Does the bank have the right to repossess my car if I am in arrears with payments?

Question: I bought a car last year but I am having difficulty in keeping up with the repayments.  Does the bank have the right to repossess my car if I am in arrears? 

Answer:  It is not clear from your question whether you financed the purchase of your car by way of a personal loan or a hire purchase agreement.  If it was a personal loan from a bank then you are the legal owner of the car and the payment of the loan is a matter of contract between you and the bank.  The bank would not be entitled to repossess your car unless they had judgment against you for the amount that is due, and sought to have the car seized in order to discharge the judgment.

A hire purchase agreement is different in that the car is still owned by the hire purchase company until you pay off the last instalment.  This means that if you run into difficulty, you cannot sell the car to pay back what you owe.

You will need to look at your hire purchase agreement to see on what basis you can terminate the agreement.  Generally if you have paid more than half the original hire purchase price you can return the car subject to your payments being up to date.  If you have not paid more than half the hire purchase price you can agree to surrender the car but you will still be liable for the balance that is due.  Sometimes it might be more economic to pay to bring you over the half-way point and then end the agreement under the half-rule.

The finance company can repossess the car without taking legal action against you if you have paid off less than one-third of the hire purchase price and you are in arrears.  The car finance company will sell the car and you will be liable for the balance that is due after credit for the sale price.   

More information is available on the consumer website

The information contained in this article is for general information purposes only and does not constitute legal or other professional advice.  Specific legal advice should be sought on any particular matter.

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