I am discouraged by how often someone comes to my office asking me to help them solve a problem they are having with a bank or credit union regarding a voluntary repossession of a vehicle. For some reason people believe that if they simply give a car back to the lender they are all done with it.
Here’s what actually happens. The lender is entitled to spend as much money as needed to sell the vehicle. So first, most banks send the car to a repair shop and fix any issues and then put it on their lot to sell it. Then if it doesn’t sell fast enough, the vehicle is taken to a “closed” dealer auction and sold for less than wholesale price. All the costs of repairs, auction commissions, hauling the vehicle to the auction and any other costs are tallied up and added to the amount you owe the bank.
At this point the bank, lender or credit union has a loss. Now you not only have to pay for the lender’s costs in recovering the vehicle, fixing the vehicle and selling the vehicle, you find that they sold your vehicle for sometimes thousands of dollars less then it was worth, and you have to make up the difference. Now you have no car and are still making payments. If you had sold the vehicle yourself you could have gotten much more for it than the wholesale auction your lender used. Unfortunately, the end result for a lot of folks is often bankruptcy.
If given a chance, before the return of the vehicle, I can occasionally work a “deal” with a lender to take back a vehicle and get them to agree to forego any deficiency. Deficiency is the legal term used for the amount you owe the bank because by returning the vehicle and letting them sell it for half price, you still owe on your original note.
Also, never trust a bank verbally telling you anything. And especially don’t trust them if they say you will owe nothing if you bring the car back to them. If a lender’s statement is not in writing, it didn’t happen. This exact situation happened in my office today. The credit union actually encouraged the debtor to bring the car back and said, on the phone, he wouldn’t owe anything. Now that the car is sold and the bank wants over $8,000! And surprise, surprise, nobody at the bank remembers saying he wouldn’t owe anything if he returned the car.
If you are late on payments on your car, boat, motorcycle, whatever, NEVER voluntarily return it to the bank and wait to see what the damages are. Usually, the damages are stunning and most times, completely ridiculous. Speak with me first so we can review your options and negotiate with your lender. If we can’t come to an agreement with your bank, we can look at other options. Doing this could save you thousands of dollars when you need it most.