Losing your car to repossession is a significant setback, but the financial implications might extend beyond just losing your vehicle. Even after your car is repossessed, you might still be responsible for certain costs associated with the process. Understanding these costs and your rights is crucial in navigating the aftermath of a car repossession.
Understanding Repossession Fees
When your lender repossesses your car, they typically incur costs to pick it up and store it. These costs are usually passed on to you as repossession fees. While lenders are entitled to recover these expenses, the fees charged must be “reasonable.” The definition of “reasonable” isn’t fixed and can be interpreted by courts depending on specifics like the type of vehicle, the repossession method, 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 identify any potentially unreasonable charges.
Deficiency Balance and Surplus After Car Repossession
After repossession, the lender will usually sell your car to recover the outstanding loan amount. However, the sale price might not always cover the full balance you owe, including the repossession fees. If the sale price is less than what you owe, you will be responsible for paying the “deficiency balance,” which is the difference. For instance, if you still owe $10,000 on your car loan and it sells for $7,500 after repossession, you would owe a deficiency balance of $2,500, in addition to any repossession fees. Failure to pay this balance can lead the lender to hire a debt collector to pursue the debt.
Conversely, if your car sells for more than the outstanding loan amount and repossession fees, you are legally entitled to receive the surplus. Lenders are obligated to sell the repossessed vehicle in a “commercially reasonable manner.” If you believe the sale price was unreasonably low, you have the option to consult with an attorney to explore your legal options. Furthermore, state laws can provide additional rights and protections in repossession situations. You can seek information from your state attorney general or consumer protection office, or consult with a local legal services office to understand your rights and responsibilities after your car has been repossessed.
