Vehicle repossession

Yes, you should read this if you took out a loan to buy a vehicle (called financing a vehicle). The vehicle's seller might have lent you the money. In this situation, we call the seller the lender.

When you finance a vehicle, you and the lender each have important legal rights and responsibilities. For example, if you make late payments on the vehicle, or you stop making payments, the lender may have the right to take back (to repossess) your car without having to get a court order or warn you beforehand. Read this fact sheet to learn more about these rights and responsibilities.

The lender can seize your vehicle as soon as you default on your loan. The contract you and the lender defined will define what a default is. Failure to make a payment on time or to keep insurance on the vehicle are common reasons for default.

Once you are in default, the lender may repossess your car at any time. The lender does not have to notify you before the repossession takes place.

• The lender cannot commit a crime, use abusive language, enter a home without permission, or take an item if you physically resist.
• Cars can be towed from public or private lots.
• A car can be towed from your driveway if no other car is moved. It cannot be towed from your garage.

You can do any of these:

• Call your local law enforcement immediately, if you are comfortable doing so.
• Tell the person or people trying to take your vehicle to get a court order.
• Sit in the vehicle and refuse to move.

No. No one can force you to give up your vehicle except by court order. If there is a breach of the peace in seizing your car, your lender might have to pay a penalty or compensate you if the lender harms you or your property. A breach of the peace also may give you a legal defense if your lender later sues you because the sale of the vehicle didn't fully reimburse the lender.

If you have paid more than 60 percent of the amount of the loan:

• The lender must sell, lease, or otherwise dispose of the vehicle, unless you sign a statement after the default allowing the lender to keep the vehicle in full payment of the loan. The sale must be held within 90 days of repossession. The lender must send you written notice of the sale time and place.

If you have paid less than 60 percent of the amount of the loan:

• The lender can keep the vehicle as payment for the loan or sell it. The lender must send you written notice telling you what it will do. If the lender decides to keep the vehicle, you have 20 days to write them to demand they sell the vehicle. 

If you are not sure how much you have paid, ask the lender for an accounting of the charges and your payments.

The amount the lender makes from the sale must go to cover the balance of the loan and costs of the sale and repossession. The lender must return any money left over (any surplus) to you. This does not happen often.

If the amount the car sold for does not cover the loan and expenses (if there is a deficiency), the lender can sue you for the full amount owed, including repossession fees, auction costs, and legal fees. Example: You owe $10,000 on the car. Your lender sells it for $7,500. The deficiency is $2,500 plus any other fees you owe under the contract.

It depends on whether you can afford it.

You have the right to buy back (to redeem) the repossessed vehicle up until it is sold or within 21 days of getting notice that the lender is going to keep it. The cost to redeem the vehicle will depend on what your contract says about that. You may be liable for the cost of repossession and attorney's fees.

Contact your lender as soon as possible. Be honest about the situation and about why you cannot pay. Ask for an accounting so you can know for sure how much you still owe.

If you have been a good customer and made payments on time in the past, your lender might agree to put off (to defer) a payment and let you keep the car. If you can reach an agreement to change your original contract, get those updated terms in writing.

Maybe. If you agree to give the vehicle back (called voluntary repossession), you may reduce your lender's expenses. This means you would be responsible for paying the lender less.

But even if you agree to return the car, you must still pay the deficiency on your contract, and the lender's costs of the repossession (interest, late fees, legal fees, costs of the sale, and so on). The lender still can enter the late payments or repossession on your credit report.

Maybe. You might be able to negotiate a lower interest rate or spread out the payments over a longer period. This will lower your payments. The downside is that you will pay more interest.

Maybe. First, you should figure out how much you owe on the vehicle. Then check its market value on a site such as Edmunds (edmunds.com),  Kelley Blue Book (kbb.com), or the National Auto Dealers Association (NADA) Used Car Pricing Guide (Pacific Northwest edition) (bit.ly/47LHEd0). If you owe less than the car is worth, you could try to sell it and use the cash to clear your debt.

Before selling, review your financing agreement. See if the lender charges prepayment penalties for paying off your loan early.

Yes. The lender may not keep or sell any personal belongings (called personal property) found inside the vehicle after repossession.

You should immediately make a written demand for the return of your belongings. Make a list of what was in the vehicle. (See the sample letter below.) Keep a copy of your property list, demand letter, and proof of mailing.

If the lender does not return your belongings, you can file a complaint with the government agency that regulates that lender. (Search here for the agency that regulates your lender: bit.ly/3s645cG.) You may also file a small claim for the value of your lost property. Read How do I sue in Small Claims Court to learn more.

First, try to talk to a lawyer right away. See contact info below. The lender can only sue to collect the remaining amount owed if the lender followed the proper procedures for repossession and sale. If the lender didn't follow the proper procedures, you might have a legal defense against the lawsuit.

Next, if you are served with legal papers called a Summons and Complaint, read How do I Answer a Lawsuit for Debt Collection, or use our interactive interview, Answer a Lawsuit for Debt Collection. You have a short deadline to respond to preserve your rights and avoid a default judgment.  

It could. If you are facing, or already in, bankruptcy, ask a lawyer about your rights to the vehicle during that process.

Some lenders might only lend you money to buy a vehicle if you will agree to the installation of an electronic device that tracks the vehicle's movement with the global positioning system (GPS) or keeps your car from starting if you do not make payments on time.