If you have sold a car but the buyer has breached the terms of the contract, then you are allowed to repossess the vehicle. Repossessing your car means that you reclaim it as your own due to the failed contract or lack of payment from the new owner.
If the person you sold your car to is not complying with their contractual obligations, then you are eligible to repossess the vehicle immediately.
In theory, repossessing a car is simple; you just take the car back, and then do with it what you please. However, the process of a repossessing a car successfully and legally can sometimes be tricky, so it’s imperative that you go about it correctly.
Method 1 of 2: Repossess the car on your own
Step 1: Locate the car that you want to repossess. If you know the buyer of your car, it may be easy to locate the vehicle.
However, if the buyer is aware that you are going to attempt to repossess the vehicle, then they may be evasive, or have the car hidden from you.
One of the best places to look for the vehicle is at the buyer’s place of employment, as that is usually a public area, and easy to find. If you cannot locate their place of employment, the best approach is to visit the buyer’s home address (which you should have from the selling process).
Step 2: Approach the vehicle when it is in a public place. The right to repossess your car does not come with the right to breach the peace.
In other words, you cannot disturb or damage the buyer or the buyer’s property when repossessing your car.
Note: If you locate the car in the buyer’s closed garage or gated driveway, for instance, you are not allowed to break and enter to get the vehicle. Instead, wait until it leaves the private property, and is in a public area. This may mean you have to wait outside the buyer’s home until they leave with the car, and then follow them to wherever they park.
Warning: If you breach the peace while repossessing the vehicle, then the buyer is eligible to sue you.
Step 3: Verify the VIN. Once you have found the car, check the vehicle identification number (VIN), to make sure that it is actually the one you are trying to repossess.
The VIN is located at the front driver’s side corner of the dashboard, and is visible through the windshield.
Warning: If the VIN is not that of the car that you sold, then it is not the correct vehicle, and attempt to repossess it would be theft.
Tip: Before searching for your vehicle, make sure that you have the correct VIN information on hand.
Step 4: Repossess the car. There are countless ways to take the vehicle back into your possession. You can tow the car yourself, or hire a towing service to tow it for you.
You can use the key code that came with the vehicle to have a spare key made, and use that to enter the vehicle. You can also pick the lock, or call a car service to help you enter the vehicle in the same way that you do when you lock your keys in the car.
Step 5: Check the condition of your vehicle. Make sure that the vehicle is in the same condition as when you sold it.
After repossessing your car, hire a certified mechanic, such as the ones at YourMechanic, to perform an inspection. If your car has been damaged since you sold it, you will be eligible to receive payment from the buyer.
Method 2 of 2: Use a repossession specialist
Step 1: Hire a repossession specialist. If you are not comfortable repossessing your vehicle on your own, or if you do not have the time to do it, then you can hire a repossession specialist.
After giving the specialist the VIN and the buyer’s information, the specialist will then repossess the vehicle for you.
- Tip: Make sure to do your research and only hire a repossession specialist that is reputable and has positive reviews.
Step 2: Check the condition of the repossessed vehicle. Just like when you repossess the vehicle yourself, you’ll want to check the condition of the vehicle after a repossession specialist has returned the car to you.
If the car is in noticeably worse shape than when you bought it, you will be eligible to receive compensation.
After repossessing your vehicle, you can keep it as your own, or you can sell it to a new buyer. If you opt to sell the vehicle once again, then you can receive a deficiency balance, depending on what you sell the car for.
A deficiency balance is the difference in the original selling price, and the price you got paid. For example, if you agreed to sell the car to the first buyer for $20,000, but only received $2,000 before you repossessed the vehicle, and then re-sold it for $15,000, then you are still $3,000 short of the initial agreed upon price. You are therefore entitled to a $3,000 deficiency balance from the original buyer.
Furthermore, you can also re-sell the vehicle to the original buyer, as long as they work with a loan service to pay you in full, so that the issue does not arise again.
