Your leasing company has the right to repossess your vehicle if you are even one day late on your lease payments. However, many companies wait longer before taking back the car. Before you break your lease, consider the negative impact a repossession will have on your credit score.
Impact
When your leased vehicle is repossessed, this damages your credit score. The missed payments appear on your report, as does a notation that the car was repossessed. Whether the repossession was voluntary or involuntary does not affect how it appears on your credit report. The exact amount of points your credit score will drop depends on what your credit looked like before the repossession. The higher your score was, the more you stand to lose. If your score was already very low, the lease repossession will not subtract as many points as if your score was very high.
Time Frame
The impact of the repossession begins to lessen right away. The longer it has been since the repossession, the less of an effect on your credit score. After seven years have passed since you were first delinquent on your lease payments, the repossession drops off your credit report.
Ripple Effects
In some cases, the impact of the repossession on your credit goes beyond the repossession itself. The leasing company can sue you to try to collect the difference between what you owed on your lease and the value of the vehicle when it was repossessed. If the leasing company succeeds, the court judgment appears on your credit report and causes additional damage to your score.
Alternatives
One option to repossession, if you have not yet missed a payment, is to call the leasing company and ask for a lower monthly payment for a short time while you get your finances back together. Another idea is to find somebody who wants to assume the remainder of your lease. Some websites allow you to advertise your lease and connect you with a potential buyer.
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