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How to Avoid Repossession of Car?

18 Jul

By far the easiest way to avoid repossession of your vehicle is to make your contractual payments on time. Start with the negotiation for the purchase of the vehicle. Before you sign any documents, be certain that you can afford to make the monthly payments. A general rule of thumb is your car payments, all of them, should not exceed twenty percent of your monthly take home income. (Ref 1) That means if you have a net income of $500 per week, your car payment should not be more than $430 a month. Make sure you fully understand all the details of the contract before you sign it, including the fine print. Ask questions. Do not sign any contract that does not sound quite right. You can always find the car you want at another dealer.

If for some reason you are unable to make your monthly payment, you should call your finance company as soon as possible. Discuss your issues with them, and see if you can work something out. They may be willing to lower your interest rate, thus lowering your payments. They might lower your monthly payments at the same interest rate extended out for a longer period of time. Perhaps they will accept a late payment. You may be able to revise your payment schedule. In some cases you may even be able to renegotiate the contract. Ask for any contractual changes to be put in writing to avoid possible future issues. If you cannot agree on new terms with the finance company, another option is to refinance your car with a different financial institution that has terms you can comply with.

If you are facing repossession for a reason other than money, you may want to consult a lawyer. An attorney can go through the fine print of the contract, answer any questions you may have, and assist you with the legal proceedings.

Even though it is in the finance company’s best interest to try to work with you, they are under no obligation to. You signed a legally binding contract with them when you purchased the car stating what you would pay and when you would pay it. You will be considered in default if you do not follow through with your end of the deal, and they have the right to repossess what is essentially their property if you still owe on it. (Ref 2)

References:

Bank Rate: How much car can you afford
FTC: Vehicle Repossession: Understanding the Rules of the Road