Losing your car to repossession can be a stressful experience. Even after the vehicle is taken, your financial obligations related to it might not be over. It’s crucial to understand what to expect financially when your car is up for repo. Here’s a breakdown of the typical costs and procedures involved.
Repossession Fees You Might Encounter
When your lender repossesses your vehicle, they will usually charge a fee to cover the costs of picking it up and storing it. These repossession fees are not arbitrary; they must be “reasonable.” What constitutes “reasonable” can be assessed by a court, taking into account factors like the type of vehicle, the method of repossession (peaceful or otherwise), and the location where it was taken. Always request a detailed list of all repossession costs from your lender to understand exactly what you are being charged for.
Deficiency Balance or Surplus After Vehicle Sale
After repossession, the lender will typically sell your car. This sale has significant financial implications for you. If the sale price of the vehicle is less than the outstanding balance on your loan, plus the repossession fees, you will be responsible for paying the difference. This is known as a “deficiency balance.”
For instance, if you still owe $10,000 on your car loan, and after repossession and associated fees, the car is sold for $7,500, you would owe a deficiency of $2,500. Lenders are within their rights to pursue debt collection for this balance if it remains unpaid, sometimes involving debt collectors.
Conversely, if your repossessed car is sold for more than what you owe on the loan, after covering repossession fees and the loan balance, you are legally entitled to receive the surplus funds.
It’s important to note that the lender is obligated to sell the car in a “commercially reasonable manner.” If you believe the sale price obtained for your vehicle was unreasonably low, it is advisable to seek legal advice from an attorney to explore your options and ensure fair practice.
Understanding Your Rights and State Laws
Beyond these general guidelines, your specific rights and the lender’s obligations can be further defined by your state laws. State laws vary, and they can influence aspects of the repossession process, including the “reasonable” nature of fees and the procedures for vehicle sale. To gain a clearer understanding of your rights in your specific location, you can reach out to your state attorney general’s office or your state’s consumer protection office. Consulting with a private attorney or a local legal aid service can also provide valuable guidance tailored to your situation and state laws.
