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Car Repossession - How to Avoid It

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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 miles away.

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 them.

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 car.

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.


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