What happens if I default on my car loan?

Defaulting on your car loan in Canada initiates a serious chain of events, primarily leading to the repossession of your vehicle and severe, long-lasting damage to your credit rating. Your lender will typically repossess the car, often without a court order, and sell it to recoup their losses. You will then be held responsible for any remaining balance, known as a deficiency, after the sale, along with all associated repossession, storage, and sale costs. The negative mark on your credit report can persist for up to 6-7 years, making it exceptionally challenging to secure future financing for a home, another vehicle, or even lines of credit, a situation compounded by the tighter lending conditions and higher interest rates prevalent in 2025. Provincial regulations are critical here: in British Columbia, the "seize or sue" rule generally means the lender must choose between repossessing the vehicle or suing you for the debt, but not both (barring specific circumstances like fraud). However, in most other provinces, including Ontario and Alberta, lenders can pursue both repossession and a deficiency judgment against you, potentially leading to wage garnishments or liens on other assets. This matters immensely because a default can significantly impede your financial progress for years, underscoring the importance of proactive communication with your lender at the first sign of financial difficulty to explore alternatives like payment deferrals or restructuring.