Taking it Back: Auto Repossession

You did it. You bought your first car, on your own. You didn’t need a co-signer and you’re incredibly proud of yourself. Congratulations, you should be. Buying your first car is a huge step, but it is a risky step unless you’ve got the means with which to sustain such a purchase. For this reason, make sure that the vehicle you bought is within your price range, and your employment is solid. Don’t sign up for more car than you can afford, unless you’re willing to risk the damage to both your reputation and your credit with an auto repossession.

It’s an unspoken topic in the auto industry, despite the numerous reality shows that glorify the repossession practice. It’s not often talked about, because it’s unpleasant for everyone involved. It’s embarrassing for the purchaser, it’s a boatload of paperwork and red tape for the financial institution, and the repo men don’t have a pleasant duty as they attempt to take back the property without your interference. This doesn’t even include the amount of people that will argue that they’ve made their payments or those who try to hide the vehicle in order to usurp the repossession. It’s not a fun topic, and this is why not much is known what happens when car is repossessed.

The first part of the process is the financial company contacting the borrower in order to try and work with them. Many buyers are given several chances to make at least one payment toward what is owed, which is usually at least ninety days behind. Repeated contact begins the process, as the financing company wishes to have the evidence that they tried to get the money before accepting that the car needs to be taken back from the borrower. Ignoring these phone calls is a sure way to wake up to an empty parking space.

The second part of the process is that actual repossession. Some finance companies will be kind enough to inform their borrowers as to when the repo men will be arriving to take the car, allowing them the time to remove any personal belongings. However, this is all dependent upon the state in which you live and with whom you’ve financed. Some companies don’t have to tell you at all that they’re sending someone to get their property back, and they will often surprise the individual by removing the car overnight, or while the person is at work, depending upon how willing they’ve been to communicate effectively with the finance company.

Most people know about the first two parts of the repossession process, but no one talks about what happens afterward. You’re most likely at home licking your wounds and trying to figure out what your options are when you receive a letter from the finance company, informing you that may owe further money on the vehicle that you no longer have in your possession. That’s right, you may still owe some money on a car you can’t drive, or even look at.

What most people don’t realize is what happens with repossessed vehicles. More often than not, they go to an auto auction. One of the specialties of an auto auction is selling cars at bargain prices, and therefore your vehicle is going to be sold for a fraction of what it is worth. This means if the car sells for twelve thousand and you owe fifteen, you’re on the hook for that three thousand dollars. Yes, that deficit will be your responsibility. On top of the hit to your credit as a result of the repo, you’re also on the line for whatever they couldn’t make back from your car.

After the repo, and the sale, the finance company will begin their contact again. They will be adamant in their pursuit of recouping their money. Surely, they will offer a settlement in order to quickly resolve the issue, but this deal will impact your tax return. Before you blindly accept what sounds like a good deal, ensure that the amount you’re saving will not have to be included as income on your yearly tax return because, in most cases, it will be dependent on the amount you’re saving.

When you’re signing the paperwork for that first new car, make sure you’re making a smart decision. If you’re buying more car than you need, it probably isn’t a good idea. If you’re paying an astronomical amount out of desperation, walk away and reconsider your options. Consider determining what you could afford if you saved up and paid cash, avoiding the risk of a repo altogether. A repo on your credit will follow you for several years, and will make it next to impossible to obtain a loan until your balance is paid off. Use your best judgement, as a vehicle is a contract not to be entered into lightly.