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Repossessing a car isn’t a pleasant task, but knowing the correct legal steps can at least make it an efficient one.
When your car buyer defaults on his or her payments, you need to be smart about how you proceed to get your car back. If you fail to follow the rules or things get out of hand, you could potentially face civil liability or even criminal charges.
To repo your car the smart and law-abiding way, here’s a quick legal how-to:
1. Know Your State’s Repo Laws.
Some states may require that you give notice to the local police department that you will repossess (or have repossessed) your car. For example, New York requires such notice immediately following the repo by personal appearance at the local station house. Indiana, on the other hand, requires repossession agents to provide notice and information about the vehicle either before or within two hours of repossession.
2. Make Sure the Debtor Is in Default.
In general, a car cannot be repossessed until the debtor (borrower) is in default. You should have the right under your auto sales contract to repossess the car when the buyer misses payments, but the terms of car sales agreements may differ. One missed payment is generally enough for default, as long as your agreement does not allow grace periods for late payments.
3. Locate and Verify the Car.
You can’t repo a car if you don’t know where it is. You may start by providing the VIN (Vehicle Identification Number) and license plate number to police. If you have located the car on your own, verify its identity with the VIN.
4. Choose the Method to Repossess.
Once you know that it’s your car, the buyer is in default, and you’ve complied with state laws, then it’s time to choose a way to physically take back possession of the vehicle. You may consider:
- Calling a tow truck and having the car towed to your residence,
- Contacting a paid repo agent, or
- Using spare or replacement keys to unlock and start the car.
5. Do Not Breach the Peace.
You may be legally entitled to repo your car, but you shouldn’t commit an illegal breach of the peace to take it back. In some states, this includes removing your car from a closed garage without permission.
Keep in mind, you may also be committing trespass if you enter private property without permission in order to repo your vehicle. Even if you are legally entitled to enter property to repo your car, you may want to avoid any method that may lead to a violent confrontation.
Need More Help?
If you have a valid vehicle sales agreement and your buyer is truly in default, the law should be on your side. For more personal guidance, consult an experienced collections lawyer near you.
Are you facing a legal issue you’d like to handle on your own? Suggest a topic for our Legal How-To series by sending us a tweet @FindLawConsumer with the hashtag #HowTo.
You rely on your car to get you places. Without it, you may be unable to get to work, drive your kids to school or run errands. Having your car repossessed is a problem that quickly spreads to other areas of your life.
Vehicle repossession happens when you fail to make payments on a vehicle with a loan or lease. Finding yourself in danger of car repossession requires swift and informed action. We spoke with two experienced lawyers to find out how to deal with auto repossession, what rights you have if it happens to you and how to prevent a repossession before it’s too late.
How auto repossession works
In some states, your creditor or lessor can repossess your car the first time you default on your loan or lease. By failing to make a car payment once, you are at risk of losing your vehicle to the repo man. Your creditor has the right to come onto your property and seize your vehicle without notice. Attorney John-Paul LaPré cautions that your financial responsibility is not absolved even after your vehicle is taken: “Debtors often believe that when the car went away, so did the loan. This is not so.”
After repossession, the lender could auction off the vehicle if you don’t have enough funds to cover the balance owed on the car. If the car sells for less than what you owe, you might be held liable for the deficiency — the difference between the sale price and your balance.
The debtor will send written notice of the deficiency amount. This amount is often much higher than what you owed on your original balance. LaPré notes that these written notices usually “threaten lawsuits if the deficiency is not paid.”
What to do if your car is repossessed
1. Pay off the repossessed car
Bankruptcy lawyer Steven Striffler notes that you have the right to “redeem the vehicle for the outstanding loan balance plus repossession costs before the lender may sell the vehicle.” If you have the funds, paying off the car is the fastest, most effective course of action.
If you can’t pay off your balance, call your lender to see if you can negotiate a “workout,” an arrangement between you and your creditor.
