What happens when a car is repossessed that has negative equity on it?
Sunday, January 30th, 2011 at
4:18 am
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Mrs. Dwight asked:
Lets say a person couldn’t make payments on a car anymore, the car is only worth $20,000 but they owe the bank $35,000. If they were to have their car repossessed, what would happen? Would they have to come up with the extra $15,000 in cash or would it just go away? Basically, what happens in car repossession when there is negative equity involved?
Minnie
Lets say a person couldn’t make payments on a car anymore, the car is only worth $20,000 but they owe the bank $35,000. If they were to have their car repossessed, what would happen? Would they have to come up with the extra $15,000 in cash or would it just go away? Basically, what happens in car repossession when there is negative equity involved?
Minnie
Filed under: Personal Finance
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Rebecca
you still have to pay the $15000 plus all court costs
Victoria
On any car repo, they sell the car at wholesale. Add the $35,000 you owe, plus interest & penalties, plus repo company charges, then subtract the wholesale value (maybe $10,000). You have to come up with the difference. And they will come after you – garnish wages, put a lien on your house, whatever it takes.
It is a whole lot cheaper to come up with the $35,000 and pay off the car loan!
BTW, unless you put down at least 25% cash when you bought the car, you are underwater from the moment you drive the car off the lot through at least half of the loan term. So on a 48 month loan, you will be underwater for at least 2 years. This is nothing new. Most car buyers are underwater for at least half of their loan term because most of them buy too expensive a car and put too little down – just like you.
Dora
When you get a loan to buy a car the loan is for a dollar amount that is secured by the car. If you don’t make the payments and the car is repossessed the bank sells the car, deduct that amount from what is still due on the loan and you still OWE the rest. So if you bought the car for $35,000, made payments of $5000 +interest, so you still owed $30,000 when the car was repossessed, then the bank sold the car for $20000, you would still owe $10,000.
Tara
Wouldn’t it be great if that $15,000 just went away…..they will come for it they never forget……