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A vehicle can be repossessed if you do not have auto insurance, Meanwhile, your creditor might need you to purchase car insurance for the automobile you have your loan. Which can be costly. Therefore, your car can be repossessed if you do not have vehicle insurance. In addition, lenders require you to maintain vehicle insurance as a condition of leasing a vehicle, so if you drop your insurance or stop making payments, your vehicle will be repossessed.
An overview of the topic in a nutshell
- Insurance laws require that car owners carry insurance.
- When lenders repossess cars without insurance, they are protecting their assets
- The process of reclaiming your car will involve multiple fees and penalties
If you are considering repossession of your car because you lack auto insurance, you should read on to find out what will happen when your car is taken away.
Can Lenders Reclaim The Car Insurance?
Nearly every state requires that you carry auto insurance on your vehicle. Failure to have insurance may result in fines or higher rates. In addition, when you lease your car, your lender may repossess it. Despite lenders wanting to avoid repossessing your car, they will repossess it if you don’t carry auto insurance.
Your lender would immediately notify you if you stopped paying your auto insurance if you bought it through them. The lender does not wish to lose the investment in the car if you crash it, so they want to ensure that you have auto insurance. Unfortunately, it can be difficult to obtain your car back after it has been repossessed for lack of auto insurance, making it difficult to recover your vehicle financially.
Force-Placed Auto Insurance
You may be forced to purchase auto insurance by your lender before repossession if you do not have insurance. In a nutshell, the lender will add high-risk auto insurance directly to your loan. Lender-based insurance is more expensive than a personal auto insurance policy and will increase the monthly payment on your loan. You may have difficulty paying off lender-based auto insurance if you are already struggling to pay auto insurance. Insurers will also mark you as a high-risk driver if you drive without auto insurance, increasing your insurance rates.
How Can I Reclaim My Repossessed Car?
After repossession, you may be able to get your car back, but it may be expensive if your car was seized for lack of insurance. What amount must you pay back to get your vehicle back after repossession? Depending on how much you owe, any outstanding payments and penalties will need to be paid. Your lender may be able to refinance your car and make it more affordable, but getting your vehicle back will still be costly.
Your insurer may decide not to pay any balances if you can’t pay off the associated fees and penalties to get your car back. When the lender cannot resell the vehicle for the amount left on your loan, you will have to pay the deficiency balance. For example, if the lender can only sell the vehicle for $5,000, but you owe $10,000 on your loan, the deficiency balance of $5,000 must be paid. The lender may sue you for these deficiency balances, which can ruin your credit score.
Preventing Repossession of Your Car
If you make on-time payments and have valid insurance, you can prevent your car from being repossessed, but if you are experiencing financial hardship, it can be not easy. If you do not have auto insurance through your lender, you should work to reduce your auto insurance costs.
Sara Routhier, Director of Outreach at BuyAutoInsurance.com, lists some tips to help reduce your auto insurance costs:
- Consider comparing auto insurance quotes and shopping around for a more affordable policy.
- Consider taking advantage of several discounts, including participating in safe driving programs and opting for paperless billing or autopay.
You are likely receiving a better deal on your car insurance than you should if you have your insurance through your bank. If you were not required to carry insurance through your lender, you should consider shopping for an outside policy.
Summary: Repossessions For Lack Of Auto Insurance
Your automobile may be repossessed in the event that you do not have automobile insurance, but some will initially force-placed the coverage. You can still reduce your rates if you drop auto insurance because of the price.
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