We often hear the words voluntary repo or voluntary repossession and some of us think what exactly is a voluntary repo as opposed to an involuntary and how does that work exactly. I will try to explain the differences below and the effects either may have on your future of obtaining a loan especially on another car.
A voluntary repo can happen a few different ways
The most common way is the typical family that realizes they have accumulated far too much debt, too many bills coming in from all angles and there is just no way they can afford to to make this car payment any longer. Rather than waiting until the gets into repossession status, they will call the bank, in many cases the actual loan officer of the bank or just call the dealership finance company letting them know that they can no longer make the payments. At this point the car is usually not yet in default so the bank or finance company will make a note of the call knowing that these people are willing to just turn over the car. Banks prefer voluntary as the Voluntary repossession is a cheaper payout to the agent. I can’t tell you exactly how much cheaper as we never got voluntaries ever but I have heard of companies doing them for around the $150.00 range. I couldn’t see doing it for a penny less than that, in fact I will do a post here explaining how some repo agents are just trying to undercut everyone else to death in order to gain new business.
The second most common way for a voluntary repo is when a car gets into repossession status and the debtor receives calls from the bank asking for payment, or asking when will payment be coming on the car, in essence creating a file of everything said by way of phone. I remember having access to my clients, the banks systems able to see the exact notes from the collectors because many times a person will say they are voluntarily giving up the car but have a change of thought and that car quickly becomes a skip trace. Of coarse the bank or finance company can get lucky and the debtor will say ok come and get it at my address after 6pm. The bank will put it out as a voluntary and get it done cheap, many times if the car doesn’t show the first time the repossession agent will bill for a full repo with notes that the voluntary didn’t show.
Many times a skip trace before being sent out as a skip trace will turn into a voluntary repo once the bank discloses they have the new address. It could have been that the bank had not updated the phone or address and had no way of contacting the debtor. However once a new phone number is obtained the people say “ok sure come pick it up” will be sent out as a voluntary. It’s the case of if they find me, i will give it up right aaway type thing.
Voluntary repossession is much better on the credit report listed as such as it shows those in the future looking at your credit that you volunteered to turn in the car as you knew you had a problem continuing to pay. A credit report will also list an involuntary repo and the amount of time it took to get the car which a finance company may decide against extending credit to someone who is going to hide the car purposely.
I know, its tough to give up a car that you put 2 to 5k down on, or a car you have been paying for 2 or 3 years on but in reality the bank still owns the car until it is paid. The best bet is to avoid the repossession or if you are really in trouble call the bank and turn it in to have some kind of decent statement on the credit report moving forward.