3. File for bankruptcy
If a workout is unsuccessful, you could consider filing for bankruptcy. If you act quickly, you may be able to file for Chapter 13 bankruptcy and get the car back before it’s sold. Striffler says that depending on the circumstances, this action “may allow the borrower to retain or regain possession of the vehicle and possibly modify the terms of their loan.”
4. Participate in the auction
If you haven’t come to an agreement with your lender, they might decide to sell your repossessed vehicle at an auction. If you have sufficient funds, you can buy back your car.
5. Pay the deficiency
If you don’t buy the car back, you are still held responsible for the deficiency. You will receive a letter with the deficiency amount. If you refuse to pay this amount, the creditor could take legal action against you.
Understand your rights
Your creditor has the right to repossess your vehicle if you don’t make timely payments, but you also have legal rights in the process of repossession.
What a creditor cannot do
Avoiding car repossession
Taking action to prevent your vehicle from being repossessed will make your life easier going forward. Make sure you can make payments on time before committing to a lease or taking out a loan for a car.
If you’re late on a payment, LaPré suggests you review the contract you signed when you got the car. The contract should say what it means to “default” on your loan or lease. “Don’t let it get out of hand,” LaPré says. “Make a late payment ASAP, and be certain to include all late fees and other valid charges.”
Contacting your lender to negotiate a solution when you’re in default is better than getting in touch after a repossession. “Don’t just sit there waiting for the repo man,” LaPré says. “Get in touch with the lender. Often they will negotiate something that may be much better than repossession and lawsuits.” For instance, it may be possible to reinstate or refinance the loan, or to surrender the car.
If you can’t work out a deal with the bank, LaPré recommends consulting an experienced bankruptcy lawyer.
Having your vehicle repossessed is the worst-case scenario for both you and your lender. Although car repossession brings some serious repercussions, fortunately there are ways to avoid it.
What Is Vehicle Repossession?
Simply put, vehicle repossession means your lender or lienholder—whether it’s a bank, credit union, or dealership— takes back your vehicle because you’ve failed to make the monthly payments.
Lenders are able to do this because car loans are security loans; this means the lender grants the loan based on collateral (the vehicle) and can repossess that collateral in the event you don’t make your payments.
Generally, car repossession occurs after a series of missing or late payments without any communication or agreements with lenders.
NOTE: Exact vehicle repossession laws vary by state. Consult your State Attorney General or local consumer protection agency for car repossession laws in your state.
Auto Loans and “Charge Offs”
When a loan is “charged off” after a vehicle is repossessed, typically it means the lender decided the loan was uncollectible. In such cases, the lender takes a business loss on the loan.
However, a “charge off” doesn’t mean you’re off the hook. Your credit score still takes a hit, and the lender can sell the auto loan to a collection agency that will attempt to collect the remainder of the loan (including interest) from you.
How You Can Avoid Repossession
The simplest way to avoid having your vehicle repossessed is to make your monthly payments on time.
However, if you’re facing missing or late payments, contact your lender immediately to work out an arrangement. Most lenders are willing to work with you, to an extent, because just as you don’t want to lose your car, they don’t want to lose out on their auto loans.
Read our Missing and Late Payments page for more information.
What Happens After Vehicle Repossession
Reinstate or Redeem the Auto Loan Contract
In some states (and depending on the lender), it’s possible to get a repossessed vehicle back by reinstating or redeeming the auto loan contract. Both options can be costly.
When you reinstate your auto loan contract, you must pay the:
- Past due monthly payments.
- Any repossession and storage costs.
When you redeem your auto loan contract, you must pay off the entire car loan, in addition to any repossession and storage costs.
Pay the Deficiency Balance
Unless you reinstate or redeem your auto loan contract, the lender will probably put the car up for auction. Chances are high you’ll have to pay a deficiency balance on your repossessed vehicle.
The deficiency balance is the difference between the amount your vehicle sells for and the amount you still owe on the auto loan. Thus, you’ll be paying on a vehicle you no longer own.
