Individual loan contracts offer specific information about defaulting on automobile loans, but generally all it takes is one missed payment to be considered in default, according to MSN Money. That doesn't mean that repossession is imminent, however. Contacting the lender and explaining your situation could allow you time to make up the missed payment.
Time Frame
Most creditors are unlikely to repossess your car the day you miss a payment, but the threat of repossession increases with each additional day that your account remains delinquent. According to MSN Money, banks must classify the loan as a bad debt at the 90-day mark -- a move that guarantees repossession efforts at 90 days or even sooner.
Considerations
Creditors can repossess your car without warning, according to the Federal Trade Commission. They can take the car from your home, place or business or anywhere else. However, the tow truck operator cannot seize the car by committing a "breach of peace." That means using physical force such as forcing open a locked garage or intimidating you with physical threats.
Function
The threat of repossession is necessary to protect the bank or credit union. An automobile loan is a secured debt, with the car serving as collateral. When you purchased the car the bank delivered a check to the dealership for the vehicle and signed you to a finance agreement. The contract allows the bank to repossess the car if you default and sell it at auction or through a private sale. Most cars are sold at dealer auction within 41 days of being repossessed, according to MSN Money.
Effects
An automobile repossession will be listed on your credit report for seven years, according to the Federal Trade Commission. It may also cause your credit score to drop, possibly making it difficult for you to obtain new credit. The FTC says the negative impact on your credit will lessen over time.
Prevention/Solution
Make your car payments on time to avoid repossession. Also avoid buying a car you really can't afford, and don't be afraid to sell the car or trade down to a less expensive model if your financial situation changes.
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