Unlike a car loan, you never gain title to the car you lease. This has certain advantages for you, the lessee, but it also means that the lessor can enforce specific lease requirements, particularly if your car is repossessed. Repossession of a leased vehicle is different from a repossession under an auto loan.
Auction Notification
If your leased car is repossessed, you may or may not receive notification from the leasing company that your car will be sold at auction. If you are notified and have a chance to place a bid, consider getting the car back. Review your lease agreement to find out what procedures the leasing company must follow to dispose of your car.
Debt Settlement
Under the terms of your lease agreement, you may be liable for the entire balance of the lease even if the vehicle is sold at auction. With an auto loan if your loan balance is $12,000 and it sells at auction for $8,500, you are responsible for the $3,500, which represents the loan deficiency. In the case of a lease, you may be responsible for all of the remaining lease payments, despite your car being sold at auction. Make a settlement offer to the leasing company to reduce your obligation.
State Law
Consumer laws vary from state to state, which means you may have certain rights in the event your leased car is repossessed. According to the Federal Trade Commission, some states have specific procedures in place before repossessing any vehicle, and these steps must be followed precisely. If the leasing company or its agent forcibly took the vehicle back from you, failed to sell it in a commercially reasonable manner, such as a public auction, or waited too long to sue you, then you may have legal recourse. Know your rights by