Buying a Car After Repossesion

by Chuck
(Los Angeles, CA)

Question: I'm looking at buying a car after a repossession that was back in 2007. I was out of a job so I was unable to pay off the balance of the repo-ed car loan. Eventually, the bank marked it as "Charge-Off".

Beside this bad mark, my credit is clean and I have low credit cards utilization (about 20% only) and good income.

What do you think is the chance for me to get an auto loan, now that the repo situation has been about 3 years old?


Answer: Hi Chuck,

Buying a car after repossession presents some challenges, but you should be able to get a car loan as there are plenty of banks out there that give loans after a repo.

Being that it has been 3 years is a big help as most lenders want a minimum of 12-24 months after a repo before they will approve an auto loan.

A couple of things to consider however is that you may pay a higher rate than you have paid in the past, you may need more down payment and you'll probably have to arrange your loan through a car dealer that specializes in these types of loans.

A great source to find dealers that specialize in auto loans after a repossession is Auto Credit Express. They are the largest in the country and have helped quite a few of my visitors in the past.

Also, most banks will not loan you more money than the loan that was repossessed. You'll need to essentially re-prove yourself and your credit worthiness before the amount you can borrow will go up and the rates/down payment go down.

Your credit score and overall history will play a factor in what type of lender you'll be able to finance. If this is the only major blemish (which it sounds like it is) on your credit, then you will more than likely get approved with a nonprime lender (better than subprime), which will help the terms of your loan not be "so" bad.

It varies, but most nonprime lenders will be looking for a minimum credit score of 540-580 before they will even consider your application.

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Low balances on your credit cards is certainly a good thing and solid monthly income is a bonus as well.

I'd think you'd be able to get approved with not the best of rates (maybe in the mid to upper teens), pay well on that loan for 12-18 months and look to refinance with a credit union as your credit and score begin to get better.

Hope this helps,
Justin