Car Repossession: Everything You Need To Know
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Car repossession happens when a lender takes back a vehicle after missed loan payments. In many states, this can happen without warning or a court order. The lender will usually sell the car, and if the sale price doesn’t cover what you owe, you may still have to pay the difference. You have rights during repossession, including protections against wrongful actions and the ability to retrieve personal belongings. If you're at risk, options like negotiating with your lender, refinancing, or filing for bankruptcy may help you keep your car.
Written by Mae Koppes. Legally reviewed by Jonathan Petts
Updated March 20, 2025
What Is Car Repossession?
Car repossession happens when a lender takes back a vehicle because the borrower has fallen behind on payments. Since most auto loans are secured loans, the lender has the right to repossess the car if payments aren’t made on time.
In many states, lenders don’t need a court order or prior notice to repossess a vehicle.
✅They can hire a repo company to take the car from a driveway, workplace, or even a parking lot.
❌But they can’t break into a locked garage or use force to reclaim the vehicle.
Once repossessed, the lender will typically sell the car at an auction or through a private sale. If the sale price doesn’t cover the remaining loan balance, the borrower may still owe the difference. This is called a deficiency balance.
Why Do Cars Get Repossessed?
Lenders repossess vehicles when borrowers fail to meet the terms of their auto loan. The most common reasons for repossession include:
Missing or late payments: Many lenders allow a short grace period, but some states allow repossession after just one missed payment.
Failing to maintain insurance: Some auto loans require borrowers to keep full coverage insurance. If the policy lapses, the lender may have the right to repossess the car.
Violating loan terms: Other contract breaches, such as using the car for unauthorized purposes, may trigger repossession. This isn’t as common as the first two.
Since lenders want to recover their money, they often work with borrowers before repossession happens.
📱If you’re struggling with payments, it may help to contact your lender and discuss options like refinancing or a payment plan.
What Are the Steps in the Repo Process?
The repossession process varies by state and lender, but here’s a general breakdown of what to expect:
Missed payments (default): After one or more missed payments, your loan may go into default. Some lenders offer a grace period, but repossession can happen without warning.
Repossession: The lender hires a company to tow the car, usually from a driveway, street, or parking lot. They can’t break into locked property or use threats.
Notice of repossession: After taking the car, the lender usually sends a notice with the amount owed, how to reclaim the car (if possible), and details about its sale.
Auction or Private Sale: After taking the car, the lender usually sends a notice with the amount owed, how to reclaim the car (if possible), and details about its sale.
Collection or legal action (if a balance remains): If a balance remains, the lender may send the debt to collections or sue to recover the money.
In the following sections we go into more detail about each of these steps.
👉 Understanding this process can help you prepare for repossession, explore options to avoid it, or take action to recover your vehicle.
Missing Payments and Defaulting on Your Loan
Most car loans require monthly payments. If you miss one, your lender may charge a late fee or send a warning notice. If you continue missing payments, your loan may go into default. This puts your car at risk of repossession.
While missed payments are the most common reason for default, some loan agreements allow lenders to repossess a car for other violations, like failing to maintain required insurance.
Every lender has different policies, but state laws also play a role. Some states require lenders to wait a certain period before starting repossession. Others allow them to take action after just one missed payment.
❗If you’re struggling to make payments, it’s a good idea to contact your lender as soon as possible. Some lenders may offer payment extensions, loan modifications, or temporary forbearance to help you avoid repossession.
How Many Payments Can You Miss Before Repossession?
The number of payments you can miss before you’re at risk of repossession depends on your loan agreement, your lender, and state laws.
One missed payment: Some lenders offer a grace period before charging a late fee. Others may consider your loan past due right away.
Two missed payments: Your loan may be labeled delinquent. The lender might send a warning letter or call to discuss repayment options.
Three or more missed payments: At this stage, your loan may be in default, and the lender can begin the repossession process. Some states allow repossession after a single missed payment.
⚠️ Your loan contract and state laws play a big role in how soon repossession can happen. Some states require lenders to give advance notice, while others allow them to take the car immediately after default.
What Happens During a Car Repossession?
Repossession can happen quickly and without warning in many states. If your loan is in default, your lender may hire a repossession company to take back the vehicle. This usually involves a tow truck arriving at your home, workplace, or any public location where your car is parked.
📃Once repossessed, your lender will typically send a notice explaining what happens next.
They may give you a chance to redeem or reinstate the loan. But if you don’t act, the car will be sold at auction or through a private sale. If the sale price isn’t enough to cover your loan balance, you might still owe money, known as a deficiency balance.
Will You Be Notified Before Repossession?
Whether you receive notice before repossession depends on state laws and your loan agreement:
Some states require lenders to send a written notice before repossession, giving you a chance to catch up on payments.
Other states allow lenders to repossess the car immediately after default — even after just one missed payment — without any prior warning.
Your loan contract may also outline notification requirements, so it’s worth checking the terms of your auto loan.
🚨Even if you don’t receive a warning, you will be notified after repossession with details on how to reclaim your car or what happens next.
How Do Repo Companies Find and Tow Cars?
Repo companies use various tracking methods to locate vehicles quickly. Many tow trucks have license plate scanners that automatically match cars to repossession orders.
Some lenders install GPS trackers in financed vehicles, allowing them to pinpoint the car’s location in real time. If your car has built-in remote disabling technology, the lender may even prevent it from starting.
Repossession agents may also monitor common parking spots, like your home or workplace, and use recent lender records to track down the vehicle. Once they find it, they typically tow it away in minutes.
After repossession, your car is usually taken to a storage lot. You may be able to reclaim it if you pay the overdue balance, repossession fees, and storage fees within a certain timeframe.
Know Your Rights: What Repo Companies Can and Can’t Do
Even if you’re behind on payments, you still have rights during the repossession process. Lenders and repo agents must follow state and federal laws when taking back a vehicle. If they don’t, the repossession could be illegal, and you may have legal options to challenge it.
Here’s what you need to know:
Repo agents can’t breach the peace
You must be notified after repossession
Your personal belongings must be returned
Lenders must sell the car fairly
What to do if your rights were violated
Now, let’s break down these protections in more detail.
Repo Agents Can’t Breach the Peace
Repo companies can’t use threats, force, or trespass onto secured private property to take your car. This means:
They can take your car from a driveway, parking lot, or public street.
They can’t break into a locked garage, gated area, or secured property.
They can’t physically harm you, threaten you, or force you to hand over the keys.
They can’t damage your personal property (such as cutting locks or chains).
If a repo agent breaches the peace, the repossession may be illegal. And you could have grounds to challenge it. If this happens, document everything (photos, videos, witness statements) and consider reaching out to a lawyer.
You Must Be Notified After Repossession
Notice laws vary by state, but lenders usually must send you a letter after repossession. This notice should explain:
How much you owe and any added fees
How to reclaim your car (if possible)
When and where the car will be sold
If your lender fails to follow state notice requirements, you may have legal grounds to dispute the repossession or any deficiency balance.
Your Personal Belongings Must Be Returned
Repo agents can take the car, but they can’t keep or sell personal belongings inside it. In most states:
You have the right to retrieve your items after repossession
The repo company must give you access to collect your things
Some states allow storage fees, but they must be reasonable
If your lender or repo company refuses to return your belongings, that may be illegal. Learn what steps you can take in our guide on what to do if your car is repossessed with personal items inside.
Lenders Must Sell the Car Fairly
After repossession, the lender must sell the car in a commercially reasonable manner. This means they can’t intentionally sell it for much less than it’s worth. If they undervalue the car, you might be able to challenge the deficiency balance (the amount left after the sale).
What To Do if You Think Your Rights Were Violated
If you believe your lender or repo company broke the law, you can:
File a complaint with the Consumer Financial Protection Bureau (CFPB) or your state attorney general
Dispute an unfair deficiency balance in court
Consult a lawyer to see if you can take legal action
Repossession laws vary by state, so if you're unsure about your rights, it may help to talk to a consumer protection attorney or research your state’s repossession laws. You may be able to get free legal help from a legal aid nonprofit.
Can a Tow Truck Repossess a Car From Private Property?
In most states, repo companies can take a car from private property, but there are limits to what they can legally do.
👉Repo agents must follow certain laws, but they don’t need your permission to take the car.
✅ They can repossess a car from an open driveway, parking lot, or public street.
❌They can’t break into a locked garage or use physical force to take the vehicle.
If they violate these rules, it may be considered a breach of the peace, which could make the repossession illegal.
If your car is parked in an area that’s legally accessible, repo agents don’t need your permission to take it. And in many states, they aren’t required to notify the police beforehand.
Repo Towing Fees and Storage Costs: What To Expect
Once your car is repossessed, you’ll likely have to pay towing and storage fees to get it back. Repossession expenses vary but can add up quickly, especially if your car is held in storage for several days.
Many lenders require you to pay the full past-due balance, late fees, and repossession costs before releasing the vehicle.
If you can’t afford to reclaim your car right away, storage fees will continue to increase daily. Some states limit how much lenders can charge, while others allow repo companies to set their own rates.
⏱️ If your lender plans to sell the car, they must usually give you a deadline to pay off the balance before the sale happens.
