What happens if your car gets repossessed — and how to avoid it

Car ownership remains a struggle for many Americans. In the first quarter of 2026, the average monthly loan payment on a new car sped past $800 for the first time, according todata from JD Power, and nearly one in five borrowers is shelling out more than $1,000 a month.

It’s a symptom of how ongoing inflation is stretching budgets to their limits, said debt relief attorney Leslie Tayne, founder of the Tayne Law Group and author of “Life & Debt: A Fresh Approach to Achieving Financial Wellness.”

“When a consumer is trying to make a decision about what to pay, very often, they’ll choose something they need right now — electricity, food, gas,” Tayne told CNBC Select. “If cash is tight, something like a car payment might be put on the back burner.”

In February, 60-day delinquencyrates on subprime auto loans reached 6.8%, according to Fitch Ratings ABS Index, just slightly down from the record 6.9% seen in January.

Unsurprisingly, repossession rates are also surging.

According to auto industry research firm Cox Automotive, between 2022 and 2024, vehicle repossessionsincreased nearly 43% to reach 1.73 million, the highest level since the Great Recession.

Year-end totals for 2025 are projected to exceed 3 million, auto recovery news site CURepossession reported.

An auto loan is considered in default after anywhere from 30 to 90 days of non-payment, depending on the lender, the state and the terms of the loan contract.

Once that happens, the lender can turn the account over to a collection agency and take physical possession of the vehicle. Because of the time and cost involved, most lenders will wait until at least the 60-day mark before calling the repo man, according to auto information clearinghouse Edmunds, although subprime lenders and Buy Here Pay Here outfits may move faster.

A recovery agent can’t “breach the peace” to claim your vehicle, but in many cases, you won’t be given advance notice.

“It can be a shocking and emotional experience,” Tayne said, “Your car can be repossessed in public, or even from your driveway.”

From there, the process escalates quickly, says Markia Brown, a.k.a. personal finance influencer The Money Plug.

“Once they secure the vehicle, you’ll get a notice within a couple of days, saying, ‘Hey, we took the car. It’s at this lot. You have X amount of time to reclaim it,” Brown told CNBC Select.

Reinstating a car loan after repossession involves paying the overdue balance, plus late fees and recovery and storage costs. Otherwise, the vehicle is typically sold at auction, often within 10 to 15 days.

“If they sell it, they’ll tell you how much it went for,” Brown said. “There may be a surplus — in which case your lender says, ‘Here’s a check. We consider this settled.'”

But if the car sells for less than you owe, you’re still on the hook for the remaining loan balance, or “deficiency.”

For example, if you owe $10,000 on your car loan but the lender only sold your repossessed vehicle for $7,000, you may still owe a $3,000 deficiency, plus fees.

“Whether you have the car or not, it has to be paid,” Brown said.

Besides eliminating your means of transportation, repossession can take a sledgehammer to your credit, lowering your score by 150 or 200 points. The repossession itself is listed on your credit reports for seven years.

“It affects your ability to get another car loan, rent an apartment and sometimes even get a job,” said Brown, “The domino effect is real. I lived it.”

The Baltimore native had her car repossessed about 11 years ago.

“When that happened, I had to rebuild my credit and rethink how I managed my money,,” Brown said. “I had to get honest about the habits that got me there.”

If your credit has already taken a hit, auto loan refinancing marketplace iLending can find options for borrowers with a 560 FICO Score. It also has generous vehicle limits, accepting cars up to 10 years old andwith 150,000 miles.

4. Voluntary surrender

If you don’t see a way to keep up with payments, you can turn the vehicle over before it’s repossessed.

Voluntary surrender “allows you to control the situation,” Brown said. “You can create a plan to get around the inconvenience of not having the vehicle anymore.”

It keeps recovery and storage costs from piling up, and may help with negotiations with the lender. Since they won’t have to pay to have the car reclaimed, they may even agree to waive or reduce the deficiency.

It’ll still appear on your credit reports for seven years, but according to Experian, the impact on your credit score can be less dramatic.

Voluntary surrender also shows you’re willing to cooperate, which could make lenders view you more favorably in the future.

5. Sell the car

Yes, selling your car means giving it up just as much as having it repossessed. But you’ll have more control over the timing and how much you get for it.

Before you sell, get a payoff quote from the lender, so you know how much you need to settle your account.

“Don’t be too stuck on making a profit,” Brown said. “But make sure you’re selling it, at the very least, for what you owe. Maybe a little bit more to cover fees.”

6. File for bankruptcy

If late car payments are part of a larger financial crisis, bankruptcy can provide relief, at least temporarily. Once you file, there’s an automatic stay pausing repossession, collections, wage garnishment and most legal actions.

“In some ways, I think bankruptcy would probably be better [than repossession] because you’re actually getting rid of the debt,” said Tayne. “This is a foreclosure — the debt is still there.”

In Chapter 7 bankruptcy, unsecured debts like credit card bills can be discharged. While you may be required to sell off some assets, your primary vehicle is usually exempt. If you want to keep the car permanently, though, you’ll need to get current on payments, sign a new agreement (known as reaffirming) or pay the lender in full (redeeming)

Chapter 13 bankruptcy can provide structured help with a long-term repayment plan that lets you keep your car and other essential assets. If you owe more on the car than it’s currently worth, the amount of your loan may even be reduced.

At CNBC Select, we work with experts who have specialized knowledge and authority based on years of relevant training and experience. For this article, we spoke with Leslie Tayne, a New York-based debt relief lawyerwith over 25 years of experience in debt settlement and debt legal issues.

We also spoke with Markia Brown, an Accredited Financial Counselor (AFC) who translates complex financial concepts into relatable content as a personal finance influencer the Money Plug.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every auto loan article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loans. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics..