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.
Knowing auto repossession laws for your state is important, even if you are not in the position of possibly having to deal with repossession of your vehicle. It is reported the repossessions are up over 21%, and this number continues to grow every year as more and more consumers find it harder and harder to make monthly payments on mortgages, cars, student loans and general living expenses in the decreasing economy. Having a general knowledge of auto repossession laws will allow you to direct and support your friends and co-workers that may find themselves in this unfortunate situation.
Some key perspectives and concepts that consumers need to keep in mind with regard to auto repossession laws include:
• Each state has different laws on how repossessions can occur. Some states don't require that the creditor needs to let the borrower know that the car is going to be repossessed, while other states do require this notification.
• The auto repossession laws are designed to protect the lender and the borrower and there are specific rules that each must follow to fulfill their legal requirements. While many people feel that the laws only help the lender, they also protect the borrower from property damage or any types of illegal actions that could potentially be used to attempt to seize the vehicle.
• There are attorneys that specialize in helping consumers that are facing some type of repossession or have had their property repossessed. If someone is worried about repossession, talking to an attorney that works in the area of auto repossession laws can really provide detailed and specific information to help avoid repossession.
• Lenders can work within the auto repossession laws to avoid having to move to actually seizing the car. The more that the borrower or consumer is willing to work with the lender the more likely that some type of repayment plan can be developed. Borrowers that try to hide the vehicle or thwart repossession often have limited options when it comes to negotiating with the lender or car dealership.
• If your creditor or lender has previously accepted late payments on your loan he or she, under auto repossession laws, may not be able to repossess your vehicle. This is because they have previously accepted the change in the payment plan, basically invalidating the original contract. If you know that this has happened, be prepared to show the dates where late payments were accepted.
There are many little details that can occur during the repossession of a vehicle that may make the repossession open for a counter legal action. Talking to an attorney and understanding your rights as a consumer is the first step in ensuring you have been treated correctly through the process.
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