Do I Need to Pay Back a Car If It Was Repossessed?

Having your car repossessed is a result of not paying loan or lease. You may have lost your job or had some other financial hardship that prevented you from keeping your account current. However, when you default on your auto loan, you risk repossession by the lender. Because the car was used as collateral, it is taken as payment, but you still may be responsible for a portion of the loan.

Seizure

Your car can be repossessed if you miss just one car payment. However, most lenders will contact you first to try to bring your account up-to-date. If you are unsuccessful at paying the amount you owe plus any fees or penalties, then your car can be taken from the street, a parking lot or your property. However, most states don't allow repossession from your garage if the door is shut. Also, you cannot be threatened in any way while the car is being taken.

Auction

Your lender may keep the car as full payment of your debt and then you will not have to pay back your loan. However, if your car is sold at auction and doesn't sell for the amount of your loan, you can be held responsible to pay the difference. You will be notified of the date of the auction so that you have an opportunity to buy the car back at that time. Whether before or during the auction, if you want to purchase your vehicle, you may be required to pay your default amount, the balance of the loan and any other charges the lender has accumulated because of the repossession.

Possessions

If you have personal possessions in your car when it is repossessed, you are entitled to collect them. Your lender must keep your property and care for it for a reasonable amount of time to give you an opportunity to pick it up or have the items mailed to you. If you placed improvements in your car, such as a new stereo, it generally is not considered your personal property if it is attached to the vehicle.

Options

Since a car repossession can stay on your credit report and lower your score for seven years, contact your lender as soon as you know that you can't make a payment. If you carry a high interest rate, refinance the loan if you qualify. Alternatively, ask your current lender for a loan modification to change the terms so they are affordable. You can try to sell the vehicle, if you think it will net you close to the loan amount you owe. Otherwise, ask the creditor what happens if you give the car back voluntarily. Whether you offer the car to the creditor or it is sold at auction after a repossession, ask the lender to waive the deficiency you continue to owe if the sale price did not satisfy the loan amount.