Car Repossession: Piercing the Veil of Secured Debt

Car and truck repossession, like sausage making and politics, certainly has its benefits, but the actual process can be extremely unfair and disturbing to watch. This article is going to lift the veil and let the average consumer take a look at what happens in the recovery. This article should help you decide what a foreclosure could do to you if you’re having trouble with your car payments and wondering what to do next.

deal gone wrong

It is well known that when you buy a new car, it depreciates substantially as soon as you drive it off the lot. In simple terms, that means the car is worth a lot less money right after you buy it than it was before you owned it. Depending on the size of your down payment, then, you could very well be, and most likely will be, “underwater” on the loan: the car is worth less than what you owe. For this reason, I prefer to buy used cars myself, but if you don’t, and you shop right, things will eventually take care of themselves. As long as you can continue to make the payments, the car will lose value more slowly than the note. But what if something comes up and you can’t make the payments? That’s when an unpleasant surprise awaits you.

After missing a payment, you will find that the car dealer has taken a great interest in you. They will call and write. And they will keep calling and writing until your payments are up to date. If you can’t pay, the dealership will eventually suggest that you return your car, or the idea might come to mind. If you do not return the car, the dealer may send “recovery men” to retrieve the car. You may go to your regular parking spot only to find that the car is missing. They won’t leave a note either.

But not long after, you’ll probably receive a notice that your car will be sold “at public auction” within a certain period of time. You may be told about a “right to redeem,” which at least in some states is your right to make the payments and repossess the car. Let’s assume for the present example that you can’t do that. Let’s say (to keep the numbers simple) that the purchase price of the car was $15,000 and you made a down payment plus other payments of $5,000. The car is now two years old and its “blue book value” has dropped to $8,000. So you think that after the company sells the car, you’ll owe about $2,000, right?

Recovery in the real world

Wrong! A month later, he finds out that the car was sold for $2500. He was charged $250 for the “salvage fee” and another $250 for “reconditioning.” So they “credited” your account with $2,000 against the $10,000 you owed, and now they want another $8,000 from you. They send you a letter describing everything they have done. You had a $200 worth of camera in your glove compartment and you ask about that. They tell you that it is “lost”.

That’s recovery in the real world.