With the economy being in recession for most countries, repossession of vehicles is becoming more and more prevalent. People are struggling to keep up with their payments and the cars are being taken back by the lender.
When can a car be repossessed?
A car can be repossessed when the payments are not kept up to date. This is mainly when cars have been bought of hire purchases. This is when you have a monthly payment for a car and after a certain time period, the car will become yours, but whilst you are still making the payments, the car is still the property of the lender and you are essentially hiring it from them.
With this type of purchase, the lender can repossess the car without a court order if you have paid less than one third of the value of the loan for the car. They can't do this without a court order if you are near the end of the loan period when you run into money troubles.
What is a repossession?
This is where most people get mixed up about what constitutes a repossession. The lender cannot just turn up on your doorstep, enter the premises and then take the car. This would be breaking and entering and theft. They have to have your consent to take the vehicle. If you are having money problems anyway, you might be happy giving your consent.
If you do not give consent, then the lender has to apply to the court for a default order and then a repossession order for them to legally take the vehicle.
What if you want to keep the vehicle?
If you are having money trouble, but you want to keep the vehicle, you can ask the lending company if they will give you some time to get some money together and carry on making the payments. This is at the lenders discretion and don't rely on this. They can refuse this and send you a default notice anyway.
You also have the option of contacting the lender and asking them for a reduction in payments. This way, you are still making some payments and you are not completely defaulting on the payments. You will still incur interest on this payments, so you need to discuss with the lender if the lesser payments will cover the interest as well, otherwise there is no point in making the payments.
Check your contract!
Before you do any of the above, you should check the contract and see how long you are actually tied into the hire purchase for and if there are any "get out" clauses. There may be a clause where if you are made unemployed, you can just give the car back no questions asked.
If you are near the end of the contract anyway, you might have options for selling the car, paying the remainder of the loan off and then paying some other items off as well. This might be better for you in the long run because you won't default on the loan and it would affect your credit score.
When you are experiencing money problems, it will be a highly stressful time for you. It will be hard for you, but keep in mind there are options out there for you. You don't have to live in the constant worry that a bailiff is going to come knocking at your door. Do your research and try to remain calm.
If you are thinking about hiring a car and you know that you might come into money troubles in the future, it may be worth having a credit check done to see what items you actually own and what could be repossessed in the future.