How to Get a Car Loan After Repossession

Although there are many cars on the roads, not all drivers are able to make their monthly car payments. With the cost of living rising across the country, many Canadians are living with a heavy debt load. More debt makes it more challenging for many to pay back lenders.
Nobody wants to be in a scenario where their vehicle gets repossessed — but it happens. As little as one missed payment can put you at the risk of repossession. If you’re currently having trouble meeting your monthly payments, it’s advised you notify your lender. With a conversation and explanation of your situation, some lenders may be more lenient and give you an extended term to make your payment, which is typically 30 days. If you’ve gone through car repossession, it may be more difficult to get approved for car finance and get back behind the wheel, but it’s not a dead end.


What happens to your credit when your car gets repossessed?


Once you’ve had a vehicle repossessed — whether it was voluntary or involuntary repossession — it will negatively impact your credit score. With repossession on your credit history, it can be challenging to get auto financing and let alone at a reasonable interest rate.  Credible lenders will do a credit assessment before approving you for a bad credit car loan.


What to do when your car gets repossessed


Repossession is a stressful situation many Canadians have faced at some point. Debt can be overwhelming and you might feel like getting back behind the wheel is out of reach. You may be seen as a risk to lenders. But this doesn’t mean you’ll never be able to get financing for a car again. There are ways you can help increase your chances of getting a car loan with bad credit and getting back on the road.

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If the current sale value of your repossessed vehicle is less than what you owe, pay off the difference as soon as you possibly can. Taking care of this debt can protect your credit score from taking yet another hit after repossession.




You can get free credit reports from the two largest credit bureaus in the country — Equifax Canada and TransUnion Canada.

Receive copies of your credit report from either Equifax Canada and TransUnion Canada to see an overview of your credit. You may also want to get your credit score or check your credit report for errors. Having your credit report on hand will also give you information you can use to better understand your credit situation and help you improve your credit score in the future.




It’s best to be realistic about what type of car would fit your needs and budget. You might not get into your dream car, but you can definitely get into a reliable one. If you opt for a car well within your means, you’ll stress less about squeezing your payments into your monthly budget. At the end of the day, the less money you need to borrow means the higher your chances of getting approved for a car loan will be.




It may be tempting to close current credit lines, but don’t do this! Closing credit lines actually reduces the amount of money that could potentially be loaned to you, in turn damaging your credit score and lessening your chance of getting a car loan. The best approach is to consistently make payments, even if they’re small, to your credit line(s). It’s also advised you do not open any new lines of credit or credit cards. If you avoid closing current credit lines, avoid opening new credit lines, and make regular payments, it can help increase your chances of getting a car loan again.

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If it’s within your reach, save a down payment for your next car. Having a small amount of money can show lenders you’re able to save and therefore may be less of a risk. In addition, if you’re looking for the best interest rate, given your finances, aim for putting down 20% of the value of the car. For example, $4000 on a $20,000 vehicle would be a sufficient down payment to ensure a better interest rate on financing and help show lenders you’re responsible. It may take a while to save for a down payment towards your car, but in the long run it can really help to rebuild your credit.




If you urgently need a vehicle after your car was repossessed, consider in-house financing. This is where the dealer is the one providing you with the loan to purchase a vehicle. This allows us the dealer to accept customers who may have difficulties getting approved through traditional financial channels such as banks, who may turn down applications based on your credit score. For example, here at Legacy Auto Credit, we lend our own money and we consider your entire financial situation when making a decision on your application.




By following these steps, you’ll be able to improve your credit and make your way back into the driver’s seat. At Legacy Auto Credit, we specialize in helping people like you who have less-than-perfect credit. If you have car repossession on your record, we can help you get back on track and explore your options for auto financing.

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In need of a new vehicle?

If you need a new vehicle and are looking for an affordable payment plan, our credit experts are ready to help you, even if you have bad credit. You can fill out an online Car Loan Application and our credit experts will help you find a payment plan that meets your budget and lifestyle. You can also reach out for a complimentary credit check.