In 2025, 2.2 million vehicles have already been repossessed across the U.S. What’s even more alarming is that distress is no longer confined to subprime segments.

Even prime and super-prime borrowers are falling behind as affordability erodes under record vehicle prices, surging insurance premiums and rising consumer debt.

The average new-car payment reached $749 per month in Q2 2025, while one in six borrowers now pays over $1,000 monthly.

Each repossession triggers a cascade of operational cost, compliance exposure and reputational damage.

So, how can lenders prevent repossessions in a way that's smarter, cheaper and with less regulatory risk?

Start before the tow truck is needed

Every repossession starts as a missed payment, but not every missed payment needs to end in a tow.

Focus on early-stage risk

The key is monitoring the 15–59 DPD segments, where borrower distress first appears. Use early-warning indicators like:

• Payment-history volatility and partial payments
• Changes in contact patterns (drop-off in call engagement)
• Regional stress factors (e.g., insurance spikes or layoffs)

Build behavioral segments

Not all delinquencies look alike. Segment consumers by:

• Intent: willing but unable vs. unwilling
• Liquidity timing: near pay cycle vs. post-pay cycle
• Vehicle usage: essential worker transport vs. discretionary use

Each segment needs a different treatment path. Reminders for one, hardship plans for another.

How to reducing repossession costs?

Repossession is inherently expensive. Lenders across auto ABS portfolios have reported higher all-in costs per repo.

Control the cost levers

• Assignment time: Every extra day between charge-off and assignment means higher depreciation.
• Vendor utilization: Consolidate with fewer, better-performing vendors to gain scale pricing.
• Storage management: Monitor average storage days, each additional day erodes vehicle value.

Use data to predict recovery value

AI-driven prediction models can estimate likely resale and deficiency outcomes before assignment, allowing lenders to make data-driven decisions on whether to repo, restructure, or defer.

Digitize the workflow

From digital lot releases to e-title transfers and automated borrower notifications, digitizing the repo lifecycle can shave days off turnaround time and hundreds of dollars per unit.

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Benchmarking vendor performance: What good looks like

For many lenders, repossession vendors are a blind spot, yet vendor performance determines both compliance and cost outcomes.

Build a vendor scorecard

Navigating repossession compliance requirement by state

Regulators have sharpened their focus on repossessions. The CFPB warns that improper repos can be deemed unfair, deceptive or abusive acts or practices (UDAAP) under federal law.

• Notice & redemption rights: Most states require advance notice before sale and provide a redemption window (typically 10–15 days). For example, the Washington Attorney General’s Office mandates lenders notify borrowers and allow redemption before resale.
• Breach of the peace: Agents cannot use force, enter locked property, or continue repossession when confronted.
• Fee disclosure: Consumers must receive a detailed breakdown of fees and the opportunity to redeem.
• Licensing: States like California and Illinois require repo agents to be licensed and bonded.
• Post-sale process: Surplus proceeds must be returned; deficiency balances must be calculated fairly and communicated promptly.

Maintain a live state-by-state repo compliance tracker inside your servicing platform. Tie it to vendor SLAs and audit logs.

Leverage AI agents to modernize the repossession call cycle

The repossession operations still heavily rely on manual phone calls to verify borrower intent, confirm surrender, or communicate redemption.

These are precisely the interactions where AI agents can deliver scale, speed and accuracy.

• Pre-repo outreach: Confirm borrower status and explore workout options.
• Voluntary surrender scheduling: Automate pickup coordination, vehicle condition verification, and consent capture.
• Skip-trace calls: Make simultaneous multi-attempt outreach and hand off confirmed contacts to live agents.
• Post-repo notifications: Provide compliant, consistent disclosure of sale details and deficiency information.

AI agents ensure every disclosure is spoken, every consent logged, every call recorded, while reducing compliance misses to zero.

They also free human collectors to handle complex negotiations while keeping after-hours and weekend coverage live.

Road ahead for auto lenders

Lenders who continue treating repossessions as an afterthought will find margins shrinking fast.

Those who modernize by integrating data, AI and compliance automation, will come out stronger.

In an environment where every dollar and every disclosure counts, automation is the best bet you can make.

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