Car repossession can be a confusing and stressful experience. Many people are unaware of the financial implications that extend beyond simply losing their vehicle. Understanding what “repoed” means and what you are still responsible for is crucial if you’re facing this situation.
When your car is repossessed, it means your lender has taken back possession of your vehicle because you have failed to keep up with your loan payments or violated the terms of your loan agreement. Even after the lender repossesses your car, the financial relationship isn’t necessarily over, and you may still have outstanding obligations.
One of the first things you should know is that you might be charged repossession fees. Lenders are typically allowed to charge you for the costs associated with seizing your vehicle. These fees can cover expenses like towing and storage. However, these fees must be “reasonable,” a term that can be interpreted by the courts. Factors influencing what’s deemed reasonable include the type of vehicle, the method of repossession, and where the repossession occurred. Don’t hesitate to request a detailed breakdown of all repossession costs from your lender to ensure transparency.
Furthermore, the story doesn’t end with repossession and fees. After taking your car back, the lender will usually sell it. This sale price is crucial because it directly impacts what you might still owe. If the car is sold for less than the remaining balance on your loan plus the repossession expenses, you will be responsible for paying the “deficiency balance.” This is the difference between what you owed and what the car sold for, plus those repossession fees.
For example, imagine you still owe $10,000 on your car loan, and after repossession and associated fees, the lender sells it for $7,500. In this scenario, you would owe a deficiency balance of $2,500, in addition to the repossession costs. Failure to pay this balance can lead the lender to involve debt collectors to recover the amount.
Conversely, if your vehicle is sold for more than what you owe on the loan, after covering the costs of repossession and sale, you are actually entitled to the “surplus.” In the same example, if the car sold for $12,000, you would be entitled to receive the excess funds after your loan and fees are settled.
Lenders are legally obligated to sell your repossessed vehicle in a “commercially reasonable manner.” This means the sale process should be fair and designed to achieve the best possible price. If you suspect that the sale price was unreasonably low, it’s advisable to seek legal advice from an attorney to understand your rights and options.
It’s also important to remember that your state laws can provide additional protections and rights in repossession situations. You can find valuable information and resources by contacting your state attorney general or your state consumer protection office. Consulting with a private attorney or a local legal aid service can also provide personalized guidance based on your specific situation and location.
Understanding what car repossession entails is more than just acknowledging the loss of your vehicle. It involves understanding the potential ongoing financial responsibilities, including repossession fees, deficiency balances, and your rights throughout the process. Being informed is your first step in navigating this challenging situation.
