The Effects of Car Repossession

The Effects of Car Repossession
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Nobody wants to get their car repossessed, but in some cases, people may find they have no other choice. Whatever the reason, when people stop making their car payments, the lender will come and repossess. The effects of car repossession are not only felt immediately by no longer having a vehicle, but for years down the road in regard to credit and interest rates on future loans.


A car repossession stays on your credit report for seven years. Not only do the late payments reflect on the list of accounts section of your credit report but also the repossession itself reports on the “Public Records” section. The damage to your credit score can range anywhere from a drop of 50 points to a whopping 150-point drop for a car repossession. The credit damage done will seriously affect your ability to get credit in the future.

Unpaid Balances

When a creditor repossesses a car, they often sell it at auction for a much lower price than what you owe on the loan. When this occurs, you are still responsible for the balance of the loan, called a deficiency balance. This amount can range for a few hundred dollars to thousands of dollars. If you cannot pay the balance off, the creditor can sue you for the amount. If a judge rules in the lender's favor, the lender can garnish your wages and/or your federal income tax refund.

Future Credit

If your credit score drops below 620, it will be extremely difficult to obtain new credit. If you are able to get a new credit card or loan in an attempt to begin rebuilding credit, expect to pay high interest rates. A drop in credit score due to car repossession affects other aspects of your life as well. For example, cell phone and utility companies may ask for deposits before opening an account for you and insurance companies may charge you higher rates based on your credit score.