Can your car get repossessed for not having insurance?

Your car can get repossessed for not having auto insurance, but most lenders will instead opt to add force-placed insurance to your loan, which is expensive and still only covers the lender's property. This will label you a high-risk driver and the auto insurance you'll still need to buy will be higher.

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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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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

UPDATED: Oct 27, 2020

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A Concise Overview:

  • A financial lender can repossess your car if you don’t follow the terms of the contract, including keeping full coverage auto insurance for the duration of the loan.
  • If your auto insurance lapses, that will cost you in the form of higher auto insurance rates.
  • Creditors must keep you informed if they plan to auction off the vehicle.
  • If your car is repossessed, you still have to pay the deficiency balance on the vehicle.

Can your car get repossessed for not having insurance? If you don’t get full coverage on a financed vehicle, that’s usually a violation of the terms of your loan agreement. And you borrowed money from the lender on those terms. Will a repossession affect auto insurance rates? Yes, but you can still get the best deals.

So, if you fail to maintain full coverage auto insurance on the vehicle or in fact don’t comply with any of the terms, your car can be repossessed. While a lender might decide to instead purchase a force-placed insurance policy on your behalf, that is not definite. And if they do, the expensive policy gets tacked onto your loan where you’ll end up paying for it over time.

Before learning more about can your car get repossessed for not having insurance, enter your ZIP code above for free quotes from multiple insurers.

Can your car get repossessed for not having insurance?

Can you get your car repossessed for not having insurance? Insurers definitely have the right to repossess your car for no insurance, but most won’t exercise that right.

Instead, they may choose to purchase lender-placed insurance on your behalf. This is an expensive type of coverage that you’ll be paying for, as they’ll likely tack the price onto your loan.

What happens if you don’t have coverage on a financed car? No insurance on a financed car means not only can you have your car repossessed, but you’ll still need to get coverage. And any lapse of coverage will result in you being labeled a more high-risk driver.

What does it mean to let your auto insurance lapse? It means you’ve failed to pay your insurance company and your insurance is no longer valid. The table below shows how your rates will increase if you let your auto insurance lapse.

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Preventing a lapse would serve you well financially. Luckily, many insurers have some type of grace period for car insurance payments to help prevent this increase.

My car was repossessed. What are my rights?

The Federal Trade Commission estimates that the average new vehicle costs $31,000, and the average used vehicle costs $17,000. Most people don’t have that sort of pocket change ready, so most cars get financed through lenders. In fact, about 84 percent of buyers finance their vehicles. And in order to keep your vehicle, you need to follow the terms of the agreement.

FindLaw notes that your lender has the right to repossess your vehicle and sell it to get back some of their investment. If your loan goes into default status, you may be facing repossession.

These are some things that can land you in default status:

  • Not maintaining full coverage insurance for the duration of the loan
  • Not doing regular maintenance
  • Not repairing the vehicle when it’s damaged
  • Relocate and don’t tell the lender about your move
  • Leaving the country with the vehicle

These are all reasons you may get a repossessed car. If you do repossess your vehicle, they can’t keep your personal possessions that were in the vehicle. You have the right to regain all personal possessions that were in the car at the time of the repo.

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Do I have to carry insurance on a repossessed car?

You should certainly carry liability insurance on a repossessed vehicle up until the date of its sale, just in case anything happens with it. At that point, you can drop the coverage.

Your lender may make a repossessed car insurance claim to your auto insurance company to cover their cost, but you can’t make a claim to cover the price of the repossession.

Repossessions will report to your credit, which is a major factor that insurance companies use to determine your rates. So, unfortunately, repossessions will affect your auto insurance rates in the future.

How long do you have to get your car out of repo?

Creditors are required to give you a reasonable amount of time before they sell the vehicle for you to explore your options. At least ten days is considered reasonable, but it varies by state. NOLO notes that California’s car repossession process requires at least a 15-day notice before the vehicle is put on the vehicle repossession list and sold.

This video from Richardson Law Office discusses what you can do if your vehicle has been repossessed.

In addition, the Federal Trade Commission notes that most states require the lender to inform you of the fate of the vehicle.

What happens if your car never gets repossessed? Although your car technically no longer belongs to you, there are reasons why a lending company may not want to repossess the car. If the car isn’t worth much money, they may not bother.

Bankruptcy Truth notes that it’s because they have to spend money to find and tow the vehicle, fix it, and find someone to buy it. If the car isn’t worth much, they might end up spending more than it’s even worth.

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What happens if you don’t pay a deficiency balance?

If your leased vehicle gets repossessed, your lender then has the right to sell the vehicle to recoup their investment. However, if you owe, for example, $10,000 and they only sell the car for $6,000, you’ll owe a deficiency balance of $4,000.

You are then liable for this deficiency balance. If you don’t pay it, you can be sued. The lender may gain the right to get their money by garnishing your wages or taking funds directly from your bank account.

How do repo companies find your car?

Repo agents know how to find you. Like all debt-collectors, repo agents use “skip tracing” to find where you are. They use public and private databases to find information that will lead them to you. Edmunds notes that repo agents will even use good old-fashioned detective work if needed. But they will usually find your vehicle if it is due to be repossessed.

Can your car be repossessed for not having insurance? Now you know! If you need cheap auto insurance with a repo on your record, we can help.

Now that you can your car get repossesed for not having insurance, enter your ZIP code below to get free quotes from multiple insurers.

References

  1. https://www.nolo.com/legal-encyclopedia/the-bank-repossessed-car-how-much-time-i-back.html
  2. https://www.consumer.ftc.gov/articles/0056-financing-or-leasing-car
  3. https://corporate.findlaw.com/finance/vehicle-repossession.html
  4. https://www.bankruptcytruth.com/learning-center/before-bankruptcy/368-lender-refuses-to-repossess-a-vehicle-you-want-to-surrender/
  5. https://www.edmunds.com/car-loan/stay-one-step-ahead-of-the-repo-man.html

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