Discovering that your car has been repossessed can be a stressful and confusing experience. It’s important to understand that repossession doesn’t necessarily end your financial obligations related to the vehicle. Even after the car is taken, you might still be responsible for certain costs. This guide from Car Repair Online will walk you through what you need to know and what steps you should take if your car has been repo’d.
Understanding Repossession Fees
When your lender repossesses your vehicle, they typically incur costs for picking it up and storing it. These repossession fees are usually passed on to you, the borrower. While lenders are entitled to recover these costs, they must be reasonable.
What is considered “reasonable” isn’t strictly defined and can be evaluated by a court if disputes arise. Factors that influence reasonableness include the type of vehicle, the method of repossession (peaceful or requiring more effort), and the distance the vehicle had to be transported. Don’t hesitate to request a detailed breakdown of all repossession costs from your lender to ensure transparency and accuracy.
Deficiency Balance and Surplus After Car Repossession
After repossession, the lender will typically sell your vehicle, often through auction. The proceeds from this sale are used to offset your outstanding loan balance. However, the sale price might not cover the full amount you still owe, including the loan principal, interest, and repossession fees.
If the sale price is less than what you owe, you are responsible for paying the “deficiency balance” – the difference between your debt and the sale price, plus repossession expenses. For example, if you owe $10,000 and the car sells for $7,500, the deficiency balance is $2,500, in addition to any repossession fees. Failure to pay this deficiency can lead the lender to involve debt collectors and further impact your credit score.
Conversely, if your vehicle sells for more than what you owe, after covering all fees and the loan balance, you are legally entitled to the “surplus” – the excess funds from the sale.
It’s crucial to understand that lenders are obligated to sell the repossessed car in a “commercially reasonable manner.” This means the sale process should be fair and designed to achieve a reasonable market price. If you suspect the sale was not commercially reasonable and the sale price was unfairly low, it’s advisable to consult with an attorney to understand your rights and options.
Actions to Take After Repossession
Knowing what to do after your car is repossessed can empower you to manage the situation effectively:
- Contact Your Lender: Immediately reach out to your lender to understand the exact amount you owe, including repossession fees and the deficiency balance. Request a detailed account of all charges.
- Review Your Loan Agreement: Re-examine your original car loan agreement. It outlines the terms of repossession, your rights, and the lender’s obligations. Pay close attention to clauses related to default, repossession, and sale of the vehicle.
- Understand the Sale Process: Ask your lender for information about how and when your car will be sold. Inquire about your right to be notified of the sale and potentially attend public auctions if applicable in your state.
- Seek Legal Advice if Necessary: If you believe the repossession process was mishandled, fees are unreasonable, or the sale was not commercially reasonable, consider consulting with an attorney. You can find legal aid resources through your state attorney general or local legal services office.
Navigating car repossession can be challenging, but understanding your rights and responsibilities is the first step towards recovery. By taking prompt action and seeking clarification from your lender, you can manage the financial aftermath and work towards resolving the outstanding debt.
