Car repos on the rise; what to do if it happens to you

A growing number of drivers are falling behind on their car payments, with no relief in sight.

The average monthly payment for a new car is up 26% since 2019 to $718 a month, and nearly one in six new car buyers are spending more than $1,000 a month on their vehicles. Other costs associated with owning a car have also shot up, like insurance, gas and repairs.

Thanks to inflation and growing unemployment, people who could afford a $500 or $600 monthly payment a few years ago are starting to feel the pinch.

Getting your car repossessed is one of the most frustrating things to deal with as a driver. This typically happens when you default on your loan and stop making the payments. Once your car is repossessed, the lender will typically sell it at auction to recoup their money.

Reclaiming your car

While it can be a tedious process, it's possible to get your vehicle back after a repossession. Just remember that you must act quickly. It boils down to two options:

1. Pay off the outstanding balance

Easier said than done, but if you can pull it off, this is very effective. That means paying off the entire car loan balance in full, in addition to collection and car repossession costs, such as the labor and tow truck charges. Most lenders also have late fees you must pay. Once you complete these steps, the vehicle will be returned to you and you'll own it outright, eliminating the possibility of car repossession in the future.

2. Reinstate the loan

Car repossession happens when you default on the loan, so you can get the car back by reinstating the loan. That means you'll catch up on your loan payments, so you no longer have an outstanding balance. However, this also requires covering any late fees and repossession costs.

Reclaiming personal property left in your car

It's normal for people to store personal items in their vehicles, but repo companies don't wait for you to clear them out before taking your vehicle. You can get your personal property back, but you'll have to jump through a few hoops first.

Before you reach out to the repossession company, learn about the state laws around reclaiming items from a repossession company. It's not uncommon for these repossession companies to charge "storage fees" before they'll allow you to get your personal property back. In some cases, this is illegal, so make sure they're abiding by your state's regulations.

When you're ready to get your stuff back, contact the repossession company and schedule an appointment to do so. Meeting them for this appointment will allow you to go through your vehicle and grab everything that's your property and not considered part of the vehicle. Check the items for damage as well.

If any of your items have sustained damage, it's on the repossession company to cover the cost of it. In addition to items inside the vehicle, this includes property damage that occurred during the repossession process. For example, if the repo agent damaged your mailbox or garage door in the process of taking your vehicle, they are responsible for the cost of repairs.

Preventing repossession

The easiest way to deal with repossession is to prevent it from happening in the first place. Being proactive is the best way to keep your vehicle firmly in your possession and avoid hurting your credit.

If you're having trouble making your loan payments, reach out to your lender to see what kind of options they're willing to offer. Sometimes, lenders will give you a relief period to get your finances in order before having to make a car payment again. They might even modify your loan terms and put you on a new payment plan to better suit your current financial situation.