A repo occurs when a consumer–who finances a purchase–cannot meet the payment obligation of their loan. After defaulting (rules concerning number of missed payments and defaults are rendered by the creditor), the creditor will send a repo-man to repossess the property. So, for instance, if you finance a car and fail to make payments, a repo man–after say 3 months of missed payments–will come to your house and take the car. The repo man will drive the car back to the dealership and you will be stripped of all ownership rights. Moreover, your credit rating will take a severe hit due to your inability to pay meet the payment obligations of the loan.
The repo agent, in this situation, will typically use a tow truck to repo the car. The vehicle owner
must be notified of the repossession; the agent will find the car and
check the VIN to make sure they are repossessing the correct vehicle.
A repodoes not necessary satisfy the loan obligation; if the
repossessing party sells the asset for an appropriate amount, and if
that amount is less than the loan amount, the debtor may be liable to
pay the remaining balance.
Contracts that authorize repossession will also typically specify additional fines that the consumer must pay to the seller that are mandatory to cover the seller’s cost of the repossession and of the depreciated value associated with the object, as the seller is now in ownership of the “used” asset.
If a lender finds itself in need of repo, while the borrower attempts to avoid this situation, the dealer may contract the work of a repossession agent. A number of properties or assets may be repossessed, but most repossession agencies will focus solely on auto repossession.