Owning a car is both convenient and troublesome. If you have your own wheels, you can pretty much get around anywhere you have to go: work, school, errands, vacation. But unless you pay cash for your automobile, you have a monthly car note that you're responsible for, or the lender will come calling for you and for your car. It's no fun having your car repossessed because you weren't able to make the payments, but the reality is that you can't keep what you're unable to pay for.

Here are some tips on how to keep the car you bought and advice on what to do if you find yourself in a car repossession pickle of a situation. It's not all bleak, but you have to be smart about things. 

Keep a Monthly Budget


It's especially easy for your car payment to get away from you if you don't plan well. Most people don't keep or stick to a monthly budget, but it behooves you to make note of all of your scheduled and variable spending as closely as possible. Categorize all of your spending and don't leave anything out, including cash taken out at ATMs, entertainment expenses, etc. Make sure you have enough every month to cover the major expenses (including your car note) and try to eliminate unnecessary spending. Once you start to build up some savings, you'll have a cushion from which you can tap when things get tight. 

Keep in mind that if you don't pay for your car, you will likely lose it and there goes your job that you can no longer get to, thereby losing your ability to pay for everything else in your life. There are plenty of tools to help you budget including here and here. You may not be able to stick to your budget every month, but these are solid guidelines you can try to adhere to that will set you on a positive course.

Don't Buy More Car Than You Can Afford

camaro ss

Sure that Camaro SS looks and sounds fantastic, but can you really afford to pay $500 a month for 72 months if your monthly income is $1,500? That's 33% of your take-home pay, leaving you barely anything after your rent/mortgage, grocery bill, utility bills. It's definitely wise to keep your monthly car payments to less than 20% of your take home pay. The lower, the better.

Consider buying a car that gets good reliability ratings to keep repairs down so you don't completely overblow your budget, and also aim for a mid-size car that has ample space for all of your needs. You can find cars like the Honda Accord and the Toyota Camry that start in the low $20Ks. In the long run, it will serve you well to go for the less expensive car since you'll likely be able to keep the payments affordable. Build your credit by making the regular payments, and you may just be able to get a lower interest rate the next time you're ready to buy a car. 

What To Do When You Miss a Payment


Talk to your lender immediately and don't just sit there hoping things will go away (which is what many folks do, oddly enough). You will likely get letters and phone calls, even if you only just miss one payment. Some lenders wait, others don't, and some states allow lenders to physically repossess your car after just one missed payment

Try to reach an agreement with your lender if you've missed a payment or know you will miss one. Don't be argumentative or give lame excuses. Simply tell them you've missed a payment, it was your fault and tell them what you aim to do about it. They may be able to set up a payment plan with you. But be aware that not everyone makes this exception. 

What To Do When Your Car Gets Repossessed


Your lender has a legal right to repossess your car (without force or breach of peace) if you are in default on your loan. They will then likely sell the car to cover the cost of some of the loan. You may still be able to get your car back if the lender has not sold it yet, but the time tends to be limited in which you can do so.

Though given the financial situation you were in that got you into this situation, you may be able ot "redeem the car", which means that you can buy back the car if you come up with the funds. But keep in mind that this also entails covering the entire loan balance and associated costs like repossession costs. Though this is the less likely option for most people who've had their cars repossessed, it's important to know that it does exist. You can also buy it back at auction (you can find out from the lender where and when it's being sold), but you will still have to cover loan balance costs. 

You may also be able to get your loan reinstated, which means you need to pay all arrears and repossession costs, get your loan reinstated and then make regular payments in order to remain in good standing. In the end, however, it's best to avoid repossession altogether by planning well with your expenses and also communicating with your lender before things become irreversible.

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