Repo cars go through the following process after being seized by the lender:
| Stage | Description |
|---|---|
| Lender’s Possession | The lender secures the vehicle following repossession. |
| Storage | The vehicle is kept either at the lender’s facility or a contracted lot. |
| Auction | Usually, repossessed vehicles are auctioned off to settle the remaining loan amount. |
| Dealerships | Some vehicles may be directly sold to used car dealerships. |
| Private Sale | Occasionally, the lender might sell the vehicle through a private sale, but this is rare. |
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Table of Contents
The Repossession Process
When a borrower defaults on their car loan payments, the lender has the legal right to repossess the vehicle. This is where they hire a third-party repossession company to locate and seize the car.
Once the vehicle is repossessed, the lender takes possession and stores it at their facility or a contracted storage lot, which could also be the lot of the tow company that took the car.
Where Repo Cars Go
At this point, the lender then has several options for disposing of the repossessed car:
Public Auctions
Public auctions are the most common method for selling repossessed vehicles. Lenders list the cars at auction houses, where they are sold to the highest bidder. These auctions are open to the public, including the original borrower, who can attempt to buy back their repossessed car.
Private Auctions
Some lenders opt for private auctions, which are typically attended by used car dealers and wholesalers. These auctions are not open to the general public.
Dealership Sales
Lenders may also sell repossessed cars directly to used car dealerships. Dealerships often purchase these vehicles at a discounted price and resell them to consumers.
Private Sales
In rare cases, lenders may attempt to sell repossessed vehicles through private sales, such as online classifieds or direct negotiations with interested buyers.
The Deficiency Balance
After the repossessed car is sold, the lender applies the sale proceeds to the outstanding loan balance. If the sale price does not cover the entire loan balance, the borrower is responsible for paying the remaining amount, known as the deficiency balance.
Lenders may pursue legal action to collect the deficiency balance, including wage garnishment or placing a lien on the borrower’s other assets.
Car Repossessed With Your Personal Belongings
If personal belongings were left in the repossessed vehicle, the borrower has a limited time to retrieve them.
The specific timeframe varies by state, but it’s usually 30 days from the date of repossession.
Borrowers should contact the lender or repossession company promptly to arrange for the retrieval of their personal items.
My Conclusion
After a car is repossessed the lenders priority is to try and recoup any lost money, both from the loan and from the cost of getting the car back.
To do this, the car almost always heads to auction, but sometimes the lender does pursue other avenues of selling the car such as direct to dealer sales or even private buyers.
