Even though you no longer possess your vehicle, you might still be liable for certain expenses. Here’s what you should understand regarding car repossession and its implications on your finances.
Understanding Car Repossession Costs
When your car is repossessed, the lender typically levies a charge to cover the retrieval process. It’s important to note that this repossession fee must be deemed reasonable.
The definition of “reasonable” is generally determined by courts and can vary depending on factors such as the vehicle type, the method of repossession, and the location of repossession. You have the right to request a detailed breakdown of all repossession costs from your lender to ensure transparency and accuracy.
Deficiency Balance and Surplus After Repossession
Following the repossession and subsequent sale of your vehicle, you could be held responsible for what is known as a “deficiency balance.” This is the difference between the outstanding loan amount, plus any repossession fees, and the vehicle’s sale price. Conversely, if the car sells for an amount exceeding your debt, you are entitled to receive the surplus funds.
Lenders are legally obligated to sell repossessed vehicles in a “commercially reasonable manner.” Knowing the sale price is crucial. If you believe the sale price obtained during repossession was unreasonably low, it is advisable to consult an attorney to understand your rights and options.
For instance, imagine you still owe $10,000 on your car loan, and after repossession, the lender sells it for $7,500. In this scenario, you would owe a deficiency of $2,500, in addition to any repossession-related fees. Failure to pay this deficiency balance can lead the lender to hire a debt collector to pursue the outstanding amount.
On the other hand, if in the same example, the vehicle was sold for $12,000, you would be entitled to receive the $2,000 surplus after the loan and fees are settled.
It’s also important to be aware that your state laws may provide additional rights and protections in repossession cases. You can find more information by contacting your state attorney general or your state consumer protection office . Seeking advice from a private attorney or your local legal services office can also provide personalized guidance based on your specific situation and jurisdiction.
