Can You Buy a Car With a Repossession on Your Credit Report?

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Content Manager

David Topham is the Automotive Content Manager for Internet Brands. He works as the lead editor for CarsDirect and Auto Credit Express, and contributes to those sites alongside other Internet Brands' properties like The Car Connection. He was born and raised in Michigan and is a graduate of Michigan State University.


, Content Manager - October 28, 2016

A repossession can negatively impact your credit for up to seven years, but it's still possible to buy a car with a repo on your credit reports.

What Happens When Your Vehicle Is Repossessed

When you get an auto loan, the lender owns the car until the loan is paid off, even though you're the one driving it. And if the loan goes into default, the lender can seize the vehicle. This act of taking back the car is known as a repossession.

In most states, the lender can do this at any point when the loan is in default, and they don't have to notify you beforehand. However, note that the laws and procedures governing repossessions vary from state to state.

The lender will then sell the repossessed car at auction and try to recover the money they lost. Even then, you will still be responsible for any difference between what it sells for and the balance left on your loan contract. Plus, you may also owe repossession fees and possibly other fees that can be added to the loan balance.

How Repossession Affects Your Credit

Not only can a repossession be expensive, it also negatively affects your credit for years to come. A repo can remain on your credit reports for up to seven years from the original delinquency date of the auto loan.

It will also cause your credit score to drop, usually around 60 to 240 points, depending on what your score was prior to the repo. Strange as it sounds, the higher your score, the greater the point drop generally is following the repossession.

But this doesn't mean that your credit has to stay down for seven years. The impact it has on your credit lessens with time, and you can always take action to improve your credit in other areas.

Buy a Car With a Repossession on Your Credit Reports

A repossession doesn't mean you can't get a car loan for seven years. There are lenders who are willing to work with borrowers with bad credit, even those who have a repo.

Of course, these lenders will still view a repossession as unfavorable. After all, you agreed to pay back money borrowed for a vehicle purchase and failed to do so. So, while possible, getting approved for a car loan after repossession is more challenging and comes with less favorable terms.

We say more challenging because most traditional banks and lenders won't be willing to work with you. Instead, you'll likely have to find a dealership with subprime lending connections. And even though an approval will come with a higher than average interest rate, a loan gives you a chance to improve your credit with every timely payment.

Tips to Help You Get Approved

A subprime auto loan is a little different than your traditional car loan. On top of the less favorable interest rates, the process of getting approved is more thorough. The lender will take extra care and closely evaluate your financial situation. Be prepared to provide income, employment, and residence verification, as well as a list of personal references.

Additionally, there's no guarantee that you'll be approved. But there are some things you can do to increase your chances of getting approved for a car loan with a repossession on your credit reports:

  • Pay off the deficiency balance ASAP – If there's a balance on your loan, you need to pay it as soon as possible. Paying this off quickly reduces the impact it has on your credit score, helping you in your credit repair efforts post-repossession.
  • Time is your friend – As a general rule, it won't be possible to get approved for a car loan until a year has passed since the repossession. That's fine because you should use this time to work on repairing your credit. You can check your credit reports for errors or missing information and have them corrected, repay any outstanding debts, pay down credit card balances, and establish a good payment history on your other credit accounts. These efforts can help you qualify for a better interest rate when it's time to apply.
  • Reduce the risk the loan represents to the lender – You can help your approval chances in several ways. First, you should save up for a down payment, which is usually a requirement on any bad credit auto loan. The bigger your down payment, the better your chances of approval usually are. Second, you can reduce the risk of the loan by choosing an affordable vehicle and keeping the loan term as short as possible. Finally, you can consider using a cosigner.

It also helps if you are working with the right dealership with the right lending connections. If you find yourself in this situation and you're struggling to find a dealer that can work with you, CarsDirect can help.

We have been helping people in all types of credit situations find hassle-free auto financing for over 20 years. Get the process started by completing our free, easy, and secure car loan request form today.

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, Content Manager

David Topham is the Automotive Content Manager for Internet Brands. He works as the lead editor for CarsDirect and Auto Credit Express, and contributes to those sites alongside other Internet Brands' properties like The Car Connection. He was born and raised in Michigan and is a graduate of Michigan State University.


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