Picture this, it’s a Monday morning and you are running a bit late to work. You grab your coffee and race out the door. You pause to lock it behind you and quickly turn around to down the front steps. Only to be halted in your tracks by the sight of an empty space where your car was parked just yesterday.
You look around, frantically, wondering if you’re still dreaming. You briefly consider that it was stolen. Neither is the case. Instead, a repossession agent has come to repossess your car.
Panic sets in as you wonder, “Now, what?”
Repossession, commonly referred to as repo, is defined as, “the action of retaking possession of something, in particular when a buyer defaults on payments.” Simply put, when payments are not made a creditor will repossess, or take back, the item on loan.
Most often, it is car repossession. However, boats, motorcycles, and sports and activity vehicles can also be repoed. Repossession can only be performed if it was included on the signed agreement at purchase.
Activity in the repossession industry is on the rise in the United States. The ripple effect that is set into motion when a vehicle is repossessed leaves Americans feeling unsteady. Suddenly without a car, individuals are left wondering how they will get to work and school, consequently providing for their families.
In 2019, prior to the COVID-19 pandemic and the era of penalty and payment forgiveness, the rate of loan defaults rate was 2.6% and accounted for 1.6 million vehicles. Last year, the loan default rate was recorded at 2.3%. While still low compared to historical averages, the current rate is higher than recorded in 2020 and 2021.
A note-worthy figure published by Cox Automotive shows that 60-day delinquent auto loans were up 26.7% in December 2022 compared to a year prior. A direct correlation to the current economic state. Inflation, unemployment, and high-interest rates are a recipe for a high car payment and low options for covering the expense.
In fact, Edmunds recently recorded that 15% of Americans are now responsible for paying $1,000 each month for their new car payment. The culprit? Ever-growing interest rates on car loans and inflated vehicle costs due to supply chain issues.
Unfortunately, car owners who cannot pay the amount owed go into delinquent status. Regulations vary by state, but in most states, a vehicle can be repossessed after 60 days of delinquency.
Due to the recent surge of recoveries, repo companies are struggling to staff repossession agents to keep up with the jobs they’re commissioned for.
What To Do When Facing Repossession
If you become delinquent on your loan it is best to contact the lender as soon as possible. In the instance that you are struggling to pay the full amount owed, you can attempt to negotiate new lease terms or ask for forbearance. Keep in mind, a repossession will stay on your credit report for seven years. So, it’s best to avoid it.
The important thing to remember is to communicate with your lender. Ultimately, they want payment over having to repossess the vehicle. Even if that means renegotiating the loan terms.
If you are unable to make payments and face repossession, you do have the option to buy back the vehicle.
Contact Between Owner and Lender
- In most states, lenders do not have to notify an owner announcing repossession. They do however have to notify the owner of a defaulted account.
- Owners should immediately contact a lender when they are unable to make payments as listed in the loan agreement.
- Once a vehicle has been repoed, the lender must send a notice detailing the owner’s right to redeem.
- If the loan remains unpaid and the lender organizes a sale, they must notify the owner with details of the sale terms.
- To redeem personal items in the vehicle, an owner should immediately contact the lender in writing, listing the items they are seeking.
State laws do not require correspondence to be sent via Certified Mail. However, for proper record-keeping, it is highly suggested. If a repo is followed by legal action, proof of mailings, delivery, and receipt is invaluable.
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