The Bank Does Not Want to Repossess My Car

When a consumer defaults on a car loan, a creditor has a right to repossess the vehicle without giving any notice. However, in many cases a bank may not want to repossess a vehicle right away and give the car owner a chance to make payment arrangements. Some financial institutions want to avoid repossession, as the process is costly and time-consuming.

Seizing a Vehicle

When a consumer finances a vehicle, the loan contract lists what constitutes a default. Most financial institutions consider it to be three or more consecutive missed payments. If a consumer doesn't bring his loan current and doesn't contact the lender to make payment arrangements, a financial institution can seize the collateral without notice. A bank pays the expenses associated with towing and storing a car and adds them to the consumer's loan balance.

Selling the Vehicle

Most creditors sell seized vehicles in a public or private sale to cover a consumer's loan balance and the repossession expenses. Some financial institutions have lists of seized vehicles available for sale that they mail to the public. Most banks don't go through the hassles of private sales. Any excess from the auction sale is refunded to the borrower. When there is a deficiency, the owner is responsible for paying it. While sale or auction expenses, attorney fees and other charges associated with the sale of a vehicle are the responsibility of a consumer, a financial institution must pay them first.

Repaying the Loan

In most cases, a consumer has a deficiency balance and has to pay it. This amount includes any remaining loan balance, plus late fees, interest and repossession charges. Since the loan collateral is sold, the bank may convert the remainder into a personal loan. If a consumer had no money to pay his car loan, chances are he will not make regular payments on the deficiency loan. Most states allow a creditor to sue the car owner for a deficiency balance. To file a lawsuit, a financial institution has to hire an attorney, whose services will cost additional money.

Negotiating with a Creditor

As demonstrated, a creditor has to incur many expenses to repossess collateral. While repossession expenses are a consumer's responsibility, a creditor may recover only a small portion of this amount. A consumer may file bankruptcy, in which case a creditor doesn't receive anything. This is why most creditors do not want to repossess and will try to negotiate a different payment schedule with a consumer. If a consumer's financial difficulties are temporary, a bank may postpone a payment or two. A lender may offer to refinance the loan with more favorable terms, such as lower monthly payments or a reduced interest rate. It is also in a consumer's best interest to avoid repossession as it will have a negative affect upon his credit history and score, and he may have difficulties obtaining another loan.