Once your car loan lender repossesses your vehicle for nonpayment, it no longer belongs to you. What you do with your title depends on your state laws. Since the car is no longer in your possession, you need to call your insurance company to cancel your insurance on the vehicle.
After Repossession
Immediately after your creditor repossesses your car, you can contact it to discuss your options for getting the car back. Generally, this requires either paying off the loan in full or making your past due payments plus repossession fees. If this is not an option, the lender will begin making arrangements to sell the car at a public auction. Once it auctions off the car, it will apply any proceeds from the sale to the outstanding balance on your loan. If there is still a balance on the loan after the lender applies the sale proceeds, you will be responsible for paying that amount back to your lender.
Insurance
If you do not plan to get your car back after repossession, call your insurance company to discuss canceling your insurance. Depending on your insurance policy and terms, you may have to pay a cancellation rate. Cancellation rates differ by insurance company. For instance, you have a 12-month insurance policy that costs $800 per year that you paid in full in January. You car is repossessed in June and you cancel your insurance. Your insurance company will apply its specific cancellation fee to your refund and send you the remaining amount.
Tags and Registration
The tag on your license plate and your vehicle registration are connected. In some states, the repossession company informs you where to pick up plates and your personal belongings that were inside the car at the time of repossession. The plates and tags remain with you. Depending on your state laws, you may surrender your plates to your state's Department of Motor Vehicles (DMV) to cancel your registration. In other states, you may go to your local DMV and fill out an affidavit attesting to your vehicle repossession, and the DMV cancels your registration. Another option is to allow the registration to expire. In states where the plates remain in the possession of the creditor, the creditor must sign an affidavit regarding the repossession. Doing so cancels your registration and tags with the vehicle.
Title
When you have a car loan, the lender is listed on your title as a secured lien holder. Once the lender repossesses your car, it must remove your name from the title before it can sell your vehicle at auction. Depending on your state laws, the lender must complete an Affidavit of Repossession with the DMV as well as a notarized copy of your original loan agreement and a copy of the final demand letter sent to you after repossession with the postal receipt as proof that it sent and you received the letter. A final demand letter is an official notice giving you one last chance to get your vehicle back and notifying you of the legal actions your lender plans to take regarding the repossession.
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