“When can they repossess my car” is a question we get asked a lot at Conn Law, PC. There is a common misconception that lenders, in California, must wait a certain number of days after a payment is late before they can repossess a consumer’s vehicle. But in truth, there is no hard and fast rule. While a few states have repossession grace periods or a pre-repossession “right to cure” set in statute, California does not. But this does not necessarily mean that a lender can always repossess your car as soon as you are one day behind on your payments. Answering, “when can my car get repossessed,” depends on several factors and often requires a case by case determination.
Let’s go over the basics.
Repossession Without a “Default” is Prohibited
If a vehicle was indirectly financed pursuant to a retail installment sales contract (most vehicles in California are), California’s Rees-Levering Automobile Sales Finance Act prohibits repossession “[i]n the absence of a default in the performance of any of the buyer’s obligations under the contract.” California Civil Code § 2983.3(a).
One factor that must be considered is, whether there is a default in the performance of any obligation. What does this mean?
The standard retail installment sales contract in California, Reynolds and Reynolds Form No. 553-CA, defines “default” as “if you break your promises.” It lists the ways that promises can be broken as:
• You do not pay any payment on time;
• You give false, incomplete, or misleading information on a credit application;
• You start a proceeding in bankruptcy or one is started against you or your property;
• The vehicle is lost, damaged or destroyed; or
• You break any agreements in this contract
According to the form contract, a breaking any of the above promises allows for a repossession. But a “default” alone is not necessarily enough to justify a repossession.
Repossession Requires a Good Faith Belief that the Prospect of Payment or Performance is Impaired
Repossessions are disfavored in California. California Civil Code Section 1442 states that “[a] condition involving a forfeiture must be strictly interpreted against the party for whose benefit it is created.” This means, that any contract that calls for repossession, when possible, should be interpreted in a way that avoids the repossession.
For example, for a lender to repossess a vehicle, there cannot just be a minor default, the lender must also “in good faith [believe] that the prospect of payment or performance is impaired.” California Commercial Code § 1309. Good faith can be described as objective test of reasonableness. The question is not just “was there a default,” it is, “was there a default and did the lender reasonably believe that payments were not going to be made or something was going to happen to the vehicle?”
There are many common scenarios where there is a minor default but no good faith belief that payments will not be made. For example, if a lender has repeatedly allowed a consumer to make payments within a certain late period, without the vehicle being repossessed, the lender may not be able to repossess the vehicle for a future payment until that set late period has expired.
And most retail installment sales contracts provide for a 10-day “grace period” before late charges are assessed. With this in the contract, it may be hard for a lender to justify a good faith belief of impaired payments until after the grace period has expired. That being said, it is never a good idea to miss payments, and your vehicle may be repossessed.
A Vehicle Should Not Be Repossessed if the Default Has Already Been Cured
If you realize that a payment is late, you should make it as soon as possible. California’s anti-forfeiture statute, Civil Code Section 3275, provides that, under most circumstances, curing the default (making the late payment) eliminates the lender’s ability to repossess the vehicle. Even if there was a default, the lender may not be able to repossess the vehicle if the consumer cures it. For example, if a consumer is late on a payment, but makes it in full (and becomes current), the lender cannot repossess the vehicle for the “late payment.” Making the payment cured the default.
Pre-Repossession Notice is Generally Not Required
One last thing to note is that California generally does not require pre-repossession notice. This means, the lender does not have to tell you before they repossess the vehicle.
There is at least one exception to this rule though. Per Civil Code Section 2983.35, if a creditor requires a co-signer for the contract, and the co-signer does not take possession of the vehicle, then before repossessing the vehicle, the creditor must first give the co-signer notice before repossessing the vehicle.
Ultimately, the best way to avoid having your vehicle getting repossessed is to stay current on your payments. However, if your vehicle is repossessed, and you believe the repossession was wrongful, you should reach out to an attorney right away.