can dealership repo your car

Can Dealership Repo Your Car

Purchasing a car is a major financial decision that most people need to finance. When you finance a car, the dealership technically owns the vehicle until you finish paying off the loan. This means if you fall behind on payments,

the dealer has the legal right to repossess the car. Getting your car repossessed can be an stressful and frustrating experience. Here’s what you need to know about dealership repo processes and your rights as a borrower.

How Car Repossession Works

When you finance a car, the loan agreement gives the lender, in this case the dealership, a security interest in the vehicle. This means if you default on the loan, the dealership can seize the car to recoup the money you owe.

Legally, this is considered a self-help repossession process where the lender does not need a court order to take back the collateral. The repossession terms are outlined in the sales contract you signed when purchasing the vehicle. Typically, the dealership

can begin the repossession process if you miss or are late on one or two payments. The lender is required to send notices and make attempts to collect payments before repossessing the vehicle. If you do not become current on the loan,

the dealership can engage a repossession company to pick up the car from your home, work or other public location. In some states, the repossession company may be able to tow your vehicle from private property without notice. However, they cannot trespass or breach the peace to take the car.

That means they can’t break into a locked garage or threaten you to turn over the keys. Any personal belongings left in the car will be inventoried and held for you to pick up. After the dealership repossesses the vehicle, they will sell it at auction to recoup their losses on the defaulted loan.

How Car Repossession Works
How Car Repossession Works

Protecting Your Rights

The repossession process can feel violating, but it is legal in most cases. However, lenders must follow consumer protection laws. Here are some of your rights in the repossession process:

Right to advanced notice: The lender must send a written notice that they plan to repossess the vehicle if you do not become current on payments. This is usually sent 15 days before they take action.

Right to reinstate: In many states, you have the right to bring the loan current and reclaim your vehicle after repossession but before it is sold. This may involve paying the total past due amount, repossession costs and fees.

Right to surplus: If the vehicle is sold at auction for more than you owed on the loan, you have a right to the surplus amount. Right to redeem: Some states give you a period of time after the sale where you can reclaim the vehicle by repaying the full loan balance and costs.

Right to sue: If the lender violates consumer protection laws during the repossession process, you may have grounds to take legal action. This could include trespassing, illegal entry, unlawfully disabling the car, or selling the vehicle without proper notice.

Protecting Your Rights
Protecting Your Rights

Protecting Your Credit

In addition to losing your vehicle, a repossession can also severely hurt your credit score. The delinquency and repossession will be reported to the major credit

bureaus and can stay on your credit report for up to 7 years. This can make it difficult to get approved for future loans or secure favorable interest rates.

Here are some tips to recover from a dealership repossession:

  • Here are the bullet points in a more concise format: Review your credit report for accuracy and dispute errors.
  • Try to pay any remaining balance owed after vehicle repossession. Avoid late payments by keeping current accounts paid on time.
  • Limit new credit applications until your score starts recovering. Discuss your situation with your lender to see if they’ll restructure your loan.
  • Build emergency savings to avoid defaulting if faced with hardship. Seek credit counseling help to create a budget and repayment plan.

Repossession can be emotionally and financially devastating. It often leaves people without reliable transportation to commute to work or manage day-to-day affairs. However, it is possible to rebuild and recover, even after a dealership repossession.

Protecting Your Credit
Protecting Your Credit

Alternatives to Repossession

Losing your vehicle to repossession can disrupt your life and finances. Before it gets to the repossession point, consider these alternative options to work it out with the dealership:

Reinstate the Loan

If you have fallen behind on payments but can come up with the past due amount, you may be able to reinstate the loan. This involves paying the total owed to bring the account current and paying any late fees.

The dealership may also charge a reinstatement fee around $300-$400. This allows you to keep the vehicle as long as you continue making your regular monthly payments.

Refinance the Auto Loan

Refinancing involves taking out a new loan to pay off the existing balance. This can lower your monthly payments to a more affordable level. However, you will need to have sufficient income and credit score to qualify for refinancing.

Shop around at banks, credit unions and online lenders to compare interest rates and loan terms. Watch out for prepayment penalties with your current lender if you refinance before the loan term ends.

Refinance The Auto Loan
Refinance the Auto Loan

Modify the Loan Terms

For some borrowers, a temporary hardship leads to late payments. If you can show you now have the ability to repay, ask the lender to modify the loan terms. Extending

the repayment period lowers the monthly dues by spreading payments over additional months. You will pay more interest over the life of the loan but it may help you avoid repossession.

Voluntary Vehicle Surrender

As a last resort, you may choose to voluntarily surrender the vehicle to the dealership. You will still be responsible for paying any balance owed after they liquidate the car at auction.

But this allows you to avoid some of the fees and credit damage from forced repossession. Be aware there may be consequences, like the lender suing you to collect the remaining deficit.

