If you’ve missed a recent payment on your auto loan because of the— or you think you might miss a car payment soon — you’re not alone. Typically, missing a car payment can damage or even lead to the bank repossessing your vehicle. Most lenders are sympathetic to the current situation, but take heed: the worst thing you can do is ignore the problem and assume it’ll all work out. (Scroll to the end for what you should absolutely not do.)
It’s important to be aware of how coronavirus is affecting late car payments and what you may need to do about it. Just as resources are available toand , most auto loan lenders have implemented to help borrowers who are having difficulty paying due to the pandemic — you just need to know how to sign up.
We provide the current information and resources, and will continue to update this story as new details emerge.
How is the coronavirus affecting late car payments?
Normally, most lenders will report a late payment to the credit bureaus once it’s at least 30 days overdue, and most will come to take your vehicle away after you’ve missed three or more payments in a row.
Now, the situation has changed. In response to the pandemic, some states have proposed legislation to limit or postpone vehicle repossessions, but other areas have no such measures on the table. In New York, for example, the state assembly is debating a bill that would stop all car loan payments for 90 days.
The auto repossession industry itself hasn’t agreed whether repo companies, many of whom are now laying off dozens of employees, are even allowed to operate in areas under . The Association of Credit and Collection Professionals, a lobbying group for debt collectors, argues that debt collection is an essential service, but lawmakers have yet to chime in.
These measures, however, represent a stay of execution at best. Eventually you’re going to have to face the problem. If you’re worried you’re not going to make good on your car loans, the best protection against losing your car or truck might actually come from your lender itself.
Chances are, your lender is willing to help
As a response to the widespread financial turmoil caused by the coronavirus pandemic, many lenders have broadened and streamlined their financial hardship deferment programs. These programs usually allow you to skip your car payment for the next one to three months so you can get your money situation back in order. After the deferment period ends, either your monthly payment will go up slightly or your loan will be extended by the same amount of time as the deferment.
On the downside, interest will continue to accrue during the months you skip your payment, so you’ll end up paying more for your vehicle in the long run. But on the plus side, your missed payments will not show up as.
Consumer credit monitoring company CreditKarma has a list of banks with information about their hardship programs, and car-buying guide Edmunds is keeping track of what relief automakers are offering for those with loans through the manufacturer. CNET sister site Roadshow details as well as incentive programs for new cars with a number of auto manufacturers. If you don’t see your lender on any of those lists, try contacting the company directly through its website or app.
How to talk to your bank about options
If you have no idea where to begin, the legal services website DoNotPay has a chatbot that canto your lender. With so many people losing income due to the pandemic, however, most banks have made it easier than usual to apply for a loan deferment, so you can probably handle this on your own.
You may or may not be asked to provide documentation that you’ve experienced a loss of income due to coronavirus, so if you do have a termination letter or notice of a layoff, be ready to send your bank a copy of those documents.
Otherwise, just be honest and forthcoming about your situation and realistic about how much time you’ll need to get back on your feet. Generally speaking, banks would rather work with you and retain you as a customer than leave you stranded without a vehicle.
What happens when you miss a car payment
In most states, a lender, like your bank, can start the repossession process the day after you miss even just one payment, but most companies give their customers a grace period. Often the lender won’t even charge a late fee until the payment is at least 10 days late, and most won’t report it to the until it’s over 30 days late.
If you go past 30 days delinquent — and especially if you miss the next two payments in your loan cycle as well — that’s where you start treading into repossession, or repo, territory.
Most repos occur after two or three months of no payments
If you’ve fallen behind (or you think you’re going to fall behind) on your car payment for 90 days or longer, you may very well be at risk of having your car repossessed. Your lender may be more lenient if you’ve never missed a payment, but the more often you’ve been late in the past, the sooner they might attempt repossession.
How repossession works
In most cases, your lender will contract with a third-party agency that specializes in repossessions. That company will use whatever information it can get — your home and work addresses, for example — to track down the vehicle and tow it to a secured, usually gated lot. It does not need your car keys to take your car.
The repo company will then charge your bank for towing the vehicle as well as a daily storage fee. Unless you happened to have left your keys in the car, the repo company will also contract a locksmith to make a new set of keys — then charge your bank for that service, too. When all is said and done, you’ll owe anywhere from a few hundred to over a thousand dollars in charges, which the bank will then expect you to pay whether you get your car out of repo or not.
Your rights vs. the bank’s rights
In pretty much every instance your bank does not need a court order to attempt to repossess your car. You can view a list of every state’s specific automobile repossession laws here, but generally speaking, your lending institution (or a company it hires) has the right to come onto your property and take the car so long as no one commits a “breach of the peace.” (Wait for it….)
That means its representatives can’t break into a locked garage, through a locked gate or otherwise use physical force against you or your property to take possession of your vehicle. They can, however, follow you to work — or the grocery store — and wait until you leave your car alone.
How to get your car out of repo — and what happens if you don’t
But what if it’s too late and your car has already been repoed? Many states have laws on the books about how long and under what conditions lenders must allow you the chance to get your vehicle back from repossession, but the terms aren’t exactly favorable if you’re in the kind of financial situation that led to repo in the first place.
Generally, the law only compels lenders to release your car back to you if you pay off the loan as well as any towing and storage charges that have accrued. In practice, however, most lenders are willing to give you your car back if you can at least catch up with your late payments (and, of course, even up with the repo bill as well).
If you leave your vehicle in repo, either because you can’t afford to get it out or you just decide it’s not worth it, you’re still not completely off the hook. The bank will likely auction off your car to the highest bidder, then apply the revenue from that sale to your remaining balance, including repossession charges. If that doesn’t cover your entire debt, the bank can continue pursuing you for the remainder, including handing your account over to a collection agency and reporting the delinquency to the credit bureaus.
You have a few wild-card options as well
If you’re at risk of having your car or truck repossessed, there are other options available besides deferment, but none quite as simple or easy. You could do what’s called a “voluntary repossession,” where you contact your lender and indicate your desire to turn your vehicle over to it. Your credit will take a hit and you’ll be liable for any outstanding debt the bank fails to recoup at auction, but the overall impact to both your credit score and pocketbook will be less than if you wait for the bank to forcibly repo your car.
Our new reality now that coronavirus has sent the world online
You can refinance your car for a lengthier loan term with a lower monthly payment, but that will only work if you’ve already paid off a substantial amount of the principal. If you’ve only had your car loan for a year or two, you might actually still owe more than it’s worth. Also your credit has to be good enough for a bank to underwrite a new loan for you, which may or may not be the case.
You could also try to sell your car on the open market, or trade it in for something less expensive, but again, with the economy experiencing the, neither of these options is very compelling.
What you absolutely should not do
Whatever you do, don’t try to hide your car from your bank or the repo company. For one, you’re probably not going to beat them at their own game, and the longer it takes (and the more difficult you make it), the more they’re going to charge you for their services in the end.
Uplifting scenes of coronavirus solidarity around the world
And don’t just stop paying your loan and hope for the best. Whether lawmakers decide the repo industry performs an “essential” function, or if the repo man has to wait for a treatment or vaccine like the rest of us before getting back to work, eventually your delinquency will catch up with you. With banks demonstrating some compassion right now for those who’ve suffered financial hardship, you might as well take advantage of one of their relief programs while you can.
If you’re worried about being able to pay your car payment and you haven’t gotten your stimulus check yet,to see when you can expect the money. Once you do get your check, these tips can show you how to . If you worried about housing, here’s as well as during the pandemic.