Can a Car Dealer Submit a Claim for Damages on a Repossessed Vehicle to My Insurance Company?

A dealership cannot put in a claim for your repossessed vehicle through your insurance company, nor would it want to. Dealerships do not extend loans directly. Your lender pays the dealership for the vehicle you purchased and can collect for the loan amount to which you agreed in your contract.

Full-Coverage Insurance

Although a full-coverage insurance policy is required for your vehicle while you have a loan on it, your lender cannot put in an insurance claim on your behalf. Your lender is listed as the policy's lost payee, not the policyholder. If you wanted to submit a claim for vehicle damages before your vehicle was repossessed, you could do so by contacting your insurance company. If you were at fault for the damage, expect to pay your deductible.

Dealership Involvement

Dealerships, with the exception of a buy-here, pay-here lot, do not extend loans to buyers. Dealerships sell a vehicle and your lender pays for it. In turn, you have an agreement to pay your lender. Buy-here, pay-here lots may have different rules, as the dealer is the lender and the seller. Regardless, if a dealership takes the vehicle back from you, it is not the policyholder and therefore cannot put in a claim to your insurance policy for damages.

After Repossession

After your vehicle is repossessed, you have the right to receive your belongings out of the car. If you are not sure where the vehicle is located, call your lender or local police department. If you do not need belongings from the car, ask the repossession agency when it will return your plates. Otherwise, remove your plates from the car and return them promptly. Call your insurance company immediately to avoid paying for insurance longer than you need to; you may even receive a partial refund.

Bank Collections

Once your lender collects the vehicle, it will be resold privately or at auction. The lender may not get as much money for your vehicle if it is damaged, so you can expect to pay for damages and depreciation at a later date. Once the vehicle is sold, expect to receive a letter stating the difference between the sales price and loan value; you are responsible for the balance due. If you do not pay, the bank will eventually pursue legal action. Unless you claim bankruptcy, the bank will pursue a judgment and may garnish your wages.