Can the car be repossessed for no insurance?

A vehicle can be repossessed if one doesn’t have auto insurance, or their lender may require them to purchase insurance on the vehicle, which can be costly. Their car can be repossessed if they do not have vehicle insurance. Lenders require one to maintain vehicle insurance as a condition of leasing a vehicle, so if they drop their insurance or stop making payments, their vehicle will be repossessed. 

An overview of the topic in a nutshell

  • Vehicle owners are legally required to carry auto insurance 
  • When lenders repossess cars without insurance, they are protecting their assets 
  • The process of reclaiming their car will involve multiple fees and penalties

If they are considering repossession of their car because they lack auto insurance, they should read on to find out what will happen when their car is taken away from them. 

Can Lenders Reclaim The Car Insurance?

Nearly every state requires that one carry auto insurance on their vehicle. Failure to have insurance may result in fines or higher rates. When they lease their car, their lender may repossess it. Despite lenders wanting to avoid repossessing their car, they will repossess it if they don’t carry auto insurance.

Their lender would immediately notify them if they stopped paying their auto insurance if they bought it through them. The lender does not wish to lose the investment in the car if they crash it, so they want to ensure that they have auto insurance. It can be difficult to obtain their car back after it has been repossessed for lack of auto insurance, making it difficult to recover their vehicle financially.

Force-Placed Auto Insurance 

One may be forced to purchase auto insurance by their lender before repossession if they do not have insurance. In a nutshell, the lender will add high-risk auto insurance directly to their loan. Lender-based insurance is more expensive than a personal auto insurance policy and will increase the monthly payment on their loan. One may have difficulty paying off lender-based auto insurance if they are already struggling to pay auto insurance. Insurers will also mark them as a high-risk driver if they drive without auto insurance, increasing their insurance rates.

How Can I Reclaim My Repossessed Car?

After repossession, one may be able to get their car back, but it may be expensive if their car was seized for lack of insurance. What is the cost of getting their car back after repossession? Depending on how much they owe, any outstanding payments and penalties will need to be paid. Their lender may be able to refinance their car and make it more affordable, but getting the vehicle back will still be costly.

One may have to pay a deficiency balance if one cannot pay off the fees and penalties to get their vehicle back. When the lender cannot resell the vehicle for the amount left on their loan, one will have to pay the deficiency balance. For example, if the lender can only sell the vehicle for $5,000, but one owes $10,000 on their loan, the deficiency balance of $5,000 must be paid.  The lender may sue them for these deficiency balances, which can ruin their credit score.  

Preventing Repossession of The Car 

If one makes on-time payments and has valid insurance, they can prevent their car from being repossessed, but if they are experiencing financial hardship, it can be not easy. If they do not have auto insurance through their lender, they should work to reduce their auto insurance costs.

Sara Routhier, Director of Outreach at, list some tips to help reduce their auto insurance costs:

  • Consider comparing auto insurance quotes and shopping around for a more affordable policy. 
  • Consider taking advantage of several discounts, including participating in safe driving programs and opting for paperless billing or autopay. 

There is a good chance they are overpaying for car insurance if they have auto insurance through their lender. If they were not required to carry insurance through their lender, one should consider shopping for an outside policy.

Summary: Repossessions For Lack Of Auto Insurance

The lender can repossess their car if they don’t have auto insurance, although some might first force-placed auto insurance. One can still reduce their rates if they dropped auto insurance because of the price.

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