Is a voluntary repossesion detrimental to your credit and/or purchasing a new car?

Question

I need a lower car payment. I'm trying to boost my credit by paying off other bills, etc., but that's very hard to do with $600 a month going into a car (and that doesn't include gas!!) My car has been in an accident ($10K worth of damage) and has almost 80K miles on it with $19K left to pay. A HORRRRIBBLE SITUATION!!!

Answer 1

Auto finance is what I do for a living and a repossession without a bankruptcy is one of the worst things that can show on your credit.

The lender will sell the vehicle at auction for far less then it's worth (in your case it's a total loss) and come after you for the balance plus all fees for the repossession, towing, storage, reconditioning, interest and lawyers.

This will amount to several thousand dollars and if you don't pay they can take you to court and get a judgment, at that point they can attach bank accounts, garnish wages (if your State allows it) and file liens on any other property you may own like cars, boats, land and homes.

All of this activity will show on your credit for 7-years making it very hard to get any other types of loans without massive down payments, huge fees and State maximum interest rates.

I hope you bought GAP insurance when you purchased the vehicle, you are going to need it.

Answer 2

Well my guess is it will be viewed as totaled and if you had GAP insurance then will be covered if not then you are up the creek without a paddle. With a repo you will be in no shape to purchase another. Who in their right mind is going to take a chance? Not to mention you will still be responsible for whatever is still due on the car after they auction it

Answer 3

why on earth would anyone ever get a car with a $600/mo payment? That's insane. Doesn't insurance cover accident repairs?

Answer 4

YES!