Avoiding car repossession is best achieved by making your payments on time, every time. Unfortunately, this is sometimes easier said than done. When you don't make enough to cover all your bills you might feel forced into forgoing credit card payments or even utilities in order to make a car payment. And sometimes there's still not enough; you miss one or more payments and you risk repossession. There are some things you can do to try to avoid car repossession, and they're best done when you first suspect you're going to have trouble making a payment.
What Not to Do
Don't wait until car repossession has occurred to call your lender. If you wait until the car has been repossessed, you're faced with 3 new problems. First, you no longer have a car. It's easier to keep a car than to try to get it back. Second, car repossession seriously damages your credit. Third, you've ended the trusting relationship between yourself and your lender.
When you missed the payment, your lender tried to contact you. At least, this is true in the majority of cases. They will call and perhaps even send a letter in the mail. Many people ignore these attempts at contact because they're embarrassed or ashamed that they're late, or they don't know what to say. This is a big mistake.
Chances are that even if you've ignored them for weeks, you'll find yourself calling as soon as your car is repossessed. But they know they've left you messages and tried to contact you while you were in default and you ignored them. It's going to be hard to foster an atmosphere of trust with that lender now. When you avoid all their attempts to contact you, they're left to assume that you're willfully defaulting.
Call Your Lender
When you realize you're going to have problems making a payment, call them and explain your situation. Most lenders will work with you and try to help you. They don't want to have to go to the trouble of repossessing the car and having to resell it, after all. They would much rather help you make your payments and keep the original contract.
It's beneficial for you, because if you wait until after the car repossession to try to get it back, you may have to pay the entire debt plus repossession costs at once. Or, you could reinstate the debt by paying what you owe, but you'll also have to pay all repossession costs. Talk to your lender about your financial problems and see what can be done to make it easier for you. Some will even waive a payment and add it on to the end of your loan. It can't hurt to ask.
Avoid Car Repossession at Purchase
When you enter into a loan agreement for a car, ask the lender if you can have a buffer clause included. You might be able to get a clause in your contract that allows you to skip one payment a year, or skip one and pay extra during the following months to make up for it. This clause can give you a cushion to help you avoid car repossession.
