Avoid vehicle repossession: Voluntary Surrender vs Repossession

Avoid vehicle repossession whenever possible. Affordability pressure created by Covid-19 is tragic and catastrophic. It has heightened vehicle finance arrears substantially. And as a result, the industry is experiencing high and alarming level of voluntary vehicle surrender.

What is voluntary surrender?

Most consumers are not aware of the difference between repossession and surrender. They, therefore, end up mistaking voluntary surrender for repossession.

This is where you, and out of your own will return a car bought on credit to a creditor. The creditor sells the car and settles the current outstanding balance. As a result, the arrears clears off.

This section of the law has differing consequences. Especially if you apply it whilst in default as compared to when applied when non-defaulting, for instance.

Legal procedure for surrendering a vehicle

The standard legal procedure for surrendering a vehicle is in five-fold. Understanding these helps you avoid vehicle repossession. One, you must give a written notice to the creditor notifying them of your intent to voluntarily surrender. Secondly, the vehicle is assessed to determine its value within ten (10) business days.

A creditor will then give you the estimated value of your car before its sold. You also have a legal right to withdraw a notice of surrender if you are in good standing.

If you don’t withdraw the voluntary surrender notice, creditors will sell your car at a public auction. A creditor is obliged to provide you with a letter stating the outstanding balance on the car before selling.

Furthermore, the letter should reflect the total amount received from sale. It must also show the balance left from the sale after deducting permissible charges. Lastly, the letter must set out the costs and total outstanding balance payable on your statement. It is very easy to avoid vehicle repossession with enough knowledge.

Proceeds from sale of vehicle

You are responsible for payment of the shortfall. This is if the amount from sale is insufficient to settle the balance. Creditors recover their shortfall by enforcing their rights in a court. On another hand, if there is extra cash after settling the outstanding balance, then you will receive a refund.

Should you not agree with the selling price of your vehicle. You have a right to lodge a dispute with the National Consumer Tribunal.

Vehicle repossession process

Before vehicle repossession, creditors will call and email you about arrears and the need to arrange payment.Most importantly, to avoid vehicle repossession don’t ignore these notifications. If you don’t respond, creditors will send you a Section 129 notice or a Letter of Demand. Stand guided, this is the first step towards repossession of your car.

In the Section 129(1), creditors inform you about missed payments and give a list of possible solutions. These solutions will help you bring payments up to date before enforcing the agreement in court. The idea is to give you a low-cost opportunity to pay your arrears. For instance, you may apply for Debt Counselling instead of spending money in legal costs defending legal proceedings against you.


Are a start of the actual legal process before a court, usually at the High Court. Creditors will summon you for not yielding to the Section 129 Notice or letter of demand.  The bank will use its attorneys to cancel the credit agreement and claim the vehicle. To avoid vehicle repossession, it requires full settlement of the balance.

A credit provider cancels the agreement through a Judgement entered against you for failing to defend a claim. The judgement paves way for cancellation of the credit agreement and eventually repossession of the vehicle. Cancellation of the credit agreement means you cannot avoid vehicle repossession.

The last stage before a repossession involves issuance of a Warrant for delivery of motor vehicle. This is a notice given directly to a sheriff by a court to repossess (collect) your vehicle. After repossession, the sheriff is required to notify the court of what they would have done.

How to avoid vehicle repossession?

When you receive any of the legal documents such as a section 129 to warrant of delivery, ideally contact the financial institution and arrange to pay the arrears. Calling the creditor helps you avoid vehicle repossession. If they refuse, contact the debt counselor such as DebtMap and apply for debt counselling, the NCR, or the Banking Ombudsman. Lastly If they cannot help, contact a consumer attorney to intervene and assist you.

Alternative ways to avoid vehicle repossession

Trade in for a cheaper vehicle

If you think you can afford a certain monthly installment. Consider trading down to a cheaper vehicle so to reduce your monthly installment. Talk to a car dealer about your options in trading down. Determine what your new monthly installment would be. This strategy will only work if you don’t owe more on the loan than the car is worth.

Learn more about Debt consolidation and counselling

Become one of many DebtFree consumers though DebtMap solutions

If you can get a decent price for your car in its current condition, consider selling it and using the proceeds to pay off a good portion of the loan. Even though you will still have a loan balance, you can continue making very small installments going forward and avoid the negative effects of repossession altogether. Of course, this might be a last resort for most people. You may still need to purchase another car and will need to either save up enough money to make a cash purchase or get a new loan that you can afford.

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