Sheet FCL · Item 06 of 06Repossession
Under the National Credit Code, a lender with a car as security generally cannot take it until the borrower is in default, has been given a default notice allowing at least 30 days to fix it, and has not fixed it in that time. Where the amount still owing is less than 25% of the credit or $10,000, whichever is lower, the lender needs a court’s consent. After taking the car, the lender must send a notice within 14 days and must not sell the car within 21 days of that notice, and any shortfall after the sale can still be owed.
General information, not legal advice. The Code allows exceptions to several of these steps, for example where a lender reasonably believes the car is being removed or disposed of without its permission. Moneysmart’s page on repossessed cars or goods is ASIC’s plain-language guide, and it points to free legal advice from community legal centres and Legal Aid agencies.
It must carry a prominent heading saying it is a default notice, and state the default, what fixes it, the period to fix it (at least 30 days), and the date after which enforcement and repossession may begin. It must also say that repossession and sale may not end the borrower’s liability, and give prescribed information about hardship notices, postponement requests and the AFCA scheme. Moneysmart’s advice: “do not ignore it. Talk to your lender or get free legal advice immediately.”
If the default is fixed within the period, the contract is reinstated. A borrower can also ask the lender, orally or in writing, to negotiate a postponement. The lender must reply in writing within 21 days, giving reasons and AFCA’s details if it will not negotiate, and generally must not begin enforcement until 14 days after that reply. A hardship notice can have a similar 14-day effect, subject to conditions in the Code. Moneysmart’s financial hardship page explains how to ask.
A lender must not take the car without the court’s consent if the amount currently owing is less than 25% of the credit provided or $10,000, whichever is less. The rule does not apply to continuing credit contracts, or where the lender reasonably believes the car has been, or is about to be, removed or disposed of without permission, or that urgent action is needed to protect it.
A lender or its agent must not enter residential premises to take the car unless a court has authorised it, or the occupier has consented in writing after being told in writing about this rule. Moneysmart puts it this way: a car cannot be repossessed while parked on the borrower’s property, including the garage and yard, but if it is parked on the street, it can be towed away.
The lender must give a written notice with the car’s estimated value, the enforcement expenses so far and the rate at which they are accruing, and a statement of the borrower’s rights and obligations in the prescribed form.
The lender must not dispose of the car within 21 days after that notice unless a court authorises it. It must return the car if, within that time, the arrears and its reasonable enforcement expenses are paid (and there has been no further default of the same kind), or the contract is paid out. In the same 21 days the borrower may nominate in writing a buyer prepared to pay the estimated value, or more where the lender holds a higher written offer, and the lender must offer the car to that person at that price.
The lender must sell as soon as reasonably practicable, to a nominated buyer or otherwise for the best price reasonably obtainable, and then give a written notice of the gross amount, the net proceeds, the amount needed to pay out the contract and any further recovery action proposed. A court can order the lender to credit more than the net proceeds if it is not satisfied the car was sold that way, and enforcement expenses are limited to those reasonably incurred.
The Code also lets a borrower give the lender written notice of an intention to return the car. It can be returned to the lender’s place of business during business hours within 7 days, or as agreed. The lender must then give a written notice of the car’s estimated value within 14 days, the borrower has 21 days to nominate a buyer at that value, or at a higher written offer the lender holds, and the lender must otherwise sell for the best price reasonably obtainable.
Moneysmart says this voluntary surrender can help avoid some of the repossession costs, and that the borrower remains responsible for the remaining balance if the sale price is less than the loan. In its 2026 review, ASIC recommended that some car lenders improve how they communicate about voluntary surrender and time-to-sell arrangements.
Moneysmart says the cost of repossessing and selling a car will generally be added to the debt already owed, and can be expensive. ASIC’s 2026 review of car lending found that in nearly 90% of over 250 repossessions reported by four lenders, the consumer still owed over half the original loan amount after the car was taken.
A borrower takes a $32,000 secured loan, including lender fees, to buy a $30,000 new car, and falls behind a year later after losing a job. With $24,000 still owing and $1,500 in repossession and sale costs, the bank re-sells the now-used car for $20,000, leaving $5,500 to pay. Moneysmart notes this also affects the borrower’s credit score.
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