Car repossession is a situation no car owner wants to face, but understanding the process and your financial obligations is crucial if you’re behind on your auto loan payments. Even after your lender repossesses your vehicle, your financial responsibility isn’t necessarily over. It’s important to understand what you still might owe and what your rights are when they repo your car.
Understanding Repossession Fees
When your lender repossesses your car, they don’t just take the vehicle. There are costs associated with the repossession process itself, and these costs are often passed on to you. These are known as repossession fees, and they cover the lender’s expenses for picking up and storing your vehicle.
What exactly constitutes “reasonable” repossession fees can be a point of contention. The definition of reasonable isn’t fixed; it’s often determined by courts and can vary depending on several factors. These factors include the type of vehicle being repossessed – a standard sedan versus a large truck, for instance – the specific method used for repossession, and the location from where the vehicle was taken. You have the right to request a detailed breakdown of all repossession costs from your lender to ensure transparency and to check for any unwarranted charges.
Deficiency Balance and Surplus After Vehicle Repossession
After repossession, the lender will typically sell your car, often through an auction. This sale is intended to recoup some of the money you still owe on the loan. However, the sale price rarely covers the entire outstanding loan amount, especially when you factor in repossession fees and the remaining principal.
This is where the concepts of “deficiency balance” and “surplus” come into play. If the sale price of your repossessed vehicle is less than the total amount you owe on the loan (including repossession fees), you are responsible for paying the difference. This difference is called the deficiency balance.
For example, imagine you still owe $10,000 on your car loan, and the lender sells the repossessed vehicle for $7,500. In this scenario, you would owe a deficiency balance of $2,500, in addition to any repossession fees that were incurred. Lenders have the right to pursue debt collection for this deficiency balance, and they may hire a debt collector to recover the funds.
Conversely, in a less common scenario, if your car sells 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. Using the previous example, if the car sold for $12,000, you would be entitled to the $2,000 surplus after the loan and fees are covered.
It’s crucial to be aware 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 achieve a reasonable market price for the vehicle. If you believe that the sale price obtained for your repossessed car was unreasonably low, you have the right to contest it and should consider seeking legal advice.
Your Rights and Further Recourse
State laws provide additional protections and rights concerning car repossession. These laws can vary, so it’s beneficial to understand the specific regulations in your state. Resources like your state attorney general’s office and state consumer protection agencies are valuable sources of information regarding your rights and car repossession procedures in your jurisdiction. They can provide guidance on what is considered a commercially reasonable sale and what your options are if you believe your lender has acted unfairly.
Furthermore, consulting with an attorney specializing in consumer rights or debt collection can provide personalized advice and help you understand your legal position when they repo your car. Legal aid services in your local area can also offer assistance if you are unable to afford private legal counsel. Knowing your rights and seeking appropriate help is vital when navigating the complexities of car repossession and its financial aftermath.
