If you're unable to keep up with your auto loan and it results in repossession, did you know that it may be possible to get your vehicle back? It's true, but it's not an option in every case. If you do have the option to get your car back from your lender, there are a few ways to go about it.
How Auto Repossessions Happen
The repossession of a vehicle happens when you default on your auto loan. This means that you let a payment (or two or three) slide – it all depends on the language in your loan contract. As soon as you miss a loan payment, even one day late is enough for some lenders to call a recovery company and send them after your car.
Since no one wants to go through a repossession, the first thing to do when you even think you might not make a payment is to call your lender – communication is key.
If you missed the boat on talking to your lender and a repo man is on their way to find your vehicle, you're not out of luck. You may be able to get your car back if you can come up with some cash. Before you jump to conclusions, you're not using the cash to pay off the repo man!
Getting Your Car Back After a Repo
You need to at least catch up on your payment(s) if you want to continue driving your vehicle. There are usually three options for getting back a car once the repo man hath come:
- Redeem your loan – Most states allow you to redeem your auto loan by paying the entire remaining loan balance, including any missed payments, repossession costs, and additional fees. This option isn't often used because most people that have fallen behind aren't able to come up with enough money to pay off the entire loan at once.
- Reinstate your loan – Reinstating a car loan is much more common than redeeming one. In order to reinstate your loan, you need to make up your missing payment(s) and pay any repo charges and any additional fees in one lump sum. Once you're caught up, you can continue making payments as normal. Not all lenders allow reinstatement, and it isn't available in every state. To use this option, it must be written into your contract that you have the right to reinstate, or you must live in a state that allows it.
- Buy your car back at auction – Once a vehicle is repossessed, it's typically sold at auction. Lenders are required by law to alert you to the pending sale, and they must include the time, date, and location of the auction, so that you have a fair chance to bid on it. If the car is sold for less than what you owed on the loan (including fees and repossession costs), you're responsible for paying the difference, called a deficiency balance.
Options for Buying a Car After a Repossession
Subprime lenders typically prefer that you wait at least a year after a repossession before attempting to get another auto loan. This isn't always an option, though. If this is the case, you should be looking for either a subprime lender or a buy here pay here dealership to help with your next loan.
Subprime loans, also known as bad credit car loans, are for new borrowers and people that are in unique credit situations. Many of these lenders don't work with people right after a repossession, but each lender and situation is different.
These lenders know that poor credit situations can happen to good people, and use more than your credit score to determine auto loan eligibility. They rely on your income, employment and residence stability, willingness to make a down payment, and more to judge if you have the ability to take on a car loan.
Another option that exists for people with less than perfect credit is a buy here pay here (BHPH) car lot. At these lots, the dealer is the lender, and they use in-house financing to get you the auto loan you need – they typically don't rely on your credit score for approval.
At a BHPH lot, if you have the income to make your loan payments and can provide a down payment, your chances of getting approved are often high.
Find a Dealer for Your Next Car Loan
After a repossession, you can get your car back if you can afford to redeem it, reinstate your loan, or buy it at auction. If these options don't work for you, it may be challenging to find a dealership that can get you approved.
CarsDirect wants to help. We're teamed up with a nationwide network of special finance car dealers that have lending options for borrowers with credit challenges. We’ll look for a dealership for you so you can save time and effort. Just fill out our fast, free, and zero-obligation auto loan request form, and we'll work to match you with a local dealer that knows how to help.