What Happens After Your Car Is Repossessed?
After repossession, your lender will typically send a notice explaining your options.
📄This notice may include details on:
How to get your car back
The total amount you owe
Whether (and how) the lender plans to sell the vehicle
In most cases, you have a limited time to pay off the loan, reinstate it, or negotiate with the lender before the car is sold. If you don’t act within this timeframe, the lender will move forward with auctioning or reselling the vehicle.
If the sale doesn’t cover your remaining loan balance, you may still owe money. This is called a deficiency balance.
If your car has been repossessed, it’s important to review your lender’s notice carefully and consider your options quickly to avoid additional costs.
Will You Be Notified After Repossession?
Yes, lenders are usually required to notify you after repossession.
The notice will typically explain:
How much you owe and what fees have been added
How long you have to redeem or reinstate the loan
When and where the car will be sold at auction, if applicable
The timeline for this notice varies by state, but lenders must generally provide reasonable notice before selling the car. If you don’t receive one, or if you believe the lender mishandled the repossession, you may have legal grounds to challenge the sale or dispute any deficiency balance.
How Long Before a Repossessed Car Is Sold?
The timeline for selling a repossessed car depends on state laws and lender policies.
📅 In most cases, lenders must wait a certain period, usually between 10 and 30 days, before selling the vehicle.
This waiting period gives you a chance to pay off the loan, reinstate it, or negotiate with the lender before the sale happens.
Once the waiting period ends, the lender will sell the car at a public auction or through a private sale.
Deficiency Balances: What If Your Car Sells for Less Than You Owe?
If your repossessed car is sold for less than the total amount you owed on the loan, you may have to pay the remaining balance. This is called a deficiency balance.
You’re legally responsible for paying this amount, and your lender may take steps to collect the debt, including:
Sending the balance to a collection agency
Seeking a court order to garnish your wages or freeze your bank account
Some states have laws that limit deficiency balances or require lenders to sell repossessed cars for fair market value. If you believe your car was sold for too little, you may have legal options to challenge the deficiency.
If you can’t afford to pay the deficiency balance, you may be able to negotiate a settlement or explore other options. For example, Chapter 7 bankruptcy can help eliminate certain debts, like credit cards, medical bills, and deficiency balances.
How Long Does a Repossession Stay on Your Credit Report?
A car repossession can feel like a major setback, but its impact on your credit won’t last forever.
Repos, like other negative items, stay on your credit report for seven years. When the repo is first reported to the credit bureaus, your credit score will likely take a dip. This can make it harder to qualify for loans or credit cards in the short term. But over time, the impact on your score will lessen. And you can take steps to rebuild your credit score.
How Much Does Repossession Hurt Your Score?
The exact impact on your score depends on your overall credit history. If your credit was strong before the repossession, you might see a big drop.
If you were already struggling with late payments or other debt, the effect may be smaller. Either way, a repossession is a negative mark that lenders consider when deciding whether to approve new credit.
The good news is that you can start to rebuild your credit right away. Focus on making on-time credit card and loan payments, paying down debt, and checking your credit report for errors.
Can You Get Your Car Back After Repossession?
If your car has been repossessed, you may still have options to get it back. Your choices depend on state laws, your lender’s policies, and how quickly you act. In most cases, you will need to pay a certain amount of money to reclaim your vehicle before it is sold.
How Much Does It Cost to Redeem a Repossessed Car?
One way to get your car back is through redemption, which means paying off the full remaining balance on your loan. This includes:
Past-due payments
Late fees
Repossession costs
Storage fees
Redemption can be expensive, but if you have access to funds or can borrow money, it allows you to regain full ownership of the car.
Reinstating Your Car Loan: Can You Get Your Car Back by Catching Up on Payments?
Some states allow loan reinstatement, which means catching up on all missed payments, plus fees, to bring the loan current.
Unlike redemption, you don’t have to pay off the entire loan — just the overdue amount. If reinstatement is an option, your lender must provide details on how much you need to pay and the deadline to do so.
Can You Buy Your Car Back at Auction?
If you can't redeem or reinstate the loan, the lender will likely sell the car at an auction.
In some cases, you can attend the auction and bid on your own vehicle. However, even if you win the auction, you may still owe money if the sale price is lower than what you originally owed on the loan.
Since time is limited, it’s important to act quickly and check your repossession notice to understand your options.
How To Stop Repossession
If you're behind on car payments, the following options may help you avoid repossession:
Sell the car before repossession: If you can’t afford the payments, selling the car yourself may help you pay off the loan and avoid a deficiency balance.
Work with your lender: Many lenders would rather help you keep the car than go through repossession. You might be able to refinance, modify your loan, defer a payment, or set up a new repayment plan.