Voluntary Vehicle Surrender
Voluntary Vehicle Surrender

Hardship Options

If you are facing financial challenges, communicate with the lender to request hardship assistance. Explain your situation and provide supporting documents. Many lenders want to help borrowers stay current on payments. They may offer options like:

  • Temporary reduction or suspension of payments
  • Extending the payment due date
  • Changing from weekly to monthly payments
  • Waiving late fees

This temporary arrangement gives you time to improve your financial situation and start making payments again. It requires you to stay in touch with the lender and uphold any modified agreements.


For some borrowers overwhelmed by insurmountable debt, declaring bankruptcy may be the only option. This legally eliminates your obligation to pay certain debts. However, you will have to surrender the vehicle.

Bankruptcy severely damages your credit for 7-10 years, so only consider this last resort option if you have no other way out. Consult a bankruptcy attorney and credit counselor to discuss the consequences.


Avoiding Repossession

The best way to prevent dealership repossession is to keep your loan current. If you anticipate having trouble making payments in the future due to job loss, medical issues or other emergencies, address the situation immediately. Here are some tips:

Build an emergency fund with at least 3-6 months of living expenses in savings so you can tap into it if needed to make payments. Contact the lender at the first sign of financial hardship to discuss alternative repayment options. Do not wait until you have multiple missed payments.

Consider a part-time job or other income stream to supplement your household budget and transportation costs. Even a couple hundred dollars per month can make a difference. Reduce expenses where possible, like eliminating dining out, cable packages, etc.

Stick to a spartan budget until you get back on your feet. Modify your auto insurance policy to minimize premiums, like increasing deductibles or dropping optional coverage. Stay in communication with the lender to show intent to repay.

Avoiding Repossession
Avoiding Repossession

what are some common resons for car loan default?

Loss of job or reduced income which makes it difficult to make payments. Unexpected medical or other bills that strain overall finances.

Separation, divorce or death which impacts household finances. Errors or disagreements over payment amounts that cause missed payments. Accident or mechanical issues with the vehicle that require funds to repair.

can repossession affect my ability to get a loan in the future?

Yes, a car repossession will negatively impact your credit score and credit reports. Lenders view repossession as a sign of higher credit risk since it shows an inability to fulfill loan obligations. Future lenders may deny your applications,

or approve you only for loans with higher interest rates to compensate for the added risk. The repo will stay on your reports for 7 years from the date of the delinquency.

are there any specific laws or regulation regarding car repossession that i should be aware of?

Lenders must provide notice in writing before repossession that they intend to repossess for missed or late payments. Repossession must be done peacefully and without causing a breach of peace. Repossessors cannot use force or enter your property without consent.

You have the right to redeem the vehicle by paying off the balance within a certain timeframe, usually around 15 days. Lenders must notify you of the location where the repossessed vehicle is being stored and any costs/fees associated with redemption or sale.

In some states, debtors are entitled to any surplus funds from the sale of the repossessed vehicle after loan payoff.


What are the repo laws in Indiana?

In Indiana, creditors must wait 30 days from the date of default before repossessing a vehicle. They must send a notice of intent to repossess 15 days prior. Repossession must be done peacefully and without entering private property or breach of peace. The owner has right to redeem the vehicle by paying off balance within 30 days of repossession. Creditors must send a notice of sale 20 days before auctioning the vehicle.

What are the repossession laws in Washington state?

In Washington state, creditors can repossess a vehicle once the borrower defaults. They must send a default notice at least 10 days prior to repossession. Repossession is allowed between 6 AM to 9 PM only. Creditors cannot use deception, breach of peace or improperly detain the borrower during repossession. The owner has right to reinstate the contract within 15 days by paying off past due amounts. Repossessed vehicles can be sold after 30 days.

What are the repo laws in Texas?

In Texas, creditors can repossess a vehicle if the borrower defaults. They must send a default/intent to repossess notice first. Repossession cannot involve breach of peace. It can happen at any time of the day. The borrower gets a right to cure by paying past due amounts within 20 days. After that the vehicle can be resold. Notice of sale must be given to the borrower at least 10 days before auction. Deficiency amounts can be pursued after sale.

What are the repossession laws in Michigan?

In Michigan, repossession is allowed any time after default. Creditors must provide a notice of default 15 days prior. Repossession agents cannot use forgery or breach of peace during repossession. It can happen even if the vehicle is parked on a private property. The borrower gets right to reinstate within 30 days by paying off past due amounts. If not reinstated, the vehicle can be sold after 15 days of repossession. Proper notices need to be sent pre and post auction sale.


In conclusion, dealerships do have the ability to repossess a car if the buyer defaults on their financing terms. As the lienholder, the dealership maintains the right to repossess the vehicle if payments are missed or past due.

Many dealers arrange financing directly through their own institution or partner banks/credit unions. This allows them to act as the primary lienholder. Even if a third party lender provides the financing, dealers often have contractual arrangements

that give them repossession authority if the buyer defaults. However, there are some consumer protections in place. Dealers must follow all local laws regarding notice, due process, and the proper legal procedures for repossessing a vehicle.

Overall, while dealerships can repo a car, they are not allowed to simply take the vehicle without notice or legal justification if the buyer has fallen behind on payments. Open communication is usually the best path to resolve payment issues without the threat of repossession.

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