The Repossession Process:
* Default: The repossession process begins when you default on your auto loan agreement. This typically means missing several loan payments. The lender will usually send you notices before repossession, giving you a chance to catch up.
* Repo Agent Arrival: A repossession agent, often working for a third-party company, will come to retrieve your vehicle. They can often do this without your presence or permission (though laws vary by state regarding how and where they can repossess). They may tow your car from your driveway, street, or even your workplace.
* Vehicle Taken: Once your car is repossessed, it's taken to a storage lot.
After Repossession:
* Storage Fees: You'll likely accrue storage fees for each day your vehicle remains at the impound lot. These fees can add up quickly.
* Deficiency Balance: If the sale price of your vehicle at auction (or private sale by the lender) is less than what you owe on the loan (including repossession and storage fees), you'll still owe the difference. This is called a deficiency balance, and the lender can pursue legal action to collect it. This might involve wage garnishment or lawsuits.
* Credit Score Impact: Repossession significantly damages your credit score. It remains on your credit report for seven years, making it much harder to get loans, rent an apartment, or even get certain jobs.
* Potential Legal Action: As mentioned above, the lender may pursue legal action to recover the deficiency balance.
* Loss of Property: You have permanently lost your vehicle.
What You Can Do to Avoid Repossession:
* Communicate with Your Lender: If you're struggling to make payments, contact your lender *immediately*. Explain your situation and see if you can work out a payment plan, loan modification, or other solution.
* Budget Carefully: Create a budget to ensure you can afford your car payments and other essential expenses.
* Consider Selling the Car: If you can't afford the payments, selling the car privately (or trading it in) might be a better option than facing repossession. This will prevent damage to your credit, though you may still owe money if the sale price is less than what you owe.
State Laws: State laws vary regarding repossession. Some states have stricter regulations on where and how repossession can occur. It's crucial to understand your state's specific laws if you're facing repossession.
In short, repossession is a severe financial setback with long-lasting consequences. Proactive communication with your lender and responsible financial planning are crucial to avoid this situation.
