Rapid Finance on 23 October 2023

So, you’ve obtained a car loan on your dream vehicle and are making your repayments on time. Then, you miss a repayment due to an unexpected event or just human error. Why does the lender care? After all, they have your car as security, right?

Many Australians get a car loan for a vehicle they can afford, as they do not have the cash in the bank.  But there are certain things to know before you sign on the dotted line. Always wondered why lenders care so much about late repayments? At Rapid Finance, we love helping people understand the ins and outs of car loans so that they can make the best decisions possible for their unique circumstances. Check out our car loan repayment calculator, to make sure you are comfortable with the likely repayments over the loan term for the amount you wish to borrow on your car.

What is car repossession?

When you borrow money to purchase a car, the loan is typically a secured car loan. If you fall behind on your repayments, lenders can take the vehicle back and sell it to recover their money. 

When can a car be repossessed?

If you owe money on your secured car loan, the lender can repossess your vehicle if you’re behind on your repayments and;

  • they have sent you a notice giving you 30 days to pay the amount.

  • the 30 days have passed, and you haven’t paid the amount or made an arrangement to pay. 

So why do lenders care so much about late repayments?

While lenders do take security over a vehicle you are paying off, the last thing they want to do is to repossess your car. Lenders see repossession as a last resort when they’re trying to recover the money you owe them. 

There are various reasons why lenders use repossession as a last resort and are therefore concerned about you paying on time:

  • Often, a lender loans you up to 1.5 times (or 150%) of what the car is worth.

  • Vehicles typically depreciate (although this did change during Covid).

  • When a vehicle is repossessed it’s never in the same condition as when it was initially sold (in fact, vehicles are often in a far worse condition).

Repossession comes at a cost

Lenders don’t send someone from their office to come and pick up the vehicle. They have to engage an agent, which costs money. Under consumer law, a car loan lender has to seek the highest amount it can get for your vehicle, meaning an auction is the best option. So, once they’ve collected it from you, it has to get transported to an auction house that the specific lender has a relationship with – which could even be in another state. Once the vehicle arrives at the auction house, there are also auction costs for the lender. 

With all things considered, repossession can cost a lender more than chasing payments from you. After lending you more than the car is worth, the car typically depreciating and then the high costs of repossession, it’s no surprise that they care when you miss a repayment. 

Rapid Finance car loans

As car loan experts, Rapid Finance can offer a range of automotive solutions, including new, demo and used car loans, novated leases, chattel mortgages, car refinancing, secured car loans, business car loans, and even commercial hire purchases. 

Wholesale network vehicles at Rapid Finance

Did you know that, through our extensive wholesale car network, we offer customers a one-stop shop to help you source the perfect vehicle for your needs?

Through our network, we will do extra checks on your behalf, including checking that the vehicle is in great condition.

We will also check:

  • That there is no money owing on the vehicle.

  • That the vehicle has not been a repairable write-off.

  • That the vehicle has not been in any serious accidents. 

  • We will check if everything works on the vehicle.

  • We will get a roadworthy for the vehicle.

  • We will do a detailed inspection of the vehicle.