Buying a car with a bank loan is so common most of us don’t even think about it—and these days, you increasingly need a bank loan to buy a used car. When you take a loan for a car you’re signing an agreement that says you’ll make the required payments or the lender can come and take the car away from you, but car dealers don’t have a reputation for explaining how much a loan will really cost—and how hard it might be to keep up with paying it.
In most states all it takes to trigger a default on your loan and begin the repossession process is a single missed payment, so now you’re sweating it out, watching the street for tow trucks. You’re trapped in the classic Catch-22: You need your car to get to work, to buy groceries, to live your life, but you can’t afford your car. How can you avoid having your car repossessed?
What not to do if you’re worried
First of all, here’s what not to do if you’re trying to hang onto a car that’s been listed for repossession. There are several very bad ideas you should not be tempted into trying:
- Hiding the car. This might seem like a genius idea, but it’s probably illegal. You voluntarily signed an agreement with your lender, and part of that agreement covered what would happen if you default. Hiding the car is a very bad idea.
- Confronting the repo agent. Physically threatening or verbally harassing the person who comes to tow your vehicle away isn’t going to get you anywhere and might get you into trouble. Plus, even if you succeed in chasing them off you’ll have burned any chance of getting a little leeway from them in the future.
- Masking the car. Changing the license plates and covering the vehicle identification number (VIN) on the car just makes the repossession professional work a little harder. In most states it’s illegal to obscure a VIN, so the repo pro will just call the cops and they’ll be within their rights to unlock the car and remove the obstruction. And the repo person has several ways to identify a vehicle, so your efforts are likely fruitless anyway.
- Sit-ins. If you see a repossession agent approaching, you might think jumping into your car and locking the doors is a great idea. And yes, it’s true—they’re not going to smash windows and drag you out, or tow the vehicle with you in it. But all you’re doing is kicking the can down the road. The repo person will be back—probably just before you leave for work in the morning.
Strategies that can work
So what can you do if the repo man is hunting for your ride? Here are a few things you can do that won’t land you in hot water:
- Keep it in a locked garage. If you have a garage on your property that can be locked, you can stash the car in there (this isn’t technically hiding the car, because everyone knows exactly where it is). Contrary to popular belief, repossession agents are allowed to enter private property to claim a vehicle—but they can’t “breach the peace,” which generally means they can’t use force or violence to do so. That includes circumventing locks on private property. If the garage is unlocked, however, they’re perfectly within their rights to open it up and take the car. Most car loans include what’s known as a “security agreement” that allows agents authorized by your lender to enter private property. Keep in mind this will only work for so long—eventually they’ll either grab your car from another location when you drive it, or get a court order and bring the sheriff along.
- Negotiate. Your lender does not want your car. They want the sweet interest you agreed to pay on the loan. The car itself lost much of its value the moment you rolled it off the lot, and has been getting increasingly worthless ever since, so they’d much rather have your cash. If your car is being repossessed, try calling your lender to work out a deal. They will often be open to any arrangement that involves you ultimately satisfying the loan. You can also try talking to the repossession agent. They don’t have the power to make your repossession go away, but they do have the ability to put your case at the end of their to-do list. There’s zero guarantee of success, but calling them up and pleading for some leeway might buy you some breathing room.
- Sell the car. If you’re not in default yet but know you soon will be, you can investigate whether you can sell the car for enough to pay off the loan. Make sure you know all of the fees you’ll have to cover, and that there are no penalties for paying off your loan early. Obviously this leaves you without a car—but it also leaves you with your credit score intact, so you can buy a cheaper car.
- Bankruptcy. If you can declare bankruptcy, you can probably hang onto your car even if you’re in default—as long as you can work out a payment plan with your lender. Both of the forms of bankruptcy open to individuals, Chapter 13 and Chapter 7, offer the possibility of hanging onto your car. Bankruptcy’s not a magic bullet, but it offers a realistic chance to keep your car in the short-term and restructure the loan in the long-term so you can pay it off.
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Losing your transportation to repossession can make a bad financial situation into an impossible financial situation. Your options are limited when it comes to keeping your car from the repo professionals—but there are some options. Just don’t do anything crazy.
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