Can lease cars be repossessed? | What happens if I default on my lease payment?

What happens if I default on my lease payment and can lease cars be repossessed?

can lease cars be repossessed?

Can lease cars be repossessed?

The simple answer to can lease cars be repossessed is yes. If you fall behind on your payments or default on your contract then the reality is that your car could be repossessed. This is usually a final resort. Finance companies will typically want to work with you to avoid repossession. They will attempt to contact you if you fall behind on your payments. During this contact, they will discuss your options with you and try to come to an arrangement.

Should these discussions fail, you may continue to fall behind on your lease payments. At this point, there are two types of repossession that can occur for a lease contract. In this article, we’ll take you through both types of repossession. We’ll inform you of what happens in each instance. And tackle the most frequently asked questions around the subject.

Voluntary repossession

can lease cars be repossessed?If you have lost your job, or for whatever reason are unable to meet your lease payments then a voluntary repossession may be the sensible choice. Voluntary repossessions come with fewer penalties than a forced repossession. We’ll go into more detail about forced repossessions next. The first step is to notify your finance company that you wish to hand the vehicle back for repossession. The finance company will inform you of your options at this point and usually try to help you with alternative solutions.

Repossession should only be considered as a final option so take the time to consider any other avenues you are presented with. The finance company will send a repossessor to collect the vehicle and your contract will be terminated. You will likely be liable for the cost of the repossession which will be added to your final bill. You will also be expected to pay any outstanding lease amounts and cover the cost of any damage or excessive wear and tear.

Unfortunately, the repossession will be noted on your credit file. The entry will provide details of the lease contract and the date the vehicle was placed for voluntary repossession. However, it will also note that this was a voluntary action which will go in your favour should you want to obtain another vehicle in the future. You won’t be able to obtain credit from premium lenders for the 6 years it appears on your report.

Involuntary repossession

An involuntary repossession occurs when you miss more than 3 payments. If the lease remains in arrears for three months without any attempt to pay off the debt then your vehicle could be marked for repossession. The finance company will have exhausted all other options to assist you in honouring the terms of the lease. So the only option remaining is for them to repossess the car. Some finance providers will issue for repossession after the third unpaid lease instalment. Others will allow a bit more time before repossessing. In either case, the finance company have a duty of care to inform you of their decision to repossess the vehicle.

This is usually 30 days giving you the opportunity to make a payment and avoid involuntary action. The finance companies will make several attempts to contact you should your lease account go into arrears for two months or more. Every attempt will be made within this to avoid repossession. Some people ignore the letters and phone calls from the finance company. Others are not willing to enter into an alternative arrangement. In either case, the finance company are left little choice but to repossess the car.

How long does it take for the repossession process to start?

can lease cars be repossessed?Some finance providers will issue for repossession after the third unpaid lease instalment. Others will allow a bit more time before repossessing. In either case, the finance company have a duty of care to inform you of their decision to repossess the vehicle. This is usually 30 days giving you the opportunity to make a payment and avoid involuntary action.

The finance companies will make several attempts to contact you should your lease account go into arrears for two months or more. Every attempt will be made within this to avoid repossession. Some people ignore the letters and phone calls from the finance company. Others are not willing to enter into an alternative arrangement. In either case, the finance company are left little choice but to repossess the car.

Will an involuntary repossession be bad for my credit score?

An involuntary repossession will leave a negative mark on your credit report. This could affect your ability to obtain future credit or another car in future. Not only that, there will be additional fees to pay. Especially if the finance provider must pay for the vehicle to be towed.

If my car is repossessed do I have to pay what is outstanding?

can lease cars be repossessed?In all cases, you will be responsible for paying the missed monthly instalments to bring your contract up to date.

If you are on a contract hire or standard lease agreement then the finance company will ask you to pay an early settlement fee plus the sum of any outstanding charges/ rentals and collection fees. You entered into a contracted agreement when you took out the lease and as such the finance company have the right to pursue you for this money.

 

What do I do if I don’t have the money to pay off my lease contract?

No one wants to have their car repossessed and be faced with a large bill which they cannot meet. In this instance, you should speak with your finance provider about a settlement. A settlement figure is an amount that the finance company are prepared to accept to clear your account. This will vary depending on your finance company and your individual circumstance. For advice on your finances visit

As long as you maintain contact with your finance provider and keep to any arrangements set up to assist you through your lease you won’t encounter repossession. Protect your credit score by keeping within the new arrangement set up with your finance provider.

If you're struggling to maintain payments  This handy article details your options

Faye Lindeck

Faye enjoys Music, Dog Walking and Socialising with friends.

Faye is an experienced blogger with a keen eye for finding excellent information about the subjects she writes about. Giving OSV blog readers the most accurate knowledge.
Faye Lindeck

9 Comments

  • phelim| 29th September 2018 at 11:36 am Reply

    I was living abroad for nearly a year and I missed the final balloon payment on 2 lease purchase agreements. The vehicles are due for repossession now. I’ve offered to pay balloon and any penalties but they are insisting on repossession. Is there anything I can do to avoid repossession?

    • Rachel Richardson| 2nd October 2018 at 3:01 pm Reply

      Hi,
      Sorry to hear about your situation. Your next steps depend greatly on who you are currently dealing with. If your debt has been sold to a Recovery Company then I would suggest you get in contact with your bank. If, however, you’re already in touch with your bank then ask for their complaints procedure to get more information on why they won’t allow you to clear the debt.

  • sally Green| 25th August 2018 at 12:00 am Reply

    I am 5 weeks behind o a lease agreement and the company have said that they will cancel the insurance and remove the car immediately. can they do that as the insurance on the car is part of the deal, I havent had a default notice or anything and have told them that i shall bring the car payments upto date.

    • Abbie Rawcliffe| 28th August 2018 at 9:57 am Reply

      Hi Sally, 5 weeks late would not generate a default but would generate a missed payment. Assuming this is a credit agreement, they may well be able to cancel the insurance because you are not paying for it, just like if you are paying your home insurance by Direct Debit if you stopped the Direct Debit it would also cancel the insurance. Under FCA rules they should be open to any reasonable offer to catch up on your payments and within that negotiation, you want to include ongoing insurance. I hope this helps.

  • Kaiyy| 13th July 2018 at 12:59 pm Reply

    That’s awful call them
    Amd discus it
    I’m
    Site for £40 they won’t take it back?

  • Gemma| 8th April 2018 at 12:16 pm Reply

    I am £40 behind on my car payments. Only have 6 months left on my finance. Been paying since 2013. Has a letter saying I no longer own my car and it will be taken ASAP. What can I do ?

    • Abbie Rawcliffe| 10th April 2018 at 11:39 am Reply

      I would phone the finance house and say if you paid the £40 can you keep the car, we are assuming you are on a PCP or HP agreement, if so once you have paid 1/3 of the total payable the finance house has to get a court order to be able to reposses the vehicle, if they have done this then you would have had a court date where you could represent yourself. Hope this helps.

      • Dan Allen| 27th July 2018 at 1:39 pm Reply

        Have you got any more information on this Abbie? I have paid over 1/3 on a finance lease and believe there should’ve been a court order issued but i’m struggling to find any more information on it? Thanks

        • Abbie Rawcliffe| 30th July 2018 at 12:19 pm Reply

          Hi Dan,

          On your finance agreement, it will say “Repossession Rights” it will only show if you have a Regulated Finance Agreement.

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