Voluntary repossession: Returning the car voluntarily may reduce fees, but you could still owe a deficiency balance.
File bankruptcy: Bankruptcy can temporarily stop repossession and may provide options to keep your car.
Can You Sell Your Car Before Repossession Happens?
Yes! Selling your car before repossession can be a great way to avoid the stress and damage to your credit. If you can sell it for at least what you owe, you can pay off the loan and move on.
If the sale price is lower than your loan balance, you might need to cover the difference or see if your lender will agree to a short sale, where they accept less than what’s owed.
🔑The key is acting fast. Once the repossession process starts, selling the car yourself probably won’t be an option.
How To Work With Your Lender to Avoid Repossession
If you're struggling with car payments, reaching out to your lender can open up options to help you keep your car. Many lenders would rather adjust your loan terms than go through the costly repossession process.
Here are some potential solutions:
Refinance your loan
Modify your loan terms
Ask to delay or skip payments
Catch up with a repayment plan
Here’s more information on each of these options.
Refinance Your Auto Loan
Refinancing replaces your current loan with a new one. Ideally with a lower interest rate or a longer repayment term to reduce your monthly payments. This can be a great option if your credit has improved since you took out the loan or if interest rates have dropped.
For this to be a good option, you usually need to have a good credit score and a reliable source of income.
Modify Your Loan Terms
If refinancing isn’t an option, ask your lender about a loan modification. Some lenders offer temporary payment reductions, extended loan terms, or lower interest rates to help borrowers get back on track.
Unlike refinancing, this doesn’t require taking out a new loan. It just adjusts your existing one.
Request a Payment Deferral
Some lenders allow payment deferments, which let you skip or delay a payment and add it to the end of your loan term.
This can provide short-term relief, but it’s important to understand any fees or interest that may still accrue.
Set Up a Repayment Plan
If you’ve missed payments, your lender may offer a repayment plan that spreads the overdue amount over several months. Instead of requiring a lump sum, this allows you to gradually catch up while keeping your car.
Is Voluntary Repossession Better Than Forced Repossession?
🚗 Voluntary repossession means returning your car to the lender instead of waiting for them to take it. It won’t wipe out what you owe, but it can save you some of the extra fees that come with a forced repossession.
Also, it might look a little better on your credit report since it shows you took responsibility instead of just letting the lender take the car. That said, the lender will still sell the car. And if it doesn’t cover your loan balance, you’ll likely owe the difference.
If you're thinking about voluntary repossession, it’s worth asking your lender if they’ll work with you on the remaining balance. Some might waive certain fees or let you set up a payment plan.
Can You Stop Repossession Through Bankruptcy?
Filing for bankruptcy can temporarily stop repossession and may provide options to keep your car.
🛑 When you file, an automatic stay goes into effect, which prevents lenders from taking further action against you, including repossession.
However, this protection is not permanent. The type of bankruptcy you file will determine whether you can delay, prevent, or reverse a repossession.
Below we give a quick overview. To learn more read our comprehensive guide Can Filing Bankruptcy Help With a Repossession?
Chapter 7 vs. Chapter 13 Bankruptcy: How Each Helps With Vehicle Repossession
Chapter 7 can delay repossession, but unless you can catch up on missed payments or redeem the car by paying off the loan, the lender may still repossess it.
Some filers use Chapter 7 to wipe out a deficiency balance if the car has already been repossessed and sold.
Chapter 13 allows you to catch up on missed payments through a repayment plan, which can help you keep your car as long as you continue making payments.
If you want to learn more about whether bankruptcy can help you, consider consulting with a bankruptcy attorney to get legal advice about your case. Upsolve can help you set up a free consultation with a qualified attorney near you.
Does Filing Bankruptcy Get Your Car Back?
If your car has already been repossessed but hasn’t been sold yet, filing for bankruptcy quickly may help you get it back. This depends on state laws and how soon you act.
Once the lender sells the car, bankruptcy won’t reverse the sale. But it can only eliminate any leftover balance you owe.
Key Takeaways: Managing Car Repossession
Repossession can happen quickly if you default on your loan, often without notice in some states.
Your lender must follow the law, meaning repo agents can’t use force, trespass on locked property, or keep your personal belongings.
After repossession, your car is usually sold, and you may still owe money if the sale price doesn’t cover your loan balance.
You have options to stop repossession, including selling the car, negotiating with your lender, or filing for bankruptcy.
Repossession damages your credit, but you can rebuild by making on-time payments and reducing debt.
You may be able to reclaim your car by paying what you owe, reinstating your loan, or even bidding at auction.
