Will a Repossession Affect My Future Car Insurance Rates?

When most people buy new or used cars they rarely think all that far into the future and that causes a whole lot of problems. If you buy a car that you really can't afford there could be repercussions from that decision that could affect your life for years and possibly decades.

More so than the home mortgage meltdown caused by too many people buying homes they couldn't afford, too many people are given car loans even though it is doubtful they will be able to make the payments over the entire term. Why do you think car repossession is a booming business, especially in this economic recession?

What happens if you do have your car repossessed? You do still have to drive your kids to school and get to work. What do you do now? Well, as you probably are well aware, once your vehicle is repossessed it becomes very difficult (nigh on impossible) to finance another car. You will either need to pull the cash together or have a friend or family member give one to you. The one thing you probably didn't think about, however, was the fact that your earlier repossession was going to make your auto insurance rates skyrocket.

What does your auto insurance have to do with your financial predicament? Just because you are bad with money doesn't mean you are a bad driver, does it? Well, all insurance companies use your credit rating as a means to calculate your premiums. So it can even be a problem if you don't pay off your credit cards on time each month. Ah, the sweet tyranny of credit.

As for your credit rating, only bankruptcy and home foreclosure rank as the two events that can affect your FICO score more than a car repossession. Seriously, your credit will be ruined for years. So don't just think that you can stop paying off your car and it will just be some quick economic fix to not have that monthly car payment.

In the long run you will lose a lot more money by allowing your finance lender to take back your vehicle. Auto insurance rates are high enough so why set yourself up for years of being looked upon as a high insurance risk? Just keep that in mind when you go new car shopping.

Also, if you think having your car repossessed doesn't make you seem irresponsible then you are wrong. If you are careless with your finances, it holds to reason that you are probably an irresponsible driver as well. That may sound harsh but it is true.