Car repossession is a serious situation that no car owner wants to face. It means you’ve fallen behind on your car payments, and the lender has taken back the vehicle. But what exactly happens after your car is repossessed? It’s important to understand the process and your financial responsibilities, even after you no longer have the car. This guide will walk you through what to expect when your car is repossessed.
Repossession Fees: Who Pays for the Tow?
One of the first things to understand is that you’re typically responsible for the costs associated with the repossession itself. Lenders will usually charge a fee to cover the expense of picking up your vehicle. However, there are rules in place to protect consumers. These repossession fees must be “reasonable.”
What exactly is considered “reasonable”? This isn’t always a fixed number and can be determined by a court if there’s a dispute. Factors that influence what’s reasonable include the type of car being repossessed (a standard sedan versus a large truck, for example), the method used to repossess it (peaceful pickup versus more complex situations), and the location of the repossession. Don’t hesitate to ask your lender for a detailed breakdown of all repossession costs. Knowing these costs upfront is your right and helps ensure transparency in the process.
Deficiency Balance or Surplus: The Aftermath of the Sale
After your car is repossessed, the lender will usually sell it. This sale is a crucial step in resolving the outstanding loan. Depending on the sale price, you could either owe more money (a deficiency balance) or be entitled to receive money back (a surplus).
Let’s break down the concept of a deficiency balance. Imagine you still owe $10,000 on your car loan when it’s repossessed. The lender then sells the car for $7,500. In this scenario, you are responsible for the deficiency, which is the difference between what you owed and the sale price. In this case, that’s $2,500 ($10,000 – $7,500), plus any outstanding repossession fees. If you fail to pay this deficiency balance, the lender has the right to hire a debt collector to pursue the debt.
On the flip side, it’s also possible to be in a surplus situation. Using another example, if your car is sold for $12,000 in the same scenario where you owed $10,000, you are entitled to the surplus. This means after the lender covers the outstanding loan amount and any permissible fees, the remaining money belongs to you.
It’s essential to know that lenders are legally obligated to sell your repossessed car in a “commercially reasonable manner.” This means the sale process must be fair and designed to get a reasonable market price for the vehicle. If you believe the sale price was unreasonably low, you have the right to question it and even consult with an attorney to explore your options.
Understanding Your Rights and Seeking Help
Car repossession laws and regulations can vary by state. It’s important to be aware of your rights in your specific location. A good starting point is to contact your state attorney general’s office or your state’s consumer protection agency. These offices can provide valuable information about your rights and resources available to you.
If you’re facing car repossession or dealing with the aftermath, seeking legal advice can be beneficial. Consider consulting with a private attorney or your local legal services office. They can provide guidance tailored to your situation and help you understand your rights and obligations throughout the repossession process. Understanding what happens when your car gets repo is the first step in navigating this challenging situation and protecting your financial well-being.
