How Many Car Payments Can You Miss Before A Repossession?

How Many Car Payments Can You Miss Before A Repossession?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated August 22, 2022

If you’re planning to buy a new or slightly used car, you may need to take out a loan to make the process more affordable. However, financing a car can get really expensive if you experience a loss of income or reduced work hours. This may lead to missed payments, or you defaulting on your car loan, which could result in your vehicle being repossessed.

So, before you finance a car, make sure to ask questions about your potential payment plan. For instance; how many car payments can you miss before it’s repossessed?

How Many Car Payments Can You Miss Before It’s Repossessed?

Before you apply for a car loan, get all the information about its conditions, including your lender’s repossession policies. 

Will My Car Be Repossessed After One Missed Payment?

Lenders won’t normally repossess your car after you missed one payment. Some will charge you a late fee and added interest, others will waive any late penalties if it’s your first infraction. On the other hand, your specific vehicle could feature technology that gives your lender the power to disable it remotely following a single missed payment.  

Will My Car Be Repossessed After Three Missed Payments?

Every creditor has different policies but most will consider repossessing your car after you miss 2 or 3 payments (about 60 to 90 days worth). That said, some lenders will repossess your car within a few weeks or days, especially if they think you’re at more risk of defaulting because you have a bad credit score or spotty payment history.   

Will My Car Be Repossessed After Four Missed Payments?

If you miss 2 – 4 payments and don’t make other arrangements with your lender, they’ll most likely repossess your car and report the incident to Equifax and/or TransUnion, which may damage your credit. Remember, that situation will only get more expensive and problematic if you avoid the lender’s repo personnel or attempts to contact you. 

Types Of Car Repossession

Canadian vehicle repossession laws vary by province/territory. However, if you fail to pay your car loan on time, there are two main kinds of repossessions that can occur:

Involuntary Repossession 

This happens when you miss enough car payments but refuse to work with your lender to reach a solution. This is the priciest way to go through a car repossession because they’ll usually charge you for costs like towing, bailiff fees and refurbishment, on top of your initial debt. In some areas, a lender can also sue you over the loan balance remaining after selling the car. 

The lender then reports your bad car loan to our credit bureaus (Equifax/TransUnion), which can change your credit rating to ‘R8’. If you don’t work out a payment plan with the lender soon, that rating drops to ‘R9’ (for debts that are delinquent, sold or transferred). 

Voluntary Repossession 

To avoid the extra costs and credit harm that happen after involuntary repossession, it’s safer to give your car back and pay your outstanding balance willingly. If you return the car and figure out a new payment plan, it could save you a lot of money and keep your credit rating at ‘R8’ until your balance is paid (after which it should slowly improve). 

What Happens During A Car Repossession?

You could be subject to different vehicle repossession laws based on your province or territory. For example, Ontario has the “seize and sue” law, which allows a lender to sue you over your deficiency balance after an auction. In provinces like Alberta and British Columbia, they have the choice to do this or repossess the car.

If it comes to voluntary repossession, you can bring the car to your lender (the cheapest option) or have it towed for a fee. If not, the lender may use any legal means to collect the vehicle, including sending a bailiff and tow truck to your home at their convenience.

Can A Lender Tow My Car If It’s Parked In My Garage? 

Although repo employees can’t enter a private garage or home, they may track the car’s whereabouts, wait until it’s parked in the open, then tow it without warning. This tactic is commonly referred to as ‘skip tracing’ (locating people who try to evade their creditors).  

What Happens If The Lender Can’t Recoup Your Total Loan Amount After Repossession?

After they’ve repossessed your vehicle, the lender will try to resell it. If they do but the proceeds from the sale don’t cover your entire debt, plus late fees and interest, you’re responsible for the remaining amount, otherwise known as your ‘deficiency’ balance. Be sure to pay this debt as fast as possible to avoid further penalties or harm to your credit.

Can A Car Repossession Affect Your Credit Scores?

A car repossession can negatively affect your scores, in fact, there are several because several things can happen to your credit when you miss your car payments, including:

  • If a payment is more than 30 days late, it will be reported as a late payment to the credit bureau(s) by your lender which can negatively affect your credit. 
  • Within 30 days of a missed payment, the lender can put your account in default.  When that happens your lender reserves the right to repossess your car which will add another negative mark to your credit history and may cause your credit rating to drop to an R8.
  • If you have to pay a deficiency balance but are unable to, your lender may sell your debt to a collection agency which may cause your rating to drop to an R9. This in turn may cause your credit score to fall. 
  • If the collections agency sues you and wins, another mark will show up which can further hurt your credit.

How To Avoid A Car Repossession?

Think your car is in danger of being repossessed? If so, you shouldn’t wait to act. There are several things you can do to avoid a car repossession, such as:

  • Negotiate With Your Lender –  Repossession is a huge hassle that most lenders would rather avoid. So, if you’re about to miss a payment, contact yours right away to discuss your options. If you’re unable to work out a solution or pay up, speaking with a Licensed Insolvency Trustee (LIT) may be your next step.     
  • Sell or Trade Your Car For a Cheaper One – You may also be able to trade-in or sell your car in, then use the money to pay off your current loan or finance a more affordable car. While you may not get as much as you were hoping for out of the deal, this is far safer than waiting for a car repossession. 
  • Refinance Your Car – If your credit, income and account are still in good shape, your lender might offer you a newer, cheaper car loan to replace your current one. This could lead to a lower interest rate or longer payment term.         

Car Repossession FAQs

Can you repo a car on private property?

It depends on the location of the vehicle. For instance, repo employees aren’t legally allowed to enter a garage, residence or other closed property to retrieve a car but they can tow it without a court order when it’s parked in your driveway or on a public street.  

How many points will my credit score drop after a repossession?

During a car repossession, the amount your credit score can drop will vary by person. The worse the situation gets, the further your score can drop. This is particularly true if you don’t pay your delinquency balance and your account goes to collections, which results in issues like bankruptcy

How long will a repossession remain on my credit report?

Vehicle repossession can stay on your credit report for around 7 years from the initial date of your missed payment. However, you can gradually reverse that negative impact by paying down your outstanding loan balance and working things out with your lender.  

What is a car repossession? 

After you take out a car loan, there will be a lien (held by the lender) on the vehicle until your full balance is paid. If you don’t make payments as agreed, certain penalties could come into play, like late fees, extra interest or, in the worst of cases, repossession. This is when the lender takes the car back, so they can reclaim part of the money you owe.   Essentially, the lender still owns the car while your loan is in effect, which means they can legally sell when you default. They may do this by selling it for its fair market price or putting it up for auction.  

Looking For A Way To Bypass A Car Repossession?

A car loan is a financial responsibility that you shouldn’t apply for on a whim. So, don’t forget to improve your credit, build your savings and create a realistic budget before you sign any agreements. Otherwise, your car could get repossessed, which isn’t good for anybody. Check out Loans Canada for more information about car repossession.          

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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