Repossessing a car is always a last resort for an auto lender and in most situations the last resort for the borrower too. Almost every time a bank, a leasing company or auto finance institution has to repo a vehicle they end up taking a financial loss. These losses are one of the many reasons you pay interest on your auto loan and in some cases, it can directly affect the amount of interest rate you pay. There are two types of auto loan repossessions: Involuntary Repo and Voluntary Repo
Involuntary Auto Loan Repossession
The involuntary auto loan repo is what most people consider the standard repossession. The typical situation involves the debtor either struggling with their car payments or refusing to make payments. Eventually, after the auto loan gets far enough past due, repayment conditions continue to be broken or the car payments just stop coming, the creditor has no choice but to hire a bailiff to repossess the vehicle against the debtors will.
Voluntary Auto Loan Repossession
Just like its name suggests, a voluntary repo is deliberate. If a consumer is struggling with auto loan payments and determines that they can no longer afford the vehicle, they have the option to surrender it. Although this is within their rights as a borrower, it does not limit or change their responsibilities. It does however show cooperation and can help save the lender some expenses, such as collection, bailiff and other repossession expenses. Because these expenses are usually charged back to you, the borrower, the voluntary repo may help reduce the overall liability you will owe.
The benefits to a voluntary repossession are limited but can include
avoiding extra costs, a reduction in collection calls and temporary access
to income that might otherwise go towards an auto loan the consumer is unable
It is very important that you consider your legal responsibilities when you have an auto loan. If your auto loan is repossessed or you choose to surrender it, you will damage your credit and you will be breaking a legal agreement. So please, if you are struggling with your auto loan payments do your best to work with the auto lender to try and find a suitable payment schedule or alternative to repossession.
Remarketing an Auto Loan Repo
Once an auto loan has been repossessed and the vehicle is seized by the creditor, it is taken to auction and then re- sold (usually at a loss). In the auto industry, re-selling a used vehicle is called remarketing. An auto lender that has repo’d a vehicle will often use their remarketing department to resell the vehicle as quick as possible. Because vehicles depreciate on a daily basis, the faster they can remarket the repo, the smaller their losses will be.
Once the vehicle has been sold at auction, the proceeds from the sale are applied against the balance owed on the auto loan (the auto loan balance is called a lien). A combination of vehicle depreciation, vehicle wear and negative equity (other costs inside the loan) result in the creditor rarely receiving enough sales proceeds to pay out the outstanding loan. This leaves a lien balance owing. The balance left over is the consumer’s responsibility and the lender has full legal rights to pursue them for it. The amount you owe and how you respond to it (will you pay it off? Will you settle? Will you ignore it?) has a direct impact on you and your credit bureau.
Recovering from an Auto Loan Repo
If your auto loan is repossessed, it can be very damaging to your credit history, credit score and of course the relationship you have with your auto lender. After the repo your credit bureau will update and show the repossession as an I8 (Installment Loan Repo).
Once a Repo is registered to the credit bureaus it can be very difficult to get approved for a loan, especially an auto loan. In most cases, any auto loan application a consumer submits will be declined immediately. There are however, other cases where getting approved on an auto loan after a repo is possible.
Occasionally, if the repo circumstances are justified or the right variables are present (a qualifying job or adequate down payment) special auto lenders may review your total credit history or income situation and finance you on a new, after repossession auto loan!
With the emergence of specialized auto finance centers like Car Credit Hero in Port Hope and an increasing demand for higher risk loans, second chance auto loans are becoming more and more common in today’s market place. When presented properly, a car lender can take an otherwise declined auto loan and approve it!
This post repo auto loan can be the first and best
step in repaired a previously repossessed consumers bad
credit. There are plenty of auto lenders and car dealerships
in Ontario that claim they can get you 100% approved on an auto loan after
repossession but few can actually deliver on that promise.
Car Credit Hero located in Port Hope Ontario is an auto finance expert that not only has the product (a huge new car and used vehicle inventory) but also the credit knowledge and experience to get you approved every time. If you’re an Ontario resident living the Oshawa, Trenton, Peterborough, Cobourg or Belleville area, then you’re minutes away from Car Credit Hero and their excellent service.
If you’re ready to move past the repo on your credit bureau and get into a new or used car auto loan, then apply online now!