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Life After A Vehicle Repossession

There is no worse feeling than having a vehicle repossessed. Watching a car get towed away due to nonpayment, or worse, waking up to find your vehicle missing from your driveway is an awful experience. Coupled with the fact that you now do not have a car, people can find themselves in a terrible situation very quickly. There are ways forward after a vehicle gets repossessed and there is a possibility you may be able to finance another rather quickly, but a history of repossessions can be a major credit hurdle to overcome.


Whenever you finance or lease a vehicle, you sign a contract between yourself and the lending company. This contract stipulates the amount financed, the term it is financed for, interest rates, and other financial terms. Purchase agreements also include provisions for the lender to recover costs and expenses should you default on your payments.

If you should ever become delinquent on your vehicle payments, the lender has the right to repossess the vehicle to recover their investment. Every state’s laws differ slightly, so whatever rights you have after a car is repossessed will vary depending on where you live.

Generally after a repossession, you have a limited amount of time to fulfill your finance obligation. Many lenders will require the total balance (plus any fees associated with the repossession) be paid in full in around 30 days. This is great if you have the liquid assets to pay the lender, but often times people who default on their car note don’t have any money set aside – let alone an amount of cash large enough to pay off their vehicle.

The lender will report both the delinquency and repossession on your credit report, where it will usually stay for 7 years.

While delinquencies and late payments negatively affect your credit score, repossessions on your record make it particularly hard to obtain future car finance as long as the repossession remains on your credit report.


If you are in a situation where you know you are not able to meet your monthly payment obligation, you should call your lender. Since repossessions are costly for the lender (and they have no guarantee they’ll recover the total amount owed to them at auction), many times auto finance companies offer programs to help you catch back up on your missed payments. Many times they will add past due amounts to the tail end of your finance period, allowing you to continue to make your monthly payments without late fees or additional costs.

Situations in life sometimes make it impossible to meet your monthly payment obligations, with job loss being one of the main factors. If you are unable to pay for your vehicle any longer, you have the option to voluntarily surrender the vehicle back to the finance company. While a voluntary surrender will show up on your credit report, it doesn’t have as much negative weight as a full repossession. Speak to your lender for more information.

A car towing sign hung on a fence.


Once you’ve had a car repossessed, the best thing you can do is try to build your credit back up. If you’re behind on many of your bills and a significant life change such as divorce or job loss is to blame, you may want to speak to a Bankruptcy attorney and discuss your options. Filing for bankruptcy doesn’t have the social stigma it once had, and many times it’s the fastest path to financial freedom for people who are buried in debt they cannot pay.

Whether bankruptcy is an option or not, it is important that you take the steps necessary to begin rebuilding your credit. Here are some helpful tips for rebuilding your credit after a repossession:

  • Speak to your creditors and see if you can work out a payment arrangement. Many times lenders have programs available to help people who get behind on their obligations.
  • If you’re able to come to an agreement with your auto finance company (whether by surrender, paying the full amount, or including the vehicle in a bankruptcy), request the lender reports your repossession as “paid in full” or “satisfied” to the credit bureaus. This will help lessen the negative impact of a repossession.
  • Keep your other credit accounts in good standing by paying at least the monthly minimum amount on time.
  • Aim to use less than 30 Percent of your total available credit at any given time. This will help reduce your debt-to-income ratio.


The longer ago a repossession occurred, the more likely you’ll be to get approved for future loans. Most experts recommend letting at least a year pass after a repossession before applying for a new car loan. While it will still show up on your report and your score may still be lower because of it, having good habits for a year after the event will show you’re attempting to turn things around.

Most importantly, don’t let another repossession happen. Remember, a repo stays on your credit report for 7 years. Many lenders and dealerships are able to finance someone who has had one repossession, but numerous repos on a credit history will result in automatic “no’s” from banks and lenders.

Getting a new vehicle after repossession is possible and if you are able to make the payments on time, you’ll see your overall credit begin to increase.