The Cost of Vehicle Repossession

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

, - March 17, 2021

If your car gets repo'd, it's not the end of the line in terms of payments. Just because the vehicle's been towed away by a recovery company, doesn't mean you're off the hook for what you owe. You still have to foot the bill for your loan until the car sells – and pay for the repossession costs, too.

Repo Costs

You don't get to not pay your agreed-upon auto loan just because your lender had your car towed away. In most cases, not paying for your loan is likely what led to the repo in the first place. Once your car is hooked up to the tow truck, you're on the hook for even more money owed.

If your vehicle has been repossessed recently, you may have a short window of time to correct the error that got your car towed. Before we look at your options for keeping your car after a repo, let's look at the fees and charges you're now facing:

  • Remaining loan balance – Even if a recovery company has come for your car, you still owe your entire loan balance until the vehicle is sold.
  • Late or missing payments – Any late or missing payments that led to the repo are also still owed.
  • Repossession charges – When a lender has to hire someone to come and get your car, you can bet that you're going to incur those charges.
  • Storage fees – Your vehicle is typically held at a storage facility for up to or around 30 days. You can use this time to work out a way to get your vehicle back, but every day that your car’s there adds to your bill.
  • Deficiency balance – Once the vehicle's sold to someone else, either privately or at auction, the proceeds are applied to your loan balance. Any amount left over afterward is called a deficiency balance, and it's up to you to pay it.

Auto Loan Default is Expensive

Repossession is typically the result of defaulting on your auto loan. This can happen if you miss a payment, or if you otherwise break a condition of your financing. Lenders retain the right to repo your car for any of the reasons you agreed to by signing a financing contract because they're the lienholder. Their name is listed first on the vehicle title and is only removed once you complete your loan.

Once a recovery company drives off with your car in tow, your problems are far from over. Now you have a car loan to pay for on a vehicle you can no longer drive. You owe the balance to the lender until you make a plan to get back on track and get your car back, or until it's sold to recover some of the balance.

Can You Afford to Get Your Vehicle Back?

You typically only have a small window to correct default in the case of repossession. There's no hard and fast rule as to how much time you have to attempt to get your vehicle back. The law states that a lender must give borrowers a "reasonable time" to cure the situation before they sell the car. In many states, this gives you around 10 to 15 days to reclaim it – if you can afford it.

Getting your car back after repossession means taking one of the following actions:

Redeem your vehicle: To do this, pay the entire balance of your loan including all fees and charges incurred during repo. If you pay this amount in one lump sum your vehicle is returned and you own it free and clear.

Reinstate your loan: Reinstating your loan isn't allowed in all situations or all states. In order to reinstate, it must be allowed in your state or outlined in your auto loan contract, and you must pay all missing payments, plus repossession costs, and late fees. You then continue with your loan as scheduled. However, you typically aren’t given a second chance at reinstatement, so being late with another payment isn't an option.

Buy your car at auction: Your lender is required to notify you where and when the auction of your car is taking place, and you're allowed to go and bid on it. If you lose the auction, and the sale doesn't cover your loan balance, you're responsible for paying your lender the deficiency balance. If you win the auction and buy your vehicle for less than you owe, you still owe the lender the deficiency balance. If the sale of the car covers what you owe the lender, no matter who wins the bid, your loan gets paid off.

Avoiding Repossession

One of the easiest ways to avoid repossession is to not get to that point in the first place. Granted, this is easier said than done in some cases. Our advice is to contact your lender at the first sign of a tight budget. They may be able to change your due date or allow you to defer a payment or two – but immediate contact is usually required.

If you're worried about missed or late payments, or your auto loan is getting hard to handle, you may need to look for an alternative solution before it's too late. If you've had your auto loan for more than a year, you may be a candidate for refinancing. Refinancing gives you a new loan on your existing vehicle, typically with the intention of lowering your monthly payment to a more manageable amount.

There are a lot of requirements involved in refinancing a car, and not everyone's situation qualifies. If refinancing isn't in the cards, you may still have the option to trade in your vehicle for something more affordable before you get to the point of no return – when repossession is imminent.

Ready For a More Affordable Car Loan?

If you need to find a more affordable vehicle before yours is towed away, or if you need a car because yours was lost to repossession, CarsDirect wants to help. You can research new and used cars, and even find a dealership to work with for your next auto loan. We've been connecting consumers to special finance dealers for over 20 years – let us do the same for you.

To get started toward your next car loan just fill out our fast, free, no-obligation auto loan request form today, and we'll get to work matching you to a local dealership.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.

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