Act fast if you receive a default notice, to give you more chance of avoiding your car or goods being repossessed.
What is repossession
When you borrow money to buy a car or other goods, that loan is often secured against an asset (for example, the car). If you fall behind on your repayments, the credit provider (lender) may take the asset back - called 'repossession' - and sell it.
If you receive a default notice, do not ignore it. Talk to your lender or get free legal advice immediately. In this situation, the faster you act, the more chance you will have of keeping your car or goods.
The cost of repossessing and selling your car or goods will generally be added onto the debt that you already owe, and it can be expensive.
What to do to avoid repossession
Act quickly and you may be able to avoid repossession. You can:
Pay the amount owing
This can be either:
- the overdue amount, or
- the full amount owing
Ask for a hardship variation
If you're willing to pay back the loan but don't have the money, ask your credit provider for a hardship variation. They may offer you:
- extra time to pay
- a payment plan based on what you can afford
- other options to help you repay the money
Ask to make a voluntary surrender
If you’re not able to pay back the loan and don’t think your circumstances will change, you can talk to your lender about surrendering the car or goods. This can help avoid some of the repossession costs.
If you surrender the car and the lender sells the vehicle to reduce your debt, you will still be responsible to pay back the remaining balance of your loan if the price they get for the car is less than your loan amount.
When your car or goods can be repossessed
Generally, a lender can't repossess your car or goods without a court order if you owe less than:
- $10,000, or
- 25% of your loan (whichever is lower)
If you owe more than this, they can repossess your car or goods, but only if:
- you're behind on repayments, and
- they have sent you (and your loan guarantor, if you have one) a notice giving you 30 days to pay the overdue amount, and
- the 30 days have passed, and you haven't paid this amount, or made an arrangement to pay, or asked to postpone repossession
Your car can't be repossessed if it's parked on your property — this includes your garage and yard. If your car is parked on the street, it can be towed away.
Lenders can only come onto your property with your written consent or with a court order.
Eva's car is repossessed
Eva takes out a secured personal loan from a bank to buy a new $30,000 car, with the car as security for the loan. Her total loan is $32,000 (including lender fees). A year later, she loses her job and falls behind on repayments, and the bank ends up repossessing her car.
The car is used now, and the bank re-sells it for only $20,000.
Even though Eva has been making repayments for a year, she still owes $24,000 on the loan. Plus, she is up for repossession and sale costs (another $1,500). So, before the sale, the loan balance is $25,500. After the $20,000 is deducted, Eva must still pay the bank $5,500. This also affects her credit score.
How to get your car or goods back
If you want to get your car or goods back after they've been repossessed, act quickly.
Within 14 days of it being repossessed, the lender must send you a notice including:
- the estimated value of the goods
- the cost of the repossession, plus any ongoing costs
- a statement of your rights under consumer credit law
For 21 days after sending that notice, the lender can't sell your car or goods. You have a chance to get it back if you pay:
- the overdue amount (plus costs), or
- the full amount owing
During those 21 days, you might find someone who will buy the car or goods for at least the estimated value. If you do, give the buyer's details to the lender in writing.
If your repossessed car or goods have been sold
If you don't pay or make other arrangements during the 21-day period, the lender can sell the car or goods. They have to sell it for the best possible price.
After it's sold, the lender will write to you stating:
- how much it sold for
- how much it cost to repossess and sell it
- any outstanding balance (the amount you still owe)
If there's an outstanding balance, you need to pay it immediately. If you're in financial hardship, ask the credit provider to set up a repayment plan.
Where to get help
Talk to a financial counsellor
Financial counsellors offer free, independent and confidential help to people with money problems. They may also negotiate with your credit provider for you.
Call the free National Debt Helpline on 1800 007 007. The helpline is open Monday to Friday, 9:30am to 4:30pm. Or live chat, Monday to Friday, 9:00am to 8:00pm.
Aboriginal and Torres Strait Islander peoples can call the free Mob Strong Debt Help on 1800 808 488. Monday to Friday, 9:30am to 4:30pm.
Get free legal advice
If you're facing legal action, you can get free legal advice from community legal centres and Legal Aid agencies.
Make a complaint
If you’re unhappy with the action your lender has taken and you can't reach an agreement with them, contact the Australian Financial Complaints Authority (AFCA) to make a complaint and to request free, independent dispute resolution.
Learn about other urgent help with money that you may be able to access.