Can I Stop a Repossession Before I Lose My Car?

Yes, you might be able to stop a repossession before you lose your car. A repo isn't the way you want to get out of an unaffordable auto loan situation though, since it can mar your credit reports for a long time. The good news is that you may not have to face a repossession at all – if you know the right steps to take to get back on track.

Stopping a Repossession on Your Car

The No. 1 tactic for halting a repo in its tracks is to not let your car loan get to that point in the first place. This is often easier said than done, but the biggest reason for a repossession is an auto loan default, so missing even one payment isn't ideal.

To truly stop a repo, you should talk to your lender at the first sign of trouble – before you miss a payment. In fact, it's the best course of action if you're unable to keep up with your car loan payments. This means knowing your finances, though, and when you're stretching them too thin.

Having a firm handle on your finances at all times isn't always easy. There's a simple calculation that lenders use that can keep your budget on track when you apply for an auto loan: your debt to income (DTI) ratio. Your DTI ratio shows how much of your available income is being used by your existing bills, and it can help you see where you are each month so you can get a handle on things.

Budgeting to Avoid Repossession

Let's look at some steps that you can take to curb the call of the repo man:

Calculate Your DTI

Knowing how much room you have in your budget is important. If your DTI ratio becomes too great, you may be running the risk of having more bills than you can afford.

Most subprime lenders use a DTI ratio threshold of 45% to 50% when they're determining your ability to take on a car loan. If your DTI ratio leans too far toward debt, then you know to be cautious and leave room in your budget for important payments like your auto loan.

To find your DTI, simply divide your total gross monthly income by your total monthly combined bill payments. The lower the percentage, the more room you have to breathe in your finances. When your debts outweigh your income, you might be in danger of missing a vehicle payment, or have to sacrifice another payment in its place.

Talk to Your Lender

If you feel your finances getting tight, take the time to talk to your lender and let them know what your situation is. Many would rather help you than have to repossess your car. One reason for this is because a repo costs the lender money, too.

If you're going through an unexpected hardship, let your lender know. Many lenders have the ability to offer a deferment. They may be able to halt your payments for a limited time, and add them to the back of your loan, giving you the break you need. Some may also be able to authorize a one-time late payment, depending on how much you owe and how late your payment is.

Consider Refinancing

If you're not behind on your payments yet, but your lender can't help you avoid repossession, you can look into refinancing your vehicle. Refinancing replaces one auto loan contract with a new one that has different rates or terms. This is typically done to save money on your monthly payment. Refinancing allows you to lower your interest rate, extend your loan term, or possibly both.

Refinancing has many qualifications to meet for both you and your car, including having your original loan for at least one year and having an improved credit score from when you first took it out. You can learn more about refinancing here.

If You Can't Avoid a Repo

If you already missed payments, or aren't able to stop a repossession, you still have a few more opportunities to regain the vehicle you want to keep. However, getting your car back after a repo means paying even more than you already owed, since you're responsible for paying the fees involved in collecting and storing your vehicle.

You typically have these three options for getting your car back after a repossession:

1. Redeeming your auto loan – To redeem your car loan, you have to pay it off in its entirety all at once, including late or missed payments, repo and storage fees, and any additional fees required. Many people who are facing repossession don't have this option because they aren't able to come up with the payoff amount.
2. Reinstating your auto loan – In order to reinstate your loan, it must be listed as an option in your contract, or you have to live in a state that allows loan reinstatement, and not all of them do. If you're able to reinstate your car loan, you have to make up all your missing payments, repo costs, and additional fees in one lump sum. Then, you're able to resume your loan as normal, with its original terms.
3. Buying your vehicle at auction – If your car has already been towed away, it's typically bound for the auction block. When a vehicle is up for auction, you're allowed to bid on it, and the lender is required to tell you when and where you can do so. If you're able to win the auction you get your car back. However, if your bid is less than what you owed, you're still responsible for the repossession costs, and the deficiency balance you owe the lender.

It isn't the end of the road if you aren't able to stop a repo before you lose your vehicle. There are a few options for getting into something more affordable.

Ready to Find a More Affordable Car?

If you're on the brink of a repossession, or have already lost your car to a repo, we're ready to assist you in getting back on the road the right way. One answer to explore before you slip into repossession territory is to consider trading in a vehicle you can no longer afford.

Here at CarsDirect, we've got you covered with resources and services every step of the way – from researching your next, more affordable car to starting the process of finding the financing you need.

It’s simple to get started, all you have to do is fill out our fast, free auto loan request form. Then, we'll match you with a local dealership that's signed up with subprime lenders who work with people in many unique credit situations.