I just saw that hilarious 80’s flick “Repo Man”, and was wondering: car reposession is a huge business in the USA. In a recession, people fall behind on their loan payments, and so the bank/loan company hires a firm to take back the car.
Now, assumimng you have some equity in the car (say you have paid off half the loan), can the bank just sell the car for what you owe? If so, you lose your equity. Conversely, if you have paid very littel, does the reposession absolve you from further payment?
In any case, do you have any claim against the bank, for any equity in the car that you have?
Normally, in the US, in a reposession scenario, if the collateral is sold for more than the loan amount, then the owner will receive the amount of the proceeds, less the loan amount + any expenses (administrative costs to reposess and sell the collateral).
But generally, unless the buyer put a large amount as a downpayment and financed the loan amount over a shorter period, there usually isn’t a lot of equity in a financed car. And those that put large downpayments down and finance over shorter periods of time, typically aren’t the people that get behind on their car payments.
Yes, unless the depreciation on the vehicle during the time you possessed it results in it being worth less what the creditor can sell it for. In that case you may or may not owe them some more money.
Not in my state. After the redemption period expires, the car is sold at auction usually for less than the amount owed, and then the finance company sues for the balance. Assuming they win the lawsuit, they get what is called a “deficiency judgment” which is enforceable in the normal manner…or dischargeable in bankruptcy.
I went through this. It was horrible.
Note: I don’t need a lecture about personal responsibility. It was a long time ago, and there were Circumstances I’d Rather Avoid Discussing.
Anyway.
To get your car back, the bank will want full payment of the loan. When you can’t do that, they sell your car at auction, then you owe the deficit. If you’re lucky, they may settle for less, but only if you pay the total deficit up front–and if you had the money up front, you probably wouldn’t have defaulted anyway. So you end up making payments on a car you no longer have.
What I learned about my state (Indiana): It can take a really long time to get your stuff back that you left in the car. It took a month or more to get back my baby seats and textbooks. The tow company was actually irritated with me because my car was messy, too, and they had to go to all this extra trouble.
If your car is blocked in by other cars, a fence, a garage, etc, they can’t tow it–they aren’t allowed to move anything to get to your car, go inside fenced property, etc. But they’ll keep an eye out and eventually they’ll get it. (I wasn’t trying to avoid it, I just found this out later.)
You get zero warning, of course–because if they warned you, you’d block it in.
That’s all I ever want to know about repo!
The first exorcism didn’t work?
Never been through this, but I’ve always wondered; Does the bank ever just call you and ask you to return the car? Or does it go from X number of missed payments directly to a tow truck?
But does the bank have any incentive at all to try to get anything above what they’re owed?
IOW, suppose you owe $5K, and the bank could get $6K if they tried to get the best price, but if they just sold it for $5K they’d have a much easier time selling it. Is their anything to stop them from just doing this and blowing your equity?
[The same question would apply to real estate foreclosures as well.]
In the case of cars anyways, basically the bank will send the car to auction and it’ll sell for what it sells for. If the car could conceivably fetch more than the balance of the loan in a private sale, but not in an auction, that’s just too bad.
This was very much an issue in the film mentioned in the OP. 
A (now ex-) boyfriend of mine had his car repossessed. The bank gave him the option of paying off the loan in full. He did that, plus towing and impound fees, and got the car back. IIRC it was about $6,000.
I co-signed on my daughter’s car. Because she’s an idiot she turned a not having proof of insurance into losing her license and the repo of her car. Then a magical letter from Ford Credit explained how I could get it back by paying the impound fees and back payments. I needed a car and, vi-o-la, I had one!
“Oh, you have my car? Maybe you can pay me for my share.”
“Sorry, but you gave that up when you let it get repoed. It’s mine now. Your name is just also on the title.”
I have no direct experience with having a car repoed, but according to friends who have; You get repeated notices explaining that you have missed payments and that you haven’t made/made good on alternative payment offers. I’ve also been friends with people who repoed cars.
Banks don’t WANT to Repo your property, they just want the money owed to them. Repoing involves paying somebody a percentage to repo the car, and then hope they make enough at auction to break even. Or that you’ll get caught up on your payments and pay the repo fees.
It doesn’t go from x number of missed (or short) payments to the tow. It goes from x numbers of missed payments, and BS or no contact, to a tow. A bank would rather charge you late fees then have to auction the car. Among most reputable lenders, a repo is the LAST resort.
