- Buying & Selling New & Used Cars
Avoid Automobile Repossession: Don't Fear the Repo
Don't Let the Repo Man Get Your Car!
It's late at night. I'm sitting at my computer, and I hear a large truck rumbling down the road. The hairs on the back of my head stand on end; will my car be repossessed? Will my worst fears be realized?
Then I realize that my car is completely paid for, and I breathe a sigh of relief. It hasn't always been this way though. My income is often not high enough to pay the rent and the car payment at the same time. Sometimes it's not large enough to pay for either. For about a year, my "repo man senses" (much different, and not as fun, as Spidey senses) have been on high alert. Sometimes it has kept me awake at night. It has only been recently, when we received a large amount of cash and were able to pay off the car, that I have been able to relax a little. Still, I reflexively feel dread when I hear a large truck drive by in the middle of the night, until I remember they can't take it away.
If you fear the repo man too, then you're not alone. A lot of people are having difficulty affording their car payments. There are some things that you can do to minimize your risk of getting your car repossessed. I have written about them here.
Photo courtesy of Ruben de Rijcke.
Try Not to Buy Too Much Car
The first thing that you can do to minimize your risk of repossession is to not buy too much car to begin with. This is not always possible, but people make this obvious mistake all the time. Those beautiful new BMWs look great in the lot (and as someone who spent several months reviewing automobiles, I know they're nice), but they have a price tag that's beyond me. Personally, I don't think I could afford one if I couldn't pay cash for it.
Car payments can still be difficult to afford even when you do your best to buy an inexpensive car, but buying a car that is a couple of years old can be a lot less expensive than buying a brand new luxury car. If you can get the loan, buying a cheap car from a private party costs even less. We paid $1400 cash for a 20 year old car that belonged to someone's grandma. It's not my favorite car, but it works. Even when I was afraid that my gold car was going to be towed away, I knew that my paid-for white car was mine.
Talk to Your Lender
If you're having difficulties making your payment, talk to your lender. It might be tempting to let the phone ring when your bank calls, but if they don't hear from you, they might think that you're purposely not trying to pay them. It can be annoying to talk to them when are having trouble paying your bills, but they'll be more willing to work with you.
My car loan was with a small credit union. I think I talked to the same person on the phone nearly every month. I really hated discussing my financial situation with her -- we always paid the car payment eventually -- but it kept them from taking my car away. When I told them that we were going to have a lot of money coming in and were going to pay off the car in full later on in the month, they told me that they wouldn't call me until after the date that I said I'd pay the car off. I haven't talked to the bank again. Now that my car is paid off, if they talk to me again, it will probably be to tell me that they think I'm spending my money erratically or something.
What Happens During a Car Repossession?
Should You Hide Your Car?
Hiding your car is probably not a good idea. Eventually, the repo man is going to find your car, so unless you're going to be able to get your car payments up-to-date in the near future, it's not going to work. I'm pretty sure that it would be illegal as well. Your car is technically the bank's property until you pay for it, and if you're not caught up on payments, they have the right to take it back.
When I was severely behind on my car payments, I did some research on repossession, and read some stories from repo men. The first place that they will look for your car is at your house. They usually go at night, because they really don't want confrontation (in some states, it's illegal for them to take your car if you object). If they don't find your car at your house, they will start doing research. They will check your family's houses, your friend's house, and your workplace. They'll take your car from the grocery store or from church.
One of the repo men told a story about a man that had a very expensive automobile that he always stored in the garage. The repo man didn't have access to the car because it was always inside. One day, the repo man saw that the man with the expensive car was wiping down his car with the garage door open. The repo man called the man with the car on the phone (he must have been staking out the house), tricking him to go in the house. While the man was inside, the repo man hooked that expensive car up and hauled it off.
The problem with hiding your car from the repo man, other than it being illegal, is that the repo man will pass on any expenses that he has onto you. After the bank repossesses your car, the bank will sell your car at auction. Usually they will get a bargain-basement price. The difference between what you have left on the loan and what they get at auction, plus the costs of repossessing the car, will be passed onto you. If you make it more difficult for the bank to get your car back, you'll eventually have to pay back more money.
Try to Sell Your Car
If you know that you won't be able to make payments on your car in the future, you might try to sell your car. This might be the best case if you lose a job or take an extreme pay cut. You'll want to talk to your bank ahead of time before you do this, because most people are upside-down on their auto payments (unless their car is almost paid off), and you might end up owing the bank money. They might be able to arrange a smaller loan for you once you sell the car.
You still might owe a little money (although a smaller amount), and you won't have your car, but you'll avoid repossession and save yourself a lot of money. Once the bank takes your car, they really don't have much of an interest in getting the best price for your car, and they will pass on their repossession costs to you. You will obviously try to get a better price when you sell your car.
Get Your Priorities Straight
If you are overwhelmed in debt, like many people are, saving your car may just be a matter of straightening out your priorities.
Create a budget with whatever income you have coming in. Most people that work a regular job make about the same amount with every paycheck. Add up your income for the month, then dole out that money in order from highest priority to lowest priority.
The most important priority on your list is food. If you don't have food, you'll die. Next, you'll have to pay for your rent or mortgage, electricity, gas, and water. If you have money left after that, pay your car payment, insurance, and gas for your car. Credit cards, cable television, cell phones, other unsecured debt, and the internet (unless you need it at home to work) are a lower priority. Your credit cards may nag you and even ding your credit, but at least you'll be able to keep your car. A repossession won't help your credit report either.
While you are working on your budget, see if there is anything you can cut. Do you have to buy lunches at work (and take leftovers instead)? Are there things that you're paying for that you don't really need? Do you really need a latte every day? Do you need to drink so much soda? Some of these cuts can be very difficult, but it may free up enough money for you to pay your bills.
Don't Purposely Try to Rip Off the Bank
Probably you wouldn't purposely try to rip off the bank, but some people think that they can get a car for free and just avoid the repo man instead. They come up with very clever ways to try to avoid repossession, but they usually get caught in the end.
One trick that some people use, if they have friends that think alike and want to steal a car from the bank, is to buy a new car at the same time that their friend buys a new car. They trade cars. Friend A drives the car Friend B bought, and Friend B drives the car Friend A bought.
This trick doesn't work. It might work for a short while, but it's actually pretty easy to find your car in this situation. All the repo man has to do is go to your house, look up the license plate number of the car in your driveway, and they'll discover that the car doesn't belong to you, but to your friend. He'll go to your friend's house, and not only does he find your car, but he finds your friend's car too.
Should You File for Bankruptcy?
If your bills are too high, you might consider filing for bankruptcy. You might be able to save your car this way.
Bankruptcy will wipe out most of your debts, including credit cards, medical bills, and anything else you owe. Your car and your mortgage will also be included in your bankruptcy, but if you want to keep your car or your home, in most states, as long as you keep making payments on it, you will not lose either.
This isn't a good choice if you owe very little, but if your debts are incredibly high and you can't really see any way out, it might be the right solution.
It's not fun to owe money on loans that you can't pay... you might not even be able to save your car if your financial situation is bad enough. If you do end up losing your car, it's not the end of the world. A lot of people have gone through what you have -- especially during the recent financial downturn. You can recover.