Consequences of a Car Repossession

Unfortunately, there are times when you might find that you can no longer make your monthly payments on your leased vehicle. In that case your choices are: 1) voluntarily return the vehicle (voluntary repossession) or 2) wait for the vehicle to be picked up (involuntary repossession).

In either case, the amount you still owe on your lease will be calculated by the lease company according to the terms written in your contract. If you voluntarily return your vehicle and pay the remaining balance, there is no negative affect on your credit. However, if you are unable to make monthly payments, it’s also not likely that you can pay off the balance.

The remaining balance on a lease will nearly always be more than expected. It’s the “realized value” for the vehicle plus remaining payments, plus costs. Unless there was a relatively large down payment or trade-in at the beginning of the lease, the balance could easily be unaffordable. And it must be paid in full — no more monthly payments.

If you cannot pay the balance due on your lease, the vehicle will be sold at a wholesale car auction and the amount, minus costs, will be applied to your balance. You will be billed for whatever remains.

Furthermore, your default will be reported to credit agencies and your credit score will be damaged for 7 years. If you cannot pay the remaining balance, you will be sued and the debt turned over to a lawyer or collections agency. These collections companies can be persistent and may be able to take money from your bank account and/or garnishee your income. It might be possible in some cases to settle for a lesser amount, assuming you can pay that amount.

Clearly, it is best to try to find a way to continue making monthly payments if possible. Some lease companies will try to work with you and help you find a solution. It’s in their best interest, and yours, to avoid a repossession.