Car repossession can be a stressful experience. You might be facing repossession if you’ve fallen behind on your car payments. A common question many people have is: what happens if my car gets repoed? Even after your vehicle is taken away, your financial obligations related to the car loan might not be over. Here’s what you need to understand about the process and your responsibilities after your car is repossessed.
Understanding Repossession Fees
When your lender repossesses your car, they will typically charge fees to cover the cost of picking up and storing the vehicle. These are known as repossession fees. However, it’s important to know that these fees must be “reasonable.” The definition of “reasonable” isn’t fixed and can be interpreted by courts based on various factors. These factors often include the type of vehicle being repossessed, the specific method used for repossession (e.g., towing), and the location where the car was taken from. You have the right to request a detailed breakdown of all repossession costs from your lender to ensure transparency and identify any potentially unreasonable charges.
Deficiency Balance and Surplus Explained
After repossession, the lender will usually sell your car, often through an auction. This sale is intended to recover some of the outstanding loan amount. However, the sale price might not always cover the full amount you still owe on the loan, plus the repossession fees. If the sale price is less than what you owe, you may be responsible for paying the difference. This difference is called a “deficiency balance.”
Conversely, if your car is sold for more than the outstanding loan amount and repossession costs, you are legally entitled to receive the “surplus,” or the excess money.
To illustrate, imagine you still owe $10,000 on your car loan, and repossession fees amount to $500. If the lender sells the car for $7,500, you would owe a deficiency balance of $3,000 ($10,000 + $500 – $7,500 = $3,000). The lender can then pursue debt collection for this amount. On the other hand, if the car was sold for $12,000 in the same scenario, you would be entitled to a surplus of $1,500 ($12,000 – $10,000 – $500 = $1,500).
It’s crucial to be aware that lenders are legally obligated to sell the repossessed vehicle in a “commercially reasonable manner.” If you believe the sale price was unreasonably low, you should consider seeking legal advice from an attorney to explore your options.
Know Your Rights and State Laws
Your state laws provide further protections and rights regarding car repossession. These laws can vary by state, so it’s important to understand the specific regulations in your area. For instance, state laws may dictate the notices lenders must provide you before and after repossession, as well as rules surrounding the sale of the vehicle. To learn more about your rights, you can reach out to your state attorney general’s office or your state consumer protection agency. Consulting with a private attorney or a local legal aid service can also provide personalized guidance based on your situation and local laws.
Disclaimer: As a content creator for Car Repair Online, I am providing information for educational purposes only. This is not legal or financial advice. If you are facing car repossession, it is recommended to seek advice from a legal or financial professional.
