Dear Driving for Dollars,
My daughter bought a car and made on-time payments for more than five years on a six-year car loan, and then it was repossessed. She just heard from a collection agency, and they want way more than what she owed. Since the car was almost paid off, can they really collect that much?
— Nancy

Dear Nancy,
When a car is repossessed, it is typically sold at a wholesale auction with the sale of the car, minus the repossession expenses, going to the lender. The lender then typically turns over the balance to a collection agency, but the amount collected is generally higher than the balance for a variety of reasons.

First, it’s quite likely the car was worth less than what was owed. In other words, your daughter may have been upside down in the car loan. In addition, there are usually numerous fees associated with the lender going through the repossession process such as attorney’s fees. Finally, your daughter’s car loan agreement may have had loan termination fees associated with it.

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