Repossession: what does it mean in Canadian car loans?

Repossession in Canadian car loans signifies the lender's legal right to seize a vehicle when a borrower defaults on their payment obligations as outlined in the loan agreement. This process is strictly governed by provincial consumer protection legislation, such as the Consumer Protection Act in Ontario or the Fair Trading Act in Alberta, which outline specific notice requirements and the lender's obligations regarding the sale of the repossessed asset. Once seized, the vehicle is typically sold, often at auction, with the proceeds applied against the outstanding loan balance, including principal, accrued interest, and significant additional costs like repossession fees, storage, and administrative charges, which can be substantial.

For borrowers, the implications are severe and long-lasting. Their credit score will suffer a significant, lasting blow, severely hindering their ability to obtain future credit for vehicles, mortgages, or other loans. Critically, if the sale proceeds do not cover the entire outstanding debt and all associated repossession costs, the borrower remains legally responsible for the "deficiency balance." Lenders can actively pursue this balance through collection agencies or legal action, potentially leading to wage garnishment or other enforcement measures. In the current 2025 economic landscape, marked by fluctuating interest rates and cost of living pressures, understanding the comprehensive disclosure of a loan's total cost, including all fees and potential default penalties, is vital. This deep understanding empowers consumers to make informed decisions, protecting them from the profound financial and credit repercussions of repossession.