Understanding Car Repossession Laws

Generally vehicle owners don't simply choose to stop making payments on their cars so that they will be repossessed. Typically what happens is that there is some type of a change in the individual's financial situation that prevents even the most financially responsible consumer from being unable to make their car payment. Some of the issues that can lead to a missed payment or payments include:

• Illness or death in the family
• Loss of employment
• Disability
• Personal tragedy

Thankfully most lenders are more than willing to work with consumers and borrowers through problem times, however all consumers that are behind in payments or are going to miss payments on their vehicle should be aware of car repossession laws in their state. Car repossession laws have to be followed by the repossession company or you, as the consumer, may be able to go to court to sue for damages or to limit or eliminate any deficiency payment that the lender may be requiring.

The first concept that consumers should be aware of is that under car repossession laws until the final payment is made on the vehicle, often called the title transfer, the consumer is not the owner of the car. The owner of the loan, typically the dealership, has the right of ownership and the consumer has the right of possession. This means that the owner (dealership) has a right to take back the vehicle if the loan agreement is not honored. It really doesn't matter if you default on the first or last payment, until the loan is paid as per the signed agreement, the lien or loan holder can repossess the vehicle for non-payment. The number of payments that must be missed to start the repossession should be clearly stated in your loan or financing agreement.

Another key concept is that each state has their own car repossession laws and not all states are the same. In some cases the dealership must go to court and get a judgment to proceed with repossession and the owner is notified of the hearing and can appear in court on his or her behalf. In addition the owner is notified of the pending repossession. In other states there is no judgment needed, nor is the creditor required to let the consumer know that they are repossessing the vehicle. Understanding what your state requires with regards to notification is an important part of the car repossession laws.

Once the vehicle is seized it can either be sold at auction or retained by the creditor and evaluated at current market value. Car repossession laws prohibit the creditor from selling the car at a below fair market value or giving you less credit that what the car is worth as per industry accepted prices. If this happens the consumer can take the dealership to court in order to have the deficiency payment lowered or even completely removed by the judge or through a hearing.