Dealing with Car Dealers and Auto Fraud

Repossession may take place if you miss a scheduled payment on an auto loan, or if you put your vehicle up as collateral on a loan and later default. A repossession will not affect your driving record but it will certainly appear on your credit records and could make future loans difficult to qualify for, particularly in future car buying.

How It Works

When you default, your vehicle information and your personal information are entered into a database for repossession. Workers may cruise through your neighborhood looking for the car, using a license plate reader that scans hundreds of moving and parked cars each minute until they get a hit on one ripe for repossession. If the vehicle is parked, they will get a tow truck to scoop it up right away. If it’s moving they may wait until you’ve parked it for the night and get it then. In 2018 there were more than 350,000 vehicles in a repossession database.

When a car is repossessed, you may not get a notice and may think the car has been stolen. In most states it’s legal for a lienholder to simply take a vehicle off the street or out of a driveway without any notification to its owner. However they may not keep personal items that are present when the car is repossessed and may not break into a garage, damage property in any way, or initiate a fight to take possession of the vehicle.

Other lienholders may require the car to be equipped with an electronic disabling device, which is a de facto repossession because it prevents the car from being driven. This way the creditor can disable the car remotely and negotiate with the owner about payments or send a team to take physical possession of the vehicle if no agreement can be reached.

In a few states an electronic ignition disabling device can be scrutinized for illegal repossession. Find out about any grace period that your state’s consumer finance laws requires. The state of Nevada has a 30 day grace period for vehicles purchased from dealerships in that state. Payments must be more than 30 days late for the repossession process to begin.

Consumer Protection Laws

Each state has consumer protection laws that may apply to auto repossession:

  • In Washington, you have 21 days to take action from the date of the notice that the creditor plans to sell the car.
  • In New York you may bid on the car at the lender’s auction but if you’re successful you will still be responsible for the repossession costs and fees. Also, the New York Bar Association says that the creditor must sell (auction) the vehicle in a “commercially reasonable manner” that provides you with an opportunity to repurchase it and which fetches the highest possible price, reducing your financial obligation.
  • Florida’s laws stipulate that the car owner must be given 10 days notice of the vehicle’s sale after repossession, and that the creditor must give the owner an opportunity to surrender the vehicle prior to forced repossession.
  • Alaska allows the creditor to sell the vehicle privately if the owner’s payments on it didn’t meet a certain threshold.
  • In Arizona if the vehicle is sold by the creditor at a higher amount than the owner owed, the owner is eligible to receive the difference.
  • The state of Delaware suggests discussing a voluntary repossession with your lender when you know you are in default and in danger of breaching the terms of your loan. This way you can negotiate some of the terms of the repossession, including the bank waiving any responsibility for repossession fees or unpaid principle.
  • Illinois cautions car buyers to beware of auto finance scams that allow individuals to take ownership of a car before their financing has been officially approved; this tactic often results in buyers paying inflated interest rates and getting involved in loans they cannot afford.

Next Steps

Most states require the lienholder to notify you of any planned sale or auction of the vehicle so that you may exercise your right to buy it back. Usually, buying back a vehicle must include all outstanding loan payments as well as all costs for repossessing the vehicle.

If the vehicle doesn’t sell for a high price at auction, you may be responsible for paying the fees resulting from the repossession and auction process, even if you no longer have the vehicle.

If you file for bankruptcy it will probably prevent repossession of the vehicle at least temporarily. However bankruptcy is not an easy process, and you must be approved for it. While you may be able to hang onto the car a bit longer, bankruptcy usually means selling off all of your other valuable assets and not being eligible for loans for several years.