How many missed payments before car repossession?

Posted on 22 February 2022

Written by Colin Boulton

Do you feel like you can’t afford your car payments? Perhaps you are late on some payments, and nervous that your car may be repossessed? If you have missed a car payment, do not panic. It is not too late, but it is important to act fast. It is very unlikely that your car will be immediately repossessed if you miss one payment. What is important, however, is to understand why you are missing your car payments. You may be feeling overwhelmed by other debts, and struggling to keep up. This is where honest communication with your car lender is key. If debt is an issue, speaking to a Licensed Insolvency Trustee can help you with debt relief to make sure you can keep up with your car loan. So, how many missed payments before car repossession? In this article, we explain everything you need to know about missing car payments.

How many missed payments before car repossession?

If you are leasing or financing a car or vehicle and you cannot make your payments, there are no two ways about it – you are at risk of having your car repossessed. Once you become behind on payments, your car lender will likely notify you that you have missed car loan payments. At this point, if you ignore the notices and refuse to communicate with your car lender or indeed simply cannot make your car loan payments, your lender can send a bailiff to repossess your car. How many missed payments before car repossession? This will vary from lender to lender, but in most scenarios, two or three missed car loan payments in a row will lead to repossession. Some car lenders even have technology to remotely disable your vehicle after just one missed payment. These actions are taken in order to try and recoup the car loan payments that you owe. Lenders will probably try to sell your vehicle for a market price or auction it to repay your missed payments. In some cases, there may be a deficiency when the sale does not quite cover your balance as well as the additional repossession fees, which you will need to make up. Car repossession also has an impact on your credit report, which you should note when taking out a car loan. The best thing to do as soon as you get a notice issued from your lender is to communicate with them. Booking a consultation with a reputable Licensed Insolvency Trustee is also important in order to see how you can free up your debts to make your car payments more easily.

How does car repossession work in Canada?

Car repossession laws vary slightly depending on your province of residence. In Ontario, the lender has the right to seize and sue for any overdue payments that are on the loan. In Alberta and British Columbia, there is a seize or sue law, whereby the lender can either repossess your car or sue you for the overdue amount. The creditor can determine how they would like to act, but they cannot take both options. Despite these differences between provinces, there are two types of car repossession, no matter where you are located in the country. These are involuntary and voluntary repossession:

  • Involuntary repossession – this is where you miss your car payments and do not communicate with the car lender to negotiate on repayment terms, resulting in repossession
  • Voluntary repossession – this is when you realize that you cannot afford your car repayments and you decide to surrender the vehicle back to the car lender. Voluntary repossession can stop further costs that can come into play with an involuntary repossession

If your vehicle is repossessed and you later decide to file for bankruptcy or a consumer proposal, you can include any outstanding car debt you have. You cannot include this debt if your car has not been repossessed as it will still be considered secured debt. This debt becomes unsecured debt following repossession, which can be included as part of a consumer proposal or bankruptcy.

How to avoid car repossession in Canada

If you are keen to avoid having your car repossessed, there are a number of actions you should take:

Communicate with your car lender

The best possible scenario for your car lender is to receive the car loan repayments that they are owed. Repossession is a last resort for them, and so they will try to avoid this if they can. After all, it is a lot of effort for them to arrange repossession, sell your car, and even to potentially sue you for overdue repayments too. Once you realize you are having financial difficulty and will not be able to make your agreed car loan payments, you should contact your lender. They may be able to negotiate on your repayment arrangement. If there is nothing they can do, it is time to move on to the next option.

Speak to a Licensed Insolvency Trustee

Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. Although debt relief is only able to clear unsecured debts, in many instances this can relieve financial pressure to help you make your car payments. Legal forms of debt relief include a consumer proposal, which can reduce your debt by up to 80%, while allowing you to keep your assets. It also includes bankruptcy, which allows you to completely clear your debt in exchange for any non-exempt assets you may have. Both forms of debt relief automatically bring about a stay of proceedings which offers protection for you from creditors, and wage garnishment. At Spergel, unlike other bankruptcy firms, you will be assigned your own Licensed Insolvency Trustee to walk you through the debt relief process, instead of passing you from person to person. They will spend time with you to understand your unique financial circumstances before advising you on the best form of debt relief for your situation.

Sell your car

If you feel that you simply cannot afford your car loan payments, it may be a good idea to sell your car or vehicle. It would be wise to do this before repossession of your car becomes an option. Selling your car or vehicle means that you can try to regain as much money as you possibly can in order to put towards your outstanding car loan debt.

Opt for voluntary repossession

Another way to avoid involuntary repossession and the associated costs is to proactively opt for voluntary repossession. This is ideal if you know you cannot afford your car loan payments. For voluntary repossession, you will surrender your car or vehicle. You should always let your car lender know before you take any action so that they are aware. You should note that if there is any deficiency between the sale price of the vehicle and what you owe, you will be responsible for making up the difference. Voluntary repossession will also have consequences on your credit report.

How does car repossession affect your credit score?

No matter whether you have a voluntary or an involuntary repossession, your credit score will be negatively impacted. Repossessions of your car or vehicle will remain on your credit report for up to seven years. The consequences of this include difficulty taking out another car loan, getting a mortgage, or gaining other additional credit. Even if you do find a creditor who is willing to lend to you, as you are higher risk, you are likely to have to pay a higher interest rate. Learn how you can rebuild your credit score.

If you are curious about ‘how many missed payments before car repossession?’ and other related topics, book a free consultation with a Licensed Insolvency Trustee at Spergel. We understand how stressful the prospect of having your car repossessed can be, and so we are here to help. We will navigate you through the journey and can help you choose a debt relief option to make your life easier.


Colin Boulton

Colin Boulton is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on unemployment and wage garnishments and manages Spergel's offices in Eastern Ontario (including Oshawa, Peterborough, Lindsay, Ajax and Scarborough). When not at the office helping clients cross their debt-free finish lines, Colin enjoys training for and participating in triathlons.

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