What is car repossession?

If you lease or finance your car, it still belongs to the lender until you’ve paid it off entirely. The company also has the power to seize it if you fall behind with your payments.

Repossession isn’t an easy process to go through, and it can have consequences for your financial future too. However, you do have option to recover from having your car taken away from you.

When can my car be repossessed?

If your car is leased or financed, it isn’t officially yours until the debt is paid. It remains the property of the lender, who will have the right to repossess your vehicle in the following situations:

1. You fall behind on your payments.
2. You breach your loan agreement in some other way.
3. The lender finds out you gave misleading information when applying for the lease.
4. Your car is seized as part of a court order.

How does car repossession work?

How quickly a lender can repossess your car boils down to what type of lease or finance agreement you have. With both a personal contract hire (PCH) and a personal contract purchase (PCP) deal, the lender can repossess the car at any time.

However, with a personal contract purchase, the company will need to get a court order if you’ve already paid at least a third of the amount.

The lender will have to give you at least 14 days’ notice if it’s planning to repossess your car, and it will give you the chance to remedy the default.

So if you’ve fallen behind on your payments and you suddenly have an influx of cash, you could try and settle the debt. Should the lender go forward with the repossession, the lender will try sell the car off for market value.

If the car sells for less than what you owe, you may be required to pay the difference – or face being pursued in court.

What are repossession agents legally allowed to do to get the car?

Repo agents are legally allowed to take back the car, but there are restrictions on how far they can go. They can’t clamp or tow your vehicle if it’s inside a locked garage for instance.

However, they can put a clamp on your car or tow it away if it’s parked in your driveway or in a public place like a road or car park – or even if it’s left in an unlocked garage.

My car was repossessed. How do I get it back?

You have options. But if you want to get your car back, you’ll need to act quickly. There are a few different paths you can take:

1. Reclaim your car or reinstate the loan. You can get your car back if you quickly catch up on your payments or pay off the loan in full.
2. Negotiate. You may be able to come to some sort of agreement or payment plan with your lender to get your car back.
3. Terminate your contract. If you pay off 50% of your PCP or PCH, you can voluntarily terminate the deal with little impact on your credit score.
4. Surrender the car. For anyone unable to pay off half the amount, you might have to surrender the car to the lender instead. This will look pretty similar to a bog-standard repossession on your credit file, but it will leave you on better footing with the lender.

Before you go down any of these routes, you need to consider if you can actually afford to keep your car. Will you be able to keep up with the payments as well as insurance, maintenance costs and petrol expenses? If you don’t think you can, then it might be worth saying goodbye to your car and waiting until you can afford one.

How do I negotiate with my lender?

If you’ve been handed a repossession notice or your car has been taken away already, here’s what you should do:

1. It’s crucial that you get onto the phone straight away to try and remedy the situation.
2. Be polite and ask what you can do to fix the situation. Don’t fly off the handle or make any demands.
3. Your creditor or lender may agree to work out a new payment plan and give you the vehicle back. This is often easier for them than pursuing you in court for the car or for any outstanding debt.
4. If your lender refuses to revise the terms of your deal, you can voluntarily terminate the contract or surrender the car.

Can my car be repossessed for driving uninsured?

Yes. A lender can terminate your contract and repossess the car if you breach your contract in any way. Given all insurers will require you to take out car insurance, driving uninsured is a clear way of breaking your end of the bargain.

In fact, almost all lenders will insist you take out a fully comprehensive deal while you’re paying off the loan because they want to protect their asset.

This is all without mentioning the fact that driving uninsured is illegal in the UK. You could be hit with a massive fine and even lose your licence.

What happens to my car insurance after my car is repossessed?

It depends on your situation. Should you be looking to reclaim your car after it’s been repossessed, it’s best to keep your car insurance coverage active.

This way, if it all works out, you won’t have to explain to your insurer that you let your insurance lapse. If you let it lapse, it could lead to higher rates and a harder time getting a new policy.

Before doing this though, double-check that your lender hasn’t taken out insurance for the car since taking back possession of it. In this instance, there would be no point in having coverage and you should cancel it.

If your car has been repossessed and you’re waving goodbye to it, consider keeping your policy until it’s out of your possession. This is also a good idea if you plan on getting another car soon.

You could get a better rate, or even a discount, by keeping your insurance going and making sure there isn’t a break in your coverage.

Bottom line

Car repossession is a stressful and worrying process, especially if you’re going through a period of financial difficulty. However, there are still options.

If you want to hold onto your car, get on the phone to your lender and see if you can work something out. In some cases, it might be best to just cut your losses. Try to pay off at least half of the deal and you could be able to voluntarily terminate your contract and maintain a good credit rating.

Frequently asked questions

• Will car repossession affect my credit rating?

  Yes, because repossession is seen as you defaulting on your loan. So whether you voluntarily surrender the car or it is repossessed by force, it’s going to impact your credit rating.

  To repair your credit score faster, pay off the remaining loan balance and keep on top of your credit card and loan payments.

• Will I have to pay for voluntary repossession?

  In all likelihood, yes. If the lender sells the car off for less than what you still owe on the loan, you will have to pay the difference.

  You may also have to fork out for late payment fees, although you won’t be hit with towing and storage charges – which you would have to pay if the lender has to hire someone to seize the vehicle.

• Can the lender take the belongings found inside the car?

  They can’t take your personal belongings. However, if you don’t claim them within about 20 days of the vehicle being seized, they may well destroy or sell your personal belongings.