How Many Months of Non Payment Before Repo?

Vehicle repossession is a consequence of failing to meet loan agreement terms, primarily due to missed payments. It involves the lender taking back the vehicle that serves as collateral for the loan. Understanding this process is important for anyone financing a vehicle.

Understanding Loan Default

There is no universal fixed number of missed payments that triggers vehicle repossession; the exact trigger is defined by the loan agreement. A borrower enters “default” when they fail to adhere to the terms outlined in their contract. This can occur after a single missed payment, as the loan agreement often stipulates that even one missed payment constitutes a breach of contract.

While a lender technically has the right to repossess a vehicle after one missed payment, many lenders exercise discretion. They often wait until a borrower is 60 to 90 days past due, which typically means two or three missed payments, before initiating repossession. The specific terms regarding what constitutes default, including any grace periods, are detailed within the individual loan agreement.

State laws can also influence the process by setting guidelines or requiring specific notices before repossession. However, the foundational definition of default and the lender’s immediate right to repossess upon its occurrence are primarily governed by the signed loan contract. Borrowers should carefully review their loan documents to understand these specific conditions and any grace periods for late payments.

Lender Actions Before Repossession

Once a borrower is in default, lenders typically engage in a series of actions before proceeding with repossession. These steps usually begin with attempts to communicate with the borrower, such as phone calls and letters, to resolve the missed payments. Lenders prefer to avoid repossession due to the associated costs and complexities, making attempts to collect overdue payments a common first approach.

Many lenders have internal policies that provide a grace period or a window for the borrower to catch up on payments. During this time, the lender might send notices of default or an intent to repossess, especially if required by state law. These notices often inform the borrower of the amount needed to cure the default and the deadline to do so, providing an opportunity to prevent repossession.

The “how many months” question often arises from these internal lender policies and state-mandated notice periods, rather than a fixed number of missed payments. While some states require a “right to cure” notice, giving the borrower a specific number of days (e.g., 10 or 21 days) to make payments current, not all states mandate such pre-repossession warnings.

The Repossession Process

Vehicle repossession typically involves a repossession agent, a third party hired by the lender to retrieve the collateral. Repossession can occur through various methods, including towing the vehicle or, in some cases, using electronic disabling devices that prevent the car from starting. Lenders often install these devices, sometimes referred to as “kill switches,” in vehicles they finance.

In many jurisdictions, repossession can happen without prior notice to the borrower, provided the borrower is in default and the repossession can be executed without “breach of the peace.” Breach of peace generally means avoiding physical force, threats, or taking the vehicle from an enclosed, locked garage without permission. Repossession agents cannot use force or threats to seize the vehicle.

Personal property left inside the repossessed vehicle cannot be kept or sold by the lender. Borrowers have the right to reclaim their personal belongings, though they may need to contact the repossession company or lender to arrange retrieval and might be charged storage fees. It is advisable to remove all personal items from a vehicle if repossession appears imminent.

Borrower Rights After Repossession

After a vehicle has been repossessed, borrowers retain certain legal rights. One significant right is the ability to “redeem” the vehicle, which involves paying the entire outstanding loan balance, along with any late fees and repossession costs, to reclaim the car before it is sold. The lender must notify the borrower of this right and the amount required for redemption.

Lenders are obligated to sell the repossessed vehicle in a “commercially reasonable manner,” whether through a private sale or a public auction. Before the sale, the lender must provide the borrower with written notice, typically at least 10 days in advance, detailing the sale’s time, date, and location if it’s a public auction, or the earliest date of a private sale. This notice allows the borrower to attend the sale or find potential buyers.

A borrower may still be liable for a “deficiency balance” if the sale price of the vehicle does not cover the remaining loan amount and the costs associated with repossession and sale. For example, if the outstanding debt is $15,000 and the car sells for $10,000, the borrower could still owe the $5,000 difference plus fees. Conversely, if the vehicle sells for more than the amount owed, the borrower is entitled to receive the surplus. A repossession can significantly impact a borrower’s credit score, remaining on their credit report for up to seven years.