What Happens After An Automobile Repossession

A voluntary automobile repossession occurs when a borrower takes their car back to the lender, which is usually the dealership, because they are no longer able to make the payments on the loan or financing for the vehicle. An involuntary automobile repossession can occur at any time in the loan, however it is most common in the first two years of the longer term loans after there has been some change in the borrowers financial status.

One a car, truck or any type of vehicle is submitted to a dealership or a lender under an automobile repossession there are several things that can occur, depending on how the dealership or lender elects to move forward. In many cases the lender will put the car up for auction at a specialized auction that deals in selling repossessed cars. These auctions are open to the public as well as other dealerships and car salespeople. The dealership or lender will typically place a reasonable reserve bid on the vehicle as they are required to ensure that you are provided with a fair market price for the vehicle. The condition of the car, mileage and any damage or other mechanical problems of the vehicle can all factor in on what would be considered a reasonable market price. The other option in an automobile repossession is for the dealer to value the car and sell it on their own lot as a used vehicle. Again, they must ensure that they are selling it for fair market value when using this method.

Once the car from the an automobile repossession is sold, the dealership or lender then takes the purchase price and deducts any fees they have incurred in the sale of the car. This may include legal and sales fees or any other financing charges. The balance is then applied against the outstanding loan and if the balance is then zero, you are free and clear of any further debt.

Unfortunately in an automobile repossession this is rarely the case and there will typically be a negative balance still owing on the loan. This is based on three key factors and these are 1) cars depreciate the most in the first year, 2) used cars, even in great shape, are harder to sell for high prices and 3) additional fees can be costly. The original vehicle owner will then be provided with the notice of the outstanding deficiency balance and will be required to pay this amount to avoid further legal proceedings. Default on this deficiency payment may include garnishing wages through a court order or other sanctions through the court process, expenses that will be added to the costs of the outstanding balance.