Peace - DESK
I went through it twice. Ditto the bit about personal responsibility and Circumstances I’d Rather Avoid Discussing, okay? I’m a lot better about keeping up with my bills now.
Okay, now to share my experience. The two events were 5 years apart, with different cars, different finance companies, and different tow lots. And VERY different results.
The first time, I got a phone call at 5 in the morning. The tow operator had already put the car up on the lift, and was calling us to let us know he was taking it, and offered to let us come out to the car and remove stuff before he drove it away. I thought that was pretty nice of him, and so I didn’t take too much out, especially because he assured me that if I call the finance company at 9 AM and catch up with my payments, getting it back the same day would be no problem. I believed him, because that was always my experience when the police towed my car for not getting the registration renewed. (No lectures, please?) To make a long story short, by 10 AM I had caught up to date on my payments to the finance company (plus a couple of hundred in towing fees), but it took two weeks to get the car back. And when I did get it back, there was lots of stuff missing from the glove compartment, back seat, etc etc. It took 3 months until I got it back, and even then, it was most but not all of it.
The second time the tow operator called also, but it was a Sunday afternoon when I was away with the other car. I didn’t even know the car was gone until I tried to find it Monday morning. If I had checked my phone messages on Sunday night, I would have found out about it, but then I wouldn’t have slept so well. Anyway, in this case also, I paid the finance company what they wanted, and by around 1 PM I was at the lot where they were ready to give me the car back. But before that, their rules were that I had to check the car to make sure there was nothing missing, and no new dents, and I had to sign off on that. And indeed, it seemed to be in the exact same condition as when I left it. And I drove it away very gratefully. I’ve often wondered if laws got passed during the 5-year interim to make these guys behave better, or whether I was just lucky that the second bunch were honorable human beings.
I appreciate that you included the “probably”. In my case, it is true that I was lucky enough to be able to pay the deficit the same day. But that does not mean that the money was just sitting around and I was being a jerk for not paying my car loan. Rather, I happened to get paid a couple of days before, and was in the middle of playing the game of “Well, I’m 3 months behind on this, and two months behind on that, and I owe an awful lot to the other guy, so who do I pay this week?” And when you are in that kind of rut and making those kinds of choices, having your electricity turned off or getting your car repossessed can do wonders for changing which bill gets higher priority.
Banks have a fiduciary duty to make a reasonable effort to get as much as possible. They also are required to hold a public auction giving anyone (including the bank) the opportunity to bid.
There’s a really trashy show on the Crime Channel here called something like “Repo Man”, in the USA. It features extremely large men seemingly of Polynesian extract getting these vehicles. Their sisters or whatever who go with them are even larger and really scarey.
They could have my car even though nothing is owed on it. They would just have to ask.
Here is my experience:
I did a voluntary repossesion, where I knew I couldn’t make the payments due to divorce and job loss. I returned the vehicle to the location specified by my lender.
The lender auctioned the vehicle for $7,000 less than what I owed on it. They tried to collect it for a while, then they wrote it off.
The lender then filed a 1099 with the IRS, reporting the $7000 as income to me.
The IRS came after me for taxes on the $7000, something like $1200.
At the time, I was living in Alaska, and received a yearly dividend from the Alaska Permanent Fund, so the IRS garnished my dividend for the $1200. They could have easily gone after bank accounts or any other assets or income subject to garnishment under IRS collection law.
One repo in my lifetime, and it was one of the most evil things ever done to me.
I’d been out of work for some time and had contacted the lienholder about it. I was making partial payments to show that I wasn’t a deadbeat, but somebody screwed up and submitted me for repoing. The repo guy got my resume off a job search service, called me and pretended he had a job offer. They sent me to a bogus address up on the 4th floor of an office building and when I came back down, I could see the drag marks where they had hooked me up and pulled my car out.
I was devastated. I called the lienholder and they were very apologetic, waived the towing fee, etc. and I had the car back within 24 hours. But my stuff was in the repo office and when I went in, I recognized the voice that had called me on the phone. I lit into his sorry ass like a whirlwind, to the point where they were threatening to call the cops on me. And when I finally got a job, I had to drive past that place and I used to amuse myself fantasizing on how I could blow them up in the middle of the night.
Bastards.