When you default on a vehicle loan, the lender may repossess the vehicle by force to recover the debt. Some borrowers may request that the lender repossess the vehicle when they fall behind in payments, but most repossessions are not voluntary. In most cases, either the primary borrower or the co-borrower can authorize a lender to repossess a vehicle if the loan is in default.
Repossession occurs when a borrower defaults on a loan secured with collateral. To recover the debt, the lender takes possession of the collateral and sells it. If repossession is voluntary, the borrower returns the collateral to the lender on his own or requests that the lender take possession of it. If repossession is involuntary, the lender takes the vehicle by force. If the proceeds from the sale don't cover the full amount of the debt, the lender can file a lawsuit against the borrower for the remainder, regardless of whether the repossession was voluntary or involuntary.
If you signed a vehicle loan with a co-borrower, you and the co-borrower have full responsibility for the loan and equal ownership rights to the vehicle. If you are behind in the payments, either one of you can surrender the vehicle to the lender or authorize a repossession. If the lender makes the decision to repossess on his own, neither one of you can prevent him from doing so.
Unlike a co-borrower, a co-signer takes full responsibility for the loan but has no ownership interest in the vehicle. Because a co-signer is not a legal owner of the vehicle, he can't turn the vehicle over to the lender in a voluntary repossession or request that the lender repossess the vehicle. However, the lender can still demand payment from the co-signer. If the co-signer fails to pay, the lender can obtain a judgment against him for the remainder of the debt and use it to garnish his wages, seize personal property or levy a bank account.
If you or the co-borrower requests a repossession of the vehicle, you are still liable for any debt the sale of the vehicle doesn't cover, and the repossession will still have a negative effect on both of your credit scores. The lender can collect the remaining unpaid debt from either borrower, regardless of which one requested the vehicle's repossession.
- Federal Trade Commission: Vehicle Repossession: Understanding the Rules of the Road
- Bankrate: Cosigner Payments Will Protect Credit
- Federal Trade Commission. "Vehicle Repossession." Accessed Sept. 30, 2020.
- Experian. "How Long Does It Take for a Repossession to Come off Your Credit?" Accessed Sept. 30, 2020.
- Nolo. "Deficiency Judgment." Accessed Sept. 30, 2020.
- Experian. "What is a Buy Here, Pay Here Dealership." Accessed Sept. 30, 2020.
- Georgia Department of Banking and Finance. "Repossession (Vehicles)." Accessed Dec. 20, 2019.
Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.