Car repossession is a serious issue that many car owners might face when they fall behind on their auto loan payments. Understanding what happens after your car is repoed is crucial to managing the financial consequences and knowing your rights. This guide from Car Repair Online will walk you through the essential steps and information you need to know if your car has been repossessed.
Understanding Repossession Costs and Fees
Even after your car is taken away, your financial obligations aren’t necessarily over. Lenders typically charge repossession fees to cover the cost of picking up and storing your vehicle. These fees must be reasonable, but what is considered “reasonable” can vary. Courts usually determine reasonableness based on factors like the type of vehicle, the repossession method, and the location. Always request a detailed list of all repossession costs from your lender to understand exactly what you’re being charged.
Deficiency Balance vs. Surplus After Car Repossession Sale
After repossession, the lender will usually sell your car. This sale has significant financial implications for you. If the sale price doesn’t cover the outstanding loan balance plus the repossession fees, you will be responsible for paying the “deficiency balance.” This is the difference between what you owed and what the car sold for, plus any repossession expenses.
For example, imagine you still owe $10,000 on your car loan, and after repossession, the lender sells it for $7,500. You would then owe a deficiency balance of $2,500, in addition to the repossession fees. If you fail to pay this balance, the lender may employ a debt collector to recover the amount.
Conversely, if your car sells for more than you owe, you are entitled to the surplus funds after the loan and fees are covered. It’s important to track the sale price to ensure you receive any surplus due to you.
The Importance of a Commercially Reasonable Sale
Lenders are legally obligated to sell your repossessed vehicle in a “commercially reasonable manner.” This means the sale process must be fair and designed to achieve a reasonable market price. If you believe the sale price was unreasonably low, you have the right to question it and should consider seeking legal advice from an attorney to explore your options.
Know Your Rights and State Laws
Your rights in a car repossession situation can vary depending on your state’s laws. It’s advisable to consult with your state attorney general or your state’s consumer protection office to understand your specific rights and any protections available to you. Seeking advice from a private attorney or a local legal services office can also provide personalized guidance based on your situation.
In conclusion, if your car is repoed, the key steps are to understand the repossession fees, track the vehicle’s sale and its price to determine if you owe a deficiency balance or are entitled to a surplus, ensure the sale was commercially reasonable, and know your rights under state law. Taking prompt action and seeking information can help you navigate the complexities of car repossession and protect your financial interests.
