Repossession

Repossession occurs when borrowers fail to make required loan or lease payments, prompting lenders to reclaim the financed vehicle as collateral. Once repossessed, vehicles may be sold at auction to recover the outstanding balance.

For consumers, repossession severely impacts credit scores, often remaining on reports for up to seven years, and may result in a deficiency balance if auction proceeds do not cover the loan. For lenders, repossession is a last-resort method of loss recovery, costly and often yielding less than the owed amount.

For dealerships, repossession may damage customer relationships but ensures inventory or collateral value is reclaimed. Borrowers can sometimes avoid repossession through loan modifications, deferments, or voluntary surrender.

Ultimately, repossession highlights the risks of defaulting on financing agreements and the importance of budgeting realistically when taking on debt.