How Many Car Payments Can I Miss Before Repo?
Understand how missed car payments can lead to repossession and what your loan agreement says. Learn the process and your rights.
Car ownership often involves an auto loan, allowing individuals to purchase a vehicle and pay. This requires adhering to loan terms and making timely payments. Failing to meet these obligations can lead to serious consequences, including vehicle repossession. Understanding your loan agreement is important for managing financial commitments and avoiding such outcomes.
What Your Loan Agreement Says
There is no universal number of missed car payments that triggers repossession; instead, the specifics are outlined in each auto loan contract. Review your original loan agreement to understand your obligations and the lender’s rights. This document details loan default conditions.
The “Default Clause” defines actions constituting a default, including missing payments or failing to meet other terms, such as maintaining required insurance. Some contracts consider a payment late after a few days, others specify a longer period. Lenders may consider an account in default after 30 to 90 days of missed payments, but the contract dictates the exact timeline.
Many loan agreements include a “Grace Period,” a short window after the payment due date to pay without a late fee. Grace periods commonly range from 10 to 15 days, varying by lender. Even if a grace period prevents a late fee, a payment made after the original due date could still be considered late and reported to credit bureaus if it extends beyond 30 days past due.
The “Acceleration Clause” permits the lender to demand the entire outstanding loan balance immediately if a borrower defaults. The full remaining amount, plus accrued interest and fees, becomes due at once. The contract also outlines the lender’s right to repossess the vehicle if the borrower defaults, as it serves as collateral.
Lender Communication Before Repossession
Lenders often communicate before repossession, even after default. These communications inform the borrower of delinquency and encourage resolution. Lenders typically reach out through phone calls, emails, and formal letters, including delinquency notices.
Their primary purpose is to remind the borrower of missed payments and attempt collection. Lenders may also discuss potential solutions, such as payment deferment or loan modification, to bring the account current. Engaging with the lender can prevent escalation, as they often prefer to avoid the costly repossession process.
Some state regulations may require lenders to send a “right to cure” notice before repossession. This notice grants the borrower about 20 days to make up past-due payments and fees to avoid repossession. Such correspondence indicates the lender is monitoring the account and preparing further action if default is not remedied.
The Repossession Process
Once a borrower defaults on the loan agreement, the lender can repossess the vehicle. This occurs without a court order, as the car serves as collateral. In most states, advance notice before taking the vehicle is not required; only notice after repossession.
Repossession agents can take the vehicle from almost any location, including home, workplace, or public spaces. The repossession must be conducted peacefully. Agents cannot use threats, physical force, or break into locked property to take the vehicle. Any “breach of the peace,” such as damaging property or confrontational behavior, is prohibited.
Only items permanently attached to the vehicle, like custom parts, can be taken. Personal belongings inside the vehicle, such as wallets, phones, or clothing, cannot be kept by the lender. The lender must provide a reasonable method for the borrower to retrieve these items, often by contacting the repossession company or the lender.
After Your Car is Repossessed
After vehicle repossession, the lender sends a written notice detailing their intent to sell the car. This notice provides information on next steps. The borrower usually retains a “right to redeem” the vehicle, meaning they can reclaim it by paying the entire outstanding loan balance, plus accrued interest, late fees, and repossession and storage costs. This option is time-sensitive and requires a substantial lump-sum payment.
The lender must provide notice of how and when the vehicle will be sold, whether through a public auction or a private sale. This notification allows the borrower to attend a public auction or be aware of the private sale date. The goal of the sale is for the lender to recover the outstanding debt.
A common outcome after the sale is a “deficiency balance,” occurring if sale proceeds are less than the total amount owed on the loan, including principal, interest, and all repossession, storage, and sale costs. The borrower remains responsible for paying this difference. For example, if $10,000 was owed and the car sold for $7,000, the borrower would still owe the $3,000 difference plus any fees.
If the sale generates more than the total amount owed, a “surplus” exists, and the borrower is entitled to the excess. This scenario is less common, as repossessed vehicles often sell for less than their market value.