Car Repossession - How to Avoid It
By Steve Gillman
I have some experience with car repossession, because I was
a "repo man" twenty years ago. I got to sneak around
in the middle of the night taking what was often a family's only
mode of transportation. I had guns pulled on me, met people who
wanted to fight, and many who threatened to call the police (which
always made me happy). One particular job that I recall involved
a family car in a relatively depressed part of northern Michigan...
The man and his wife were removing the last of their things
from the trunk of the car, trying to pry loose a mitten that
was frozen to the bottom, so they wouldn't have to buy another.
If people were cooperative we always let them remove personal
effects before we towed away the car. Otherwise they had to come
to the towing company storage yard, which in this case was 120
The children were watching with wide eyes. "Why are
they taking our car daddy?" one little girl asked. Without
hesitation her father had an answer.
"Because if you can't pay for it you don't get to
keep it darling."
What a perfect answer! Taking away people's cars may seem
harsh, but if you don't get to go take a car from someone without
paying, why would you get to keep one you don't pay for just
because you have been using it? It isn't really "your"
car until it is paid for after all. that should be common sense,
as it was to this man.
Before You Buy a Car Read This
Some of you may be reading this page because you are behind
on your payments and facing a car repossession. What should you
do? I'll get to that, but first I want to start with what to
do when buying a car in the first place.
Buy for cash and you don't have to worry about the repo man
coming in the night. There is rarely a good reason to borrow
money to buy a car. When I was younger friends would tell me
that they needed a new car, and that they could afford the $500
monthly cost of the payment and insurance. I asked them why they
weren't setting aside $500 each month in savings if they had
that kind of excess income. Soon they would have enough to pay
cash for a great reliable used car, with no debt hanging over
I also pointed out that 40% of millionaires buy used cars.
Why? They understand that a three or four year-old auto still
has most of it's life ahead and looks almost new, yet costs only
half what a new car does. And they pay cash.
If you think you have no way to save the $3,000 necessary
to get a decent used car, you have problems that won't be resolved
by borrowing $15,000 for a new car. For now, buy a $500 car.
You might think you'll pay a lot for repairs, but even the worst
clunkers don't average as much in repairs each month as a large
new car payment costs.
Avoiding Car Repossession
We once repossessed a car that was worth perhaps $6,000 and
the owner only owed $800 on it. What a shame! Even if he later
settled up he now had to pay an extra $500 in fees for the repossession.
When I was employed as a bill collector I had to collect $7,000
from a woman who had her car repossessed years before. The car
sold cheap, as they usually do off a repo lot, so she still owed
$3,000 for the deficiency - the difference between what the lender
got and what she owed on the loan. Over the years the interest
on that mounted, more than doubling the amount. Yes, in case
you missed that, you still owe the money even if they take the
The lesson is clear: Don't let your car get repossessed. Cut
your expenses elsewhere to make those payments. It is a bit sad
and irresponsible to lose the transportation that gets you to
the job that pays the bills, while you still have cable television
and weekly pizza nights.
Now, it's worth noting that banks often never collect in cases
like that one, so they really don't like to repossess a vehicle.
With that in mind, always go to your lender and explain your
situation if you are having trouble with the payments. They may
be able to defer payments if you will be going to work soon,
for example. Or they might be able to waive the late fees if
you can get back on track with payments. It's also possible that
they can refinance the car with lower payments.
If you really can't afford the car, you need to get out long
before it is repossessed. Sell it if it is worth more than you
owe, and then find something cheap to drive. This will save your
credit score as well. If you owe more than the value of the car,
go to the lender and turn it in voluntarily. This saves them
the expense that they would incur from a car repossession - an
expense that will be added to what you owe.
Above all, learn your lessons. They are expensive ones after
all, so make them pay. Don't buy what you can't afford, have
a contingency plan for making payments if your job is lost, stay
out of debt to begin with. Car repossession is rarely something
that has nothing to do with your decisions.