My leased car was repossessed and then sold at auction for $6,500. I was never notified of when or where the auction was to take place. My remaining balance on the lease was $9,035.82 including all fees. Shouldn’t the net proceeds from the auction — $6,500 — get subtracted from my remaining balance, leaving me responsible for $2,535.82? The leasing company says I am responsible for the whole $9,035 because I did not own the car, and that it was a lease, instead of a loan. Is this true?

Leasing and financing are different beasts. Both provide a means for driving a vehicle that you couldn’t afford to pay cash for up front. Financing is buying the vehicle on time with the borrower eventually receiving title to the vehicle.

Leasing, on the other hand, is renting or paying for the use of the vehicle over the length of the contract. The monthly payments are computed by subtracting from the sale price the “residual value” of the car — the value that it is expected to be worth when the lease is over — divided by the number of payments. It’s like renting an apartment — just because you pay rent doesn’t mean you own any portion or share of the apartment. So, you had no equity in that vehicle and consequently no claim on the auction proceeds.

The $9,035 is most likely the total of all the payments on the lease you still owed, together with fees and penalties. Unfortunately if the leasing company wants to play hard ball, it has a right to still actively collect the balance left on your contract. One possible solution is to offer a settlement.

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