Can your car get repossessed for not having insurance?
Your car can be repossessed if you don't have auto insurance, or your lender could put force-placed insurance on the vehicle, which is expensive. You have options when it comes to finding affordable auto insurance.
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Cynthia Lanctot
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Cynthia Lanctot is an insurance professional with ten years of industry experience. Cynthia is licensed in several states, and holds an associate in claims law, as well as a bachelor’s degree in English. Cynthia’s experience includes the New England and Northeast states. She currently works as a liability claims professional and an occasional online contributor.
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UPDATED: Jun 25, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our auto insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different auto insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Jun 25, 2023
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our auto insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different auto insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- You are legally required to carry auto insurance on your vehicle
- Lenders want to protect their assets, which is why they may repossess cars without insurance
- You will have to pay multiple fees and penalties to get your car back after repossession
If you’re leasing a car, your car can get repossessed if you don’t have auto insurance coverage. Lenders require drivers to have auto insurance in the lease contract, so if you drop your auto insurance or stop making payments, your car will get repossessed.
Read on to learn more about car repossession for lack of auto insurance and what happens when your car gets repossessed.
Can your lender repossess your car for lack of insurance?
You are legally required to carry auto insurance on your vehicle in nearly every state — failure to carry insurance may result in fines and higher rates.
If you’re leasing your car, you also face car repossession by your lender. While most lenders prefer to avoid the headache of repossessing your car, they will repossess your car if you don’t carry auto insurance.
If you bought auto insurance through your lender, they would immediately be aware if you stopped making auto insurance payments. Lenders don’t want to lose their investment if you crash the car, so they have an interest in ensuring you carry auto coverage.
Once your car gets repossessed for lack of auto insurance, it can be a headache and financially difficult to get it back.
Force-Placed Auto Insurance
If you don’t have auto insurance, your lender may add force-placed auto insurance before repossessing your car. Basically, they’ll add high-risk auto insurance through the lender onto your loan.
Lender-based insurance is much more expensive than a personal auto policy and will drive up your monthly loan installments. So if you’re already struggling to pay auto insurance, paying off lender-based auto insurance may be more difficult.
You’ll also be labeled a high-risk driver by insurers for driving without auto insurance, increasing your insurance rates.
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My car was repossessed, how do I get it back?
You can get your car back after repossession, but it can be expensive if it got repossessed for lack of insurance.
How much do you have to pay to get your car back after repossession? While it depends on how much you owe, you’ll have to pay any outstanding payments and penalties. You may be able to work with your lender to refinance your car and make it more affordable, but it’ll still be expensive to get your vehicle back.
If you cannot pay off the fees and penalties to get your vehicle back, your lender may resell it. In this case, you may be on the hook for a deficiency balance.
A deficiency balance is when the lender can’t resell the vehicle for the amount left on your loan. For example, if you still owe $10,000 on your loan, but the lender can only sell it for $5,000, you have to pay the deficiency balance of $5,000.
These deficiency balances can ruin your credit score, especially if the lender sues you for the balance.
How to Prevent Your Car From Getting Repossessed
While making on-time payments and carrying valid insurance will prevent car repossession, financial hardship can make it challenging to maintain auto insurance payments.
In those cases, you should work to reduce your auto insurance costs if you don’t have auto insurance through your lender. Some ways to reduce your auto rates include:
- Get different auto insurance quotes. You may be able to find more affordable auto insurance by shopping around for quotes and comparing prices.
- Get as many discounts as possible. You may get cheaper rates by participating in safe driving programs for discounts and taking advantage of other small discounts like paperless billing or autopay.
If you have auto insurance through your lender, you’re likely overpaying for insurance. If you didn’t sign a contract requiring you to carry insurance through your lender, you should consider getting an outside auto insurance policy.
The Final Word On Car Repossessions for Lack of Auto Insurance
Your lender can repossess your car for not carrying auto insurance, although some may first use force-placed auto insurance. If you dropped auto insurance because of the cost, you could still work to reduce your auto insurance rates.
To find the cheapest auto insurance rates in your area, use our free quote comparison tool to compare rates from multiple companies.
Frequently Asked Questions
Can my car get repossessed if I don’t have insurance?
Yes, in many cases, your car can be repossessed if you do not have insurance.
What is the rationale behind car repossession for not having insurance?
Car repossession for lack of insurance is typically enforced to protect the interests of lenders or lienholders. Without insurance, the vehicle is considered high-risk, which can violate the terms of the loan or lease agreement.
How do lenders find out if I don’t have insurance?
Lenders or lienholders may periodically check if you have insurance by requesting proof of coverage. They can also use various methods, such as insurance databases or third-party services, to monitor insurance coverage on financed or leased vehicles.
Are there any exceptions or cases where repossession doesn’t occur?
Some states may have specific laws or regulations regarding car insurance and repossession. In certain situations, if you can provide evidence of alternate coverage, such as self-insurance or a bond, it may prevent repossession. However, such exceptions are rare.
What are the consequences of car repossession?
Car repossession can have significant consequences. It can damage your credit score, make it harder to secure future loans or leases, and result in additional costs, such as repossession fees and legal expenses.
How can I prevent my car from being repossessed due to lack of insurance?
To prevent car repossession, it is crucial to maintain active and valid car insurance coverage throughout the duration of your loan or lease. Ensure you meet the insurance requirements set by your lender or leasing company.
Can I purchase insurance after my car has been repossessed to retrieve it?
In most cases, purchasing insurance after your car has been repossessed will not guarantee its return. You would typically need to resolve any outstanding financial obligations and work with the lender to regain possession of the vehicle.
Compare Quotes From Top Companies and Save
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Cynthia Lanctot
Licensed Agent
Cynthia Lanctot is an insurance professional with ten years of industry experience. Cynthia is licensed in several states, and holds an associate in claims law, as well as a bachelor’s degree in English. Cynthia’s experience includes the New England and Northeast states. She currently works as a liability claims professional and an occasional online contributor.
Licensed Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.