Cars have become a necessity to us, whether it’s to get to work or grocery shopping we can’t do without them. Since most of us can’t pay cash to own a car, we get into financing agreements to pay for one. When you sign a lease or loan, and miss payments, events like car repossession might take place.
What is car repossession?
When you get into a financial contract, you give the lessor or creditor the right to take the vehicle when you breach the agreement. The company you choose will have the rights to the car until you settle the amount you owe. Also, you will fully own the vehicle when the lease ends, and it is vital to keep up with the payment as per the contract. Car repossession may take place without warning or any court proceedings.
Furthermore, the parent company may sell the contract to another company to collect the vehicle. They will come for some or all of the money owed, keeping your payments up to date is very important. Your rights will vary according to what is on the contract.
What leads to car repossession?
The first cause is always missing payments, as we mentioned. Whenever you have outstanding arrears, the company owed will make sure to collect the vehicle by any means. Failure to make payments on the dates agreed upon will go down as a default on the contract. Defaults give creditors the right to possess the automobile at any given time.
Another reason that may lead to car repossession is car repairs. If you leave your car at a repair shop because you don’t have enough money to pay for it. The mechanic will have to report the vehicle to the creditors if you haven’t gone for the automobile after several days. Mechanics have to report such cases to avoid what is known as a mechanics lien on the title. Once reported, you will have to pay the cost of the repairs, plus towing and storing charges to get your car back. Additionally, if the creditor picked your vehicle even when you are current on your car note, it is officially repossessed.
Also, getting your automobile towed and stored in a county or city compound may lead to car repossession. Your creditors may decide to leave the car impounded, forcing you to pay the charges while also repaying the loan. If the creditors pay for the towing fees, you must pay the amount and storage charges to get the car back. However, you may ask for the costs to be rolled into your loan.
Inadequate insurance and voluntary car repossession
In some states, letting your insurance coverage lapse can be considered a default. Also, not having the proper insurance can lead to the repossession process. Creditors who believe they are at risk of repossession may voluntarily contact the lender to come and collect the car. You may still be required to pay the remaining amount after they sell the vehicle.
What happens during car repossession?
Once you break the contract, automatically, the car is taken without any notice or warning. They may have to seize the vehicle on your property. Luckily, the creditor cannot cause a breach of peace, meaning using physical force or taking the car in a closed garage. Moreover, any personal possessions left in the vehicle cannot be on the market.
Once they have the car, the lenders may decide to sell the car or keep it. You may be permitted to bid for the automobile at the auction. In addition, you can redeem the car by buying it for the full amount owed to the company. As you reclaim the vehicle, you will cover the costs incurred during the repossession process. In some states, you can reinstate the loan to regain the car.
Reinstating the loan will allow you to pay overdue payments and repossession expenses, then you will continue making payments. Sometimes selling the car doesn’t cover the amount owed financing the contract and costs. The difference is known as a deficiency balance, and the creditor may have to sue you to recover their money. If the vehicle goes for a higher price, then the creditors must refund you the extra cash.
Preventing car repossession
Contacting your creditor when you feel that you may be unable to make your payment is essential. You may enter into some agreement with the company to accept a late payment. Furthermore, you can try and negotiate a revised payment plan. Being in contact with the creditors is essential, and it is better than trying to hide the vehicle.
What is a lien on a car?
When your car loan is approved, you will come across the term lien. A lien on a vehicle safeguards the lender, and it is the lender’s legal right to the car until you clear payment. The car acts as collateral when you miss payments. Additionally, the borrower is required to take out full insurance coverage, both comprehensive and collision coverage.
The vehicle title will remain with the auto lender, apart from them being the lienholder. The lien is released when the loan gets cleared. A release document is sent to the DMV by the lienholder when you finish the loan. Moreover, the vehicle’s title will be updated and sent to you; also, you may receive a copy of the title. Whenever you’re buying or selling a car, always pay attention to the lien.
What do you do when they have your car?
As we mentioned earlier, personal possession found in the vehicle is still your property. The repossessing company may be required to inform you of any personal items they find in the car. You can speak to your attorney in case you find items missing in the car.
If a creditor won’t give you an extension or amend the contract agree to a voluntary repossession.
Taking the vehicle to them will save you money on the repossessing charges incurred. You’ll still be liable to the deficiency balance, and the late payment and repossession will be in your credit report. Additionally, the credit report will remain on your record, so it is crucial to clear the debt. We recommend being knowledgeable on your rights and consumer protection laws.
Getting your car back
Before you get your vehicle back, there are a few factors you need to consider. Sometimes letting the vehicle go might be the best thing to do instead of trying to rescue it. Will you be able to pay for repairs and insurance if and when you get back the automobile? Living within your means is a healthy way to live. And, if you find you can’t cover the costs of owning a car, consider public transport.
When you can’t pay for essential repairs, you might end up in a severe accident. Additionally, if you get in an accident without proper insurance, you can go to jail for a long time. Also, if you are struggling to fuel the automobile, you won’t be able to use the car often. Having a car isn’t as cheap as it may seem because you’ll need to replace worn out parts often.
If you can’t manage the expenses that come with owning a car, it’s better to let it go. Moreover, if you have access to an excellent public transport system, make use of it. The time, money, and effort you could have put into reinstating the loan could come in handy somewhere else. And, it is better to file for bankruptcy before the bank or lenders come for the automobile.
Additionally, if you are way behind on your bills with no hope of turning things around, bankruptcy should be considered. File before the repo agency calls, and have time to come up with a plan to make the payments. Talk to a bankruptcy lawyer on how to go about the process and see whether it is possible.
What rights do you have when your car is repossessed?
Knowing your rights when it comes to car repossession is vital. It will protect you from being taken advantage of and being harassed as they repo the vehicle. Depending on the state you are in, there are some laws repo agencies can’t break as they try to get to the car. Get an attorney in your local area to help you understand what the contract entails. Also, you can sue the lender if you feel that they are violating your rights in any way.
In some situations, you can call the police, but remember repossession laws vary. The police are required to keep the peace and may have reason to intervene when the repo company breaks the law. Local authorities are not supposed to help the repossession team in any way. Plus, the situation is a private one and must be settled in a court of law.
Remember, repo companies are not allowed to trespass on private property to retrieve the car. But, in some situations, they may have to take the car from your driveway. At no given time should they enter your garage to repossess the automobile.
Avoid car repossession!
Make sure your payments are updated in due time. It is better to pay in excess and have some breathing room if you have the means to. Be in contact with lenders if you feel that you might be in a financial rut and come to an agreement.