Can your car get repossessed for not having insurance?

Your car can be repossessed if you don't have auto insurance, or your lender could put force-placed insurance on the vehicle, which is expensive. You have options when it comes to finding affordable auto insurance.

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Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Written by Sara Routhier
Director of Outreach Sara Routhier

Cynthia Lanctot is an insurance professional with ten years of industry experience. Cynthia is licensed in several states, and holds an associate in claims law, as well as a bachelor’s degree in English. Cynthia’s experience includes the New England and Northeast states. She currently works as a liability claims professional and an occasional online contributor.

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Reviewed by Cynthia Lanctot
Licensed Agent Cynthia Lanctot

UPDATED: Jul 9, 2022

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A Concise Overview

  • You are legally required to carry auto insurance on your vehicle 
  • Lenders want to protect their assets, which is why they may repossess cars without insurance 
  • You will have to pay multiple fees and penalties to get your car back after repossession

If you’re leasing a car, your car can get repossessed if you don’t have auto insurance coverage. Lenders require drivers to have auto insurance in the lease contract, so if you drop your auto insurance or stop making payments, your car will get repossessed. 

Read on to learn more about car repossession for lack of auto insurance and what happens when your car gets repossessed. 

Can your lender repossess your car for lack of insurance?

You are legally required to carry auto insurance on your vehicle in nearly every state — failure to carry insurance may result in fines and higher rates.

If you’re leasing your car, you also face car repossession by your lender. While most lenders prefer to avoid the headache of repossessing your car, they will repossess your car if you don’t carry auto insurance.

If you bought auto insurance through your lender, they would immediately be aware if you stopped making auto insurance payments. Lenders don’t want to lose their investment if you crash the car, so they have an interest in ensuring you carry auto coverage.

Once your car gets repossessed for lack of auto insurance, it can be a headache and financially difficult to get it back.

Force-Placed Auto Insurance 

If you don’t have auto insurance, your lender may add force-placed auto insurance before repossessing your car. Basically, they’ll add high-risk auto insurance through the lender onto your loan.

Lender-based insurance is much more expensive than a personal auto policy and will drive up your monthly loan installments. So if you’re already struggling to pay auto insurance, paying off lender-based auto insurance may be more difficult.

You’ll also be labeled a high-risk driver by insurers for driving without auto insurance, increasing your insurance rates.

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My car was repossessed, how do I get it back?

You can get your car back after repossession, but it can be expensive if it got repossessed for lack of insurance.

How much do you have to pay to get your car back after repossession? While it depends on how much you owe, you’ll have to pay any outstanding payments and penalties. You may be able to work with your lender to refinance your car and make it more affordable, but it’ll still be expensive to get your vehicle back.

If you cannot pay off the fees and penalties to get your vehicle back, your lender may resell it. In this case, you may be on the hook for a deficiency balance.

A deficiency balance is when the lender can’t resell the vehicle for the amount left on your loan. For example, if you still owe $10,000 on your loan, but the lender can only sell it for $5,000, you have to pay the deficiency balance of $5,000.  

These deficiency balances can ruin your credit score, especially if the lender sues you for the balance.  

How to Prevent Your Car From Getting Repossessed 

While making on-time payments and carrying valid insurance will prevent car repossession, financial hardship can make it challenging to maintain auto insurance payments.

In those cases, you should work to reduce your auto insurance costs if you don’t have auto insurance through your lender. Some ways to reduce your auto rates include:

  • Get different auto insurance quotes. You may be able to find more affordable auto insurance by shopping around for quotes and comparing prices. 
  • Get as many discounts as possible. You may get cheaper rates by participating in safe driving programs for discounts and taking advantage of other small discounts like paperless billing or autopay. 

If you have auto insurance through your lender, you’re likely overpaying for insurance. If you didn’t sign a contract requiring you to carry insurance through your lender, you should consider getting an outside auto insurance policy.

The Final Word On Car Repossessions for Lack of Auto Insurance 

Your lender can repossess your car for not carrying auto insurance, although some may first use force-placed auto insurance. If you dropped auto insurance because of the cost, you could still work to reduce your auto insurance rates.

To find the cheapest auto insurance rates in your area, use our free quote comparison tool to compare rates from multiple companies.

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