Even after your car is taken back by the lender, you might still encounter further financial responsibilities. Here’s what you need to understand about vehicle repossession and its implications.
Repossession Fees Explained
When your car is repossessed, the lender typically imposes a repossession fee to cover the costs of picking up your vehicle. It’s important to know that these fees must be considered “reasonable.” The definition of “reasonable” is usually determined by courts, considering factors such as the type of vehicle, the method of repossession, and the location where it was taken. You have the right to request a detailed breakdown of all repossession costs from your lender. Understanding these fees is the first step in navigating the repossession process.
Deficiency Balance and Surplus After Repossession
Following repossession, the lender will usually sell your car. This sale can lead to either a deficiency balance or a surplus. A deficiency balance occurs when the sale price of the vehicle is less than the outstanding loan amount plus repossession fees. In such cases, you are responsible for paying this difference. Conversely, if the car sells for more than what you owe, you are entitled to receive the surplus funds after all outstanding debts and fees are settled.
Lenders are legally obligated to sell the repossessed vehicle in a “commercially reasonable manner.” It’s crucial to be aware of the sale price, and if you believe the sale price was unreasonably low, you should consider seeking legal advice. For instance, if you still owe $10,000 on your car loan and it’s sold for $7,500, you would owe a deficiency of $2,500, in addition to repossession fees. Failure to pay this balance can lead the lender to employ a debt collector. On the other hand, if the same car was sold for $12,000, you would be entitled to receive the $2,000 surplus after covering your debt and fees.
It’s also important to remember that your state laws may provide additional rights and protections related to vehicle repossession. You can get further information from your state attorney general and state consumer protection office. Consulting with a private attorney or your local legal services office can also provide personalized guidance based on your specific situation.
