auction, the amount is covered, so you won’t owe any more money. However, if the car sells for $4,000 at auction, you’d still owe $1,000.
If you owe money, you’ll need to pay it like any other debt. Failing to do so can cause the account to go to collections or may make it possible for the lender to sue you for the amount due.
Owe Money After an Auction If You Don’t Buy the Car Back
Should You Retrieve a Vehicle After Repossession?
Even if you can retrieve your vehicle after repossession, that doesn’t always mean that you should. Look at your broader financial situation. Determine whether you’d be able to cover the costs of car ownership after a reinstatement, redemption, or auction purchase.
If so, then getting your vehicle back after a car repossession isn’t necessarily a bad idea if you need it for transportation. If not, then you may want to let it go and explore alternative forms of transportation, such as public transit or a cheaper vehicle you can buy with cash.
Additionally, regardless of whether you retrieve the vehicle after repossession, the action may still show on your credit report. As a result, you’ll want to focus on rebuilding your credit. Make on-time payments on any other debts, pay off your debts as soon as possible, and avoid opening new accounts as much as possible. That way, you can regain your footing.
Have you ever had to retrieve a vehicle after repossession and want to tell others about the experience? Did you go through a car repossession, decided not to get the vehicle back, and want to let others know what that was like? Share your thoughts in the comments below.
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Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.