Finance Company Wants Car Back

The finance company wants their car back. That’s a phrase no one wants to hear, and it usually signifies a breach of contract, specifically the loan agreement used to purchase the vehicle.

Let's break down the common reasons why a finance company might repossess a car and what your rights are:

The Primary Reason: Missed Payments. The most frequent trigger for repossession is failing to make payments as agreed upon in your loan contract. Almost all loan agreements allow the lender to repossess the vehicle if you fall behind on payments. The number of missed payments before repossession varies depending on the state and the specific loan agreement. It could be just one missed payment, although lenders often wait until two or three payments are overdue.

Breaching the Loan Agreement. Beyond missed payments, other violations of the loan agreement can lead to repossession. These might include:

• Lack of Insurance: Maintaining adequate car insurance is almost always a requirement of the loan. If your insurance lapses, the lender can repossess the vehicle to protect their investment.
• Unauthorized Modifications: Making significant alterations to the car without the lender's consent, especially if those changes diminish its value, could violate the loan agreement.
• Moving the Car Out of State (Without Permission): Some loan agreements restrict you from moving the vehicle to another state without notifying the lender.
• Bankruptcy: While bankruptcy can offer some protection from repossession, it doesn't automatically prevent it. The lender may seek relief from the bankruptcy court to repossess the vehicle.

What are Your Rights?

Even if you're behind on payments, you have rights. Lenders must follow specific legal procedures when repossessing a car.

• Notice of Default: In many states, the lender is required to send you a notice of default, informing you that you are behind on payments and that repossession is a possibility. This notice often includes a deadline for you to catch up on payments.
• Peaceful Repossession: Repossession must be done without "breaching the peace." This means the lender cannot use force, threats, or illegal entry onto your property. They can't break into a locked garage to retrieve the car.
• Notice of Sale: After repossession, the lender must notify you of their intent to sell the car. This notice should include details about the sale, such as the date, time, and location (if it's a public sale) or how the sale will be conducted (if it's a private sale).
• Right of Redemption: You may have the right to redeem the car by paying off the full loan balance, including repossession fees and other expenses, before the sale.
• Deficiency Balance: If the sale of the car doesn't cover the outstanding loan balance, you may be responsible for paying the "deficiency balance." However, the lender must have conducted the sale in a commercially reasonable manner to pursue a deficiency judgment against you.

What Should You Do?

If you're facing repossession, take action immediately:

• Review your Loan Agreement: Understand your rights and obligations.
• Communicate with the Lender: See if you can negotiate a payment plan or other arrangement to avoid repossession. Lenders may be willing to work with you, especially if you've been a reliable borrower in the past.
• Seek Legal Advice: A lawyer can advise you on your rights and options, especially if you believe the lender has violated repossession laws.
• Explore Refinancing: If possible, consider refinancing the loan with a different lender to lower your monthly payments.
• Consider Voluntary Surrender: While it still negatively impacts your credit, voluntarily surrendering the car might be a less damaging option than repossession. You may also have some control over the sale process.

Repossession is a serious situation with significant financial consequences. Understanding your rights and taking proactive steps can help you navigate this challenging process.