Paying the deficiency balance is a common repercussion of vehicle repossession.
Repossession & Your Credit Score
Having a vehicle repossessed leaves a nasty scar on your credit history, which, of course, affects your overall credit score. Poor credit scores make it difficult for you to do everything from getting another loan to even landing a job.
Learn more about how you credit score affects your life in our page on Credit Reports.
Voluntarily Surrender Your Vehicle
Voluntarily surrendering your vehicle, also known as “voluntary repossession,” works the same way as regular repossession except you’re initiating it and, as such, you might be able to avoid the fees associated with vehicle’s physical repossession. However, you’ll still owe the difference between your current auto loan and what the vehicle sells for, and your credit score will still take a hit.
Just like you would with regular repossession, you should avoid voluntary repossession at all costs. Contact your lender and take all necessary steps to work out a deal.
In many states, your lender can take your car as soon as you default on your loan or lease. Your contract should say what could put you in default, but not making a payment on time is a typical example.
Once you’re in default, the lender may be able to repossess your car at any time, without notice, and come onto your property to take it. But the lender can’t “breach the peace” when they take it. In some states, breaching the peace includes using physical force, threatening to use force, or even removing your car from a closed garage without your permission.
Electronic Disabling Devices
When you got your car loan, you might have agreed to have a device on your car that prevents it from starting — sometimes called a “starter interrupt” or “kill switch” — if you don’t make your payments on time.
Depending on your contract with the lender and your state’s laws, using a kill switch might be considered the same as a repossession or a breach of the peace. How your state treats the use of these devices could affect your rights. Contact your state attorney general if you have questions.
Selling the Vehicle
After your vehicle is repossessed, your lender can either keep it to cover your debt or sell it. In some states, your lender has to let you know what will happen. For example, if the car will be sold at a public auction, your state’s laws might require the lender to tell you when and where the auction will happen so you can be there and bid. If the lender sells the car privately, you may have a right to know the date of the sale.
Either way, you may be entitled to buy back the vehicle by
- paying the full amount you owe, which typically includes your past due payments, the entire remaining debt, and costs related to the repossession, like storage, sale preparation, and attorney fees; or
- bidding on it at the repossession sale
Some states have laws that let you “reinstate” your loan by paying the past-due amount plus your lender’s repossession expenses.
Personal Property in the Vehicle
Your lender can’t keep or sell personal property found inside your repossessed vehicle. In some states, your lender has to tell you what personal items were found in your car and how you can get them back.
Paying the Deficiency
The difference between what you owe on your contract (plus certain expenses) and what your lender gets for selling the car is called a “deficiency.”
For example, if you owe $15,000 on the car and your lender sells it for $8,000, the deficiency is $7,000 plus any other fees you owe under the contract — like fees related to the repossession, early termination of your lease, or early payoff of your financing. In most states, your lender can sue you for a deficiency judgment to collect the balance owed, as long as it followed the rules for repossession and sale.
In rare cases, if your lender sells your car for more than what you owe (including the lender’s expenses), the difference is called a “surplus” and the lender may be required to provide the surplus funds to you.
Talking With Your Lender
If you’re having trouble making car payments, contact your lender as soon as possible. Many lenders will work with customers they believe will be able to pay soon, even if the payments are slightly late. You might be able to negotiate a delay in your payment or a revised schedule of payments. If you can reach an agreement to change your original contract, get it in writing to avoid questions later.
If you can’t reach an agreement, your lender may demand that you return the car. If you agree to a “voluntary repossession,” you might pay less in fees. But even if you return the car voluntarily, you’re still responsible for paying any deficiency on your contract, and your creditor still may put the late payments or repossession on your credit report.
For more on how to deal with debt, go to ftc.gov/debt.
Report a Problem
Contact your state attorney general or local consumer protection agency to learn more about your rights and specific repossession requirements in your state, and to report lenders who aren’t following the rules.
If you’re behind on your car payments and your creditor is threatening to repossess your car, here are some helpful suggestions.
- Contact your creditor when you realize that you will be late with a payment. Many creditors will work with you to set up a payment plan.
- If the creditor agrees to a change in your payment arrangement, make certain you get it in writing. If you don’t have the change in writing, the original contract still remains in effect, and if you are late, the creditor still has a right to repossess.
- If you miss a payment or default on your contract in any way, such as letting your insurance coverage lapse, your creditor has the right to repossess your car.
- A voluntary repossession occurs when you return the financed vehicle in an attempt to relinquish your responsibility.
- Your creditor is not required to give you any advance notice before repossessing your car. The creditor or its repossession agent is allowed on your property to seize the vehicle as long as there is not a “breach of the peace.”
- If you think your car is in danger of being repossessed, it is a good idea to remove all of your personal items from it as soon as possible. After the vehicle has been repossessed, it can be difficult to get back your things even though the creditor has no legal right to keep them.
- Once your car has been repossessed, your creditor has the right to ask you to pay the late payments plus the cost of repossession. The creditor may also demand that you pay off the balance of the loan in full. You may wish to consult with an attorney for advice on your legal rights.
- If you are not able to pay these costs to get your car back, the creditor has the right to sell it through a public or private sale. Before reselling your vehicle at a public sale, the creditor must notify you of the date, time, and place of the sale. You may attend the sale and bring bidders if you want. If the creditor sells your car at a private sale, the creditor must notify you of the date after which the car will be sold.
- After the vehicle has been sold, you will be notified by the creditor. If the sale doesn’t raise enough money to cover your loan balance, the difference, which you still owe, is called the “deficiency balance.” If proceeds from the sale exceed your loan balance and the cost of repossessing your vehicle, the creditor must refund the difference to you.
Remember, it is easier to try to prevent repossession before it happens than to deal with it after the fact. If you default on your contract or you’re concerned that you might miss a payment, contact your creditor.
Repossessed vehicles, also known as repo cars, are those lenders have taken back from the registered owners. When car owners fail to make their payments on a vehicle, the lender hires a repossession company to reclaim it, sometimes without the owner's knowledge. Repossession usually occurs after an owner has missed monthly payments for an extended period and cannot resolve the problem with the lender.
Many repossessed cars are priced well under fair market value because of the negative stigma associated with the previous owner's circumstances. People who might consider buying a repo car assume that the owner's financial struggles prevented them from properly maintaining the vehicle. In some cases, an owner may have abused the vehicle as a retaliatory tactic against the lender upon learning the financial institution's intention to repossess the car. On the other hand, it is possible to find a repossessed car in excellent condition. Whichever is the case, it is vital to obtain a thorough inspection of the vehicle before purchasing it.
If you want to buy a repo car, there are a few primary sources for such vehicles. These include lenders, auctions, repo companies, and used car dealers.
Some banks will make their repossessed vehicles directly available to the public. For them, this is the fastest way to get their money back on a loan that has gone bad. In this case, they accept closed offers for a period and sell the vehicle to the highest bidder.
Using the lender as a source, you can potentially get an excellent deal if the bank is in a hurry to unload their repo inventory. However, this approach requires some research on the buyer's part.
The effort begins with identifying lenders that are selling their repo vehicles directly to the public. Also, keep in mind these vehicles are often not prepped for sale since they have been sitting in lots from the time they were repossessed. They are generally in the "as-is" condition, which means they may have cosmetic or mechanical issues. And the buyer typically will not even get to see the vehicle until their bid is accepted. Before bidding, be aware of the car's general market value based on make, model, year, and mileage.
If your bid is accepted, be sure to request to see the vehicle before signing the purchase paperwork. And if the opportunity to mechanically inspect the car is available, bring a mechanic with you.
Auctions are a good way to find the vehicle you want at the price you are willing to pay. Having lots of choices is probably the biggest benefit of auctions. You also get an opportunity to look at the vehicles before deciding on which ones to bid. And of course, there is always the possibility that you can acquire a car you want at a great price.
But competition auctions can be stiff since bidders can include used car dealers, even at auctions that don't require a dealer license. A well-attended auction could have hundreds of buyers present. And there is usually a registration fee to participate.
For auctions, it is necessary to have cash on hand or pre-approved financing in place. And since everything is sold "as-is," having a certified mechanic along with you will help to ensure your purchase has no significant issues.
Repo companies are the middlemen between the lender who has repossessed a vehicle and the buying public. A buyer can find these companies online, do a quick search of their inventory, and place a bid, all in one sitting. So, this route can be very convenient.
Also, unlike banks and credit unions, repo resellers may take the time to clean up the vehicle and ensure that it is in proper working condition. And they may allow you to drive the car before purchasing.
From a pricing standpoint, a reseller will typically want more for a vehicle than buying directly from a bank or at an auction because they will be adding their fees to the bottom line. But in most cases, resellers are interested in quick sales and high volume, so the price will still likely be on the low side.
Used Car Lot
If haggling sounds better than bidding, buying from a used car dealer is the most straightforward way to purchase a repo vehicle. The price tag may be somewhat higher because dealerships have more costs to cover, but there's almost always room for negotiation.
Unlike with an auction, the dealership will most likely have cleaned the car and made certain mechanical repairs. The dealer may also include a short warranty, handle the titling and registration paperwork, and offer to finance the car. It is a one-stop-shop that is more familiar to consumers than any other.
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When your car is repossessed, you may not know why it happened — or how you’re going to get to work the next day. But you can recover by taking action to take care of your transportation needs and to protect your credit from further damage.
Here are five steps you can take to recover from a repossession:
1. Ask why your car was repossessed
If you’ve fallen behind on car payments , you may know exactly why your car was repossessed. Other times, it’s not so obvious. In some states, not getting insurance stipulated in a loan or lease contract can count as a default, and your car can be repoed because of it. Call your lender before jumping to conclusions so you can clarify how you can set things straight.
Readers also ask
In a voluntary repossession, you inform your lender you can no longer make payments and intend to return the vehicle. The creditor will resell the vehicle, and you’ll receive a statement with details of the sale. Just as with involuntary repossession, you have to pay the difference between what the car sold for and what you owed on the loan. That’s called the deficiency balance. More
Voluntary repossession, a type of loan default, will stay on your credit report for seven years . That type of negative mark will harm your scores — especially your automotive-specific credit scores, which will determine the interest rate you pay on your next car loan. More
Once seized, your car will probably be sold at auction. If your car sells for less than you owe, you may be sued for the difference, known as a deficiency, plus any applicable fees. More
2. Find out if you can get it back
Often, a bank or repossession company will let you get your car back if you pay back the loan in full, along with all the repossession costs, before it’s sold at auction. You can sometimes reinstate the loan and work out a new payment plan, too. The repossession may not be removed from your credit report in these situations, but your new payments will generally be reflected if you make a deal with your lender (but not if you buy the car back at auction).
Before getting your car back, think through these questions:
If you got your car back, would you be able to afford insurance, maintenance and gas? Neglecting important repairs or getting into an accident while uninsured may land you in an even more difficult financial situation. And without gas, you still wouldn’t be able to get from A to B. If you can’t afford these expenses, redeeming your car may not be your most cost-effective alternative.
Do you have access to affordable public transportation or a carpool? Getting to work by bus or other means may be a better option than reinstating your loan or paying your balance and repossession expenses in full.
Do you plan to declare bankruptcy? If you’re extremely behind on all your bills and have no way of turning things around, you may already be considering bankruptcy . File before the bank or repo agency sells your car, and there’s a good chance you can keep your car and work out a plan to catch up on payments. Talk to your bankruptcy lawyer about whether this would be possible, based on the type of bankruptcy you’re filing.