If you fall behind on a car loan, the lender can often repossess the vehicle without going to court. There are limits, and you have rights before and after it happens.
When repossession can happen
Under many loan contracts, a lender can repossess as soon as you are in default, which may be after a single missed payment. Notice requirements before repossession vary by state, and some states require a notice and chance to cure the default.
Limits on how it is done
- The repossessor cannot "breach the peace," such as by using force, threats or breaking into a locked garage.
- You can generally take back personal belongings from the car, and the company must make them available.
- Military members have additional federal protections in some situations.
After repossession
- Read the notice of sale or redemption, which explains what you owe and how to get the car back.
- You may be able to redeem the car by paying the full balance and costs, and some states allow reinstatement by catching up on payments.
- The lender must sell the car in a commercially reasonable way.
- If the sale price is less than what you owe, you may still owe the difference, called a deficiency.
Ways to avoid it
Call the lender before missing a payment and ask about a payment extension, deferral or loan modification. Consider selling the car yourself, which can bring a better price than an auction. A consumer attorney or nonprofit credit counselor can help.
Frequently asked questions
Can they repossess my car from my driveway?
Generally yes if no breach of the peace occurs, though state rules differ.
Does repossession affect my credit?
Yes. It can stay on your credit report for several years.