auto

Car repossessed, but you still pay

Tara Baukus MelloQuestionDear 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

AnswerDear 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.

Ask the adviser

If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories. Follow her on Facebook here or on Twitter @SheDrives.
 

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

 

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
CAR & MONEY NEWSLETTER

Get cost-cutting tips for buying, selling and maintaining your wheels. Delivered monthly.

advertisement
Partner Center
advertisement

Blog

Tara Baukus Mello

FTC targets deceptive car ads

The FTC has taken action against two car dealership chains for deceptively advertising the costs of buying and leasing cars.  ... Read more


Connect with us