• Dec 29, 2008
Just because your car has been repossessed doesn't mean you don't still owe the bank money on it. If that vehicle gets sold at auction for less than the bank is owed on it, the difference is called the "deficiency." And as MSNBC informs, banks are increasingly suing to get that deficiency amount back, plus applicable attorney's fees.

With the increasing cost of vehicles, smaller down payments, and longer loan terms, it is easier than ever to get upside-down on your car loan. Furthermore, banks don't send a repossessed car to auction and work to get the highest price for it. They farm it out to third parties who need to move cars, not hold out for the absolute best deal. Take depressed auction prices into account as well, and it's not hard to end up with a deficiency in the tens of thousands of dollars.

Banks who win deficiency judgments can sometimes garnish wages and force the sale of property, but again, that's only in certain cases. The best ways to ward off a deficiency lawsuit are to get the shortest car loan term you can afford, which will help avoid getting upside-down in the first place. If you still can't manage, try and sell the car yourself, since you'll likely get a much better price than the bank will at auction (and you'll avoid a repo on your credit history). Failing that, bankruptcy should clear the debt as an unsecured loan.

[Source: MSNBC]


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  • 29 Comments
      • 6 Years Ago
      I have neither sympathy for the greedy banks that give the loans to dead beat losers, nor for the dead beat losers who get their wages garnished etc.

      For the past few years, auto sales have been artificially high with too many losers buying cars who should not have been buying cars. Now just like the housing bubble, it's all crashing down.
        • 6 Years Ago
        @dejal:
        You should read this instead of posting asshat comments about health insurance:
        http://health.usnews.com/articles/health/2007/09/16/insurance-coverage-caps-hit-cancer-patients-hard.html
        Our health insurance system is a joke with regards to affordability and coverage. I remember having to pay for my premiums myself for a while, and they cost me $550 per month even though I was a healthy 23 year old at the time. Even then the stupid insurance wouldn't even pay for the allergy medications that I needed without making me go through a ridiculous 3 drug certification step, and after that they wanted me to pay $25 deductibles every small refill. Extra hilarious since this meant that it would be cheaper to just go buy it on ebay, instead of having to go take drugs I knew wouldn't work (because I had tried them before) but would have to take anyways in sequence and also pay 3 different deductibles (for drugs I didn't need) to get coverage for the one drug I needed with an extra high deductible that meant the insurance company would pay almost nothing anyways.
        Funny because I was working in the medical field (and am now a medical student), but I can't even get decent medical care without jumping through a billion hoops to make sure the insurance companies don't screw me.
        • 6 Years Ago
        So, Pokeys brother had a Acura TL. Costs a bit more than the average car.

        But, it sounds like there may have been no health insurance if the brother and sister in law had to eat it all.

        Health insurance or car, Health insurance or car?

        Let's get the car.

        Good prioritys.
        • 6 Years Ago
        @dejal
        Dude, you have no idea what you're talking about. People with health insurance can still rack up plenty of bills and go bankrupt due to medical costs (and a fair bit of insurance company douchebaggery) and rather obviously you stop making money when you become disabled because of a stroke, and his brother's income is impacted too because it's not like he doesn't have to take care of his wife. Jeez.
        A lot of health insurance plans have a maximum payout which you can easily exceed with drastically bad health problems. For example, the health insurance that undergrad students get in New York state colleges only covers $50,000 of healthcare. Of course that's a rather drastic example since that's the lowest limit I've ever seen, but every insurance policy has a cap, and then there are fees with deductibles, etc.
        • 6 Years Ago
        Pokey, you know that's the exception rather than the rule.
        • 6 Years Ago
        The new laws put into effect not long ago regarding bankruptcy were drafted by the banks themselves, courtesy of the pro big business government in place. I believe even being gravely ill will not save you anymore. They (and their lawyers) will come for what they believe is owed to them.
        • 6 Years Ago
        I'm not one of these "losers" that you speak of. I save up and pay cash for my cars. I even paid cash for my home, but, I do take issue with your ignorant comment.

        My brother had his Acura TL reposessed a few years ago. Why? His wife had a massive stroke, which caused alot of financial problems for them. HUGE hospital bills, loss of her income, loss of time at work for him, etc.. Nobody saw it coming.

        By your idiotic logic, my brother is a loser? Nice.
      • 6 Years Ago
      So lets say a bank loaning money fails and ends up... ummm... being sold to the government for cheap and the government sells said bank for pennies when the bank has over 100 Billion in loans out. Can the people who had the loans sue the executives of the bank for failing to do their job?
      • 6 Years Ago
      Moral of the story:

      people: live within your means
      banks: don't give loans to people who don't live within their means


        • 6 Years Ago
        To be fair, kind of like venture capital, gambling with someone else's money and investing beyond their means. Right?
      • 6 Years Ago
      Any time you go get an auto loan or borrow any money from the bank, do you think the bank is taking out that amount in some secure 'reserve' or safe in the bank? NO!! The money NEVER EXISTED until you signed on the line and they punched a few keystrokes and Voila, you have your 'money' for your car loan or whatever. It's fractional-reserve banking. So technically the money you borrowed from the bank was never physically in existence. With fractional-reserve banking, this is how we have the national debt growing and growing and growing...
      • 6 Years Ago
      You don't have to borrow money to buy a car. They will take cash.

      The bank always wins the lawsuit because you owe them money and you signed and said that you'd pay it back. You lose! You'd be better off trying to deal with them then waiting until they repo and sue. Bankruptcy may protect you from the judgement, but it puts you into a bad situation that takes years to climb out of. You're better off finding a way to pay them off. Like maybe get a job or two.
        • 6 Years Ago
        @Jake...

        My grandfathers lessons have served me well.

        1. If you can't afford to pay cash for it... YOU CAN'T AFFORD IT! Make payments to yourself BEFORE you buy and the bank pays you. Make payments AFTER you buy and you pay the interest.

        2. Think about what you NEED and want from a car. Buy a car you can afford (per rule #1) that comes close to meeting these needs & wants. Impressing others with your car is NOT a need.
        • 6 Years Ago
        3. Chances are, you are not rich enough to buy cheap goods. There are more things in a car than "good deal".
        • 6 Years Ago
        Or taking the proactive approach and buying a car you can actually afford.
      • 6 Years Ago
      Considering the amount of voluntary and involuntary repos this country is currently seeing, I would imagine these lenders are pretty far backed up. I can imagine the process taking a good deal of time before it actually saw a courtroom. I have also been told that lately banks are more willing to take part in negotiation rather than repo and deficiency judgments because they have so many upside down delinquent assets. Has anyone heard different?
        • 6 Years Ago
        In addition to an alarmingly large amount of repos, finance companies and BHPH companies that generally depend on the selling dealer to resell their own repossessions are finding another problem: no more dealer! There are "recourse" companies that utilize the dealer as a co-signer. Basically, if the dealer wants to sell a car to this less-than-qualified buyer, he can...but he takes the risk. If the consumer defaults on the loan, the dealer is required to purchase the car back from the bank for WHAT IS OWED. This worked out great for these finance companies, until the dealers started closing their doors by the dozens. Now they have hundreds of units with no place to go EXCEPT the auction, where there will almost assuredly be a huge loss. This parallels the mortgage crisis in that any business model that is designed to encourage default (ie: foreclosure, repossession) may enjoy great success before an inevitable great fall.
      • 6 Years Ago
      tekd

      "@dejal:
      You should read this instead of posting asshat comments about health insurance:
      http://health.usnews.com/articles/health/2007/09/16/insurance-coverage-caps-hit-cancer-patients-hard.html
      Our health insurance system is a joke with regards to affordability and coverage. "

      Your not doing much better... is a joke compared to what? People in Canada and Europe are screwed over by their national systems left and right too. I know more about Canada and the UK because their info is on internet in English, so I can say that cancer patients are routinely denied expensive cancer drugs in the UK... the waits are terrible for tests and procedures (they put wait times on the internet, you can look them up) and its like pulling teeth to get to a specialist (they use a General Practitioner system like our HMOs... and the NHS even pays the same kind of asinine conflict of interest bonuses to GPs that do few referrals… that we have with some HMOs... so much for removing the profit motive cleaning things up)..

      At least most people here have the option of doing some research and finding a good insurance company. If you have one, your 'coverage' and the quality of care are the best...

      Half our problems come down to good service being expensive… and on average; we get better healthcare service than those with government care… If we want cheaper coverage, we’re going to get less coverage (like payout caps… or in government care with wait times and procedures and drugs not covered)… national or private… period…
      • 6 Years Ago
      This is not news. They have been suing people over these deficiencies for years.

        • 6 Years Ago
        Well it's news to me Pokey!
        Thanks .
      • 6 Years Ago
      I agree with some of you but not everyone has cash around to buy a car or a house. I think that is bogus. I know some make more money then others, but I think is far out. I am upside down on my car and I am trying to pay it off, but is hard considering that now the warranty will go out in a few months and already has been in the shop a few times for around 2.5k bills a pop. And yes I bought American, but never again, to get to this point. Yey Ford Focus.
        • 6 Years Ago
        They still sell used cars... even in the EU. Not as fun and flashy but still capable from point A to B.
      • 6 Years Ago
      It's a little tough to sell something you don't hold title to. You can't get title until you pay off the loan. The bank doesn't want your ride. They're in the money business. Unless they'll negotiate a lower payoff, there's no deal. Any attempt to sell on your part without clear title is called "fraud."
      Tell it to the judge.
      • 6 Years Ago
      I haven't bought a brand new car in years. I paid cash for my current car so I owe nothing.
      • 6 Years Ago
      "...Furthermore, banks don't send a repossessed car to auction and work to get the highest price for it. "

      This isn't always the case. Most large banks and captive finance companies have onsite representation at auctions across the country. They are there to make value added repairs and maximize the retentions on both repo and off-lease vehicles. The ones that "need to move cars" are usually the small credit unions and local banks.

      It's in the large bank's/finance companies best interest to maximize the retentions. It provides for better residuals and it lowers the deficiency which makes it easier to recoup a larger percentage. It's different if it's just some small bank or credit union who could care less about residuals. They're just going to dump it and sue, like you said. They have very few repo's a year compared to the large banks. Since they don't have as large of a portfolio, their exposure is less than the big guys.

      The auction industry isn't like it was 10-15 years ago. Most every used car on a dealer lot comes from an auction these days. They are multi-million dollar operations with everything from full service mechanic and body shops to interior repairs and accessories shops. The picture in the post looks like a small independent auction not one of the chains.

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