William Lipovsky
When your car is in danger of repossession, your rights and those of your lender will vary by state. These state laws also govern the actions and rights of both you and the lender or collection agency after repossession.
At the very least, you should be able to reclaim any personal property that was in the car at the time of the repossession before any auction or sale takes place. You may also be able to purchase the vehicle back or reinstate your loan.
Keep in mind that repossession will have an impact on your credit score, and even if you can get the vehicle back, you’ll incur fees.
However, if you agreed to a voluntary repossession, you’ll typically see a less severe credit impact and incur fewer fees.
Below, we explain your options for reclaiming your personal property and getting your car back, as well as repossession’s impact on your credit (including the differences between voluntary and involuntary repossession).
We compiled this information by reviewing government agency and lender repossession policies, including the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC).
Reclaiming Personal Property
If there is any personal property inside the vehicle at the time of repossession, the repossession agent should allow you to retrieve it before towing the vehicle away.
If you aren’t present when the repo occurs (such as in the middle of the night) and don’t retrieve your items, you can still get them back.
You may either receive written notice of where to reclaim the items or may need to contact the lender/collection agency for that information.
In some states, the repossessor is allowed to charge you for removing your personal items from the vehicle and storing them.
Additionally, in most states, if you added any accessories that required installation in or on the vehicle, you aren’t entitled to uninstall them and take them back.
Each state has its own laws dictating how long you have to pick up your items, but you generally have about 30 days.
Keep in mind that once you become aware that the vehicle is in danger of repossession, it is a good idea to remove your personal effects from it ahead of time.
Sale of the Vehicle
After repossession, your lender may sell or auction your vehicle, either publicly or privately. This process may take a few weeks or up to several months.
Your state is required to notify you of the potential sale — all states allow you to buy back the vehicle by paying the full loan amount and all repossession fees before the sale or auction. Your loan agreement should outline specific guidelines for doing so.
Following the sale, you will owe the difference between your total loan (including fees) and the price that the vehicle was sold for (known as the deficiency).
However, if the vehicle sells for more than what you owe, the lender or collection agency will owe you the difference.
Loan Reinstatement
Reinstating the loan means that you will get your car back. Still, you’ll owe the full loan amount plus any repossession fees the lender has incurred, including accrued interest, repo agent fees, towing and storage, attorney fees, and preparation for sale. (See our related research for more information about repossession fees.)
Reinstatement requires you to pay off past due amounts and continue paying off the loan going forward. Your ability to reinstate your loan will vary depending on your state laws, your lender’s policy, and your loan contract; for example, you may be able to reinstate your loan through Toyota or GM (as previously reported).
Impact on Your Credit
Your credit score can drop 150 points or more after a repossession, and the repo will stay on your credit report for about seven years.
If you fail to pay your deficiency fee after the sale of the vehicle, you will likely be sent to collections; both late payments (after 30 days) and accounts sent to collections also appear on your credit report.
Keep in mind that if the lender does send your account to collections before or after repossession, the debt collector can sue you for non-payment. If you fail to show up in court, you will automatically receive a judgment against you.
After a repossession, it is best to try to make on-time payments for any other loans and lines of credit you may have. You should also keep your credit utilization below 30% (if possible) for the best impact on your total credit score.
Check your credit report often for misinformation, and be sure to report any errors to the credit bureaus.
A repossession on your credit report may mean that you will be labeled high-risk and charged a higher interest rate for your next auto loan. However, it is possible to get an auto loan after repossession.
Different Policies for Voluntary Repossession
Repossession and voluntary repossession are both considered loan defaults on your credit report. We spoke with Experian customer service representatives about the differences in how voluntary and involuntary repossessions affect your credit.
When you voluntarily surrender your vehicle, since you are taking some responsibility and returning the vehicle rather than having repossession agents and tow companies get involved, potential creditors will see that you were proactive despite a difficult financial situation.
You may lose fewer points on your credit score than you would for an involuntary repossession (e.g., less than 150 points rather than 150 or more), and you won’t have to pay the repossession agent and towing fees that come with an involuntary repossession.
Otherwise, voluntary and involuntary repossessions follow the same policies for reclamation, reinstatement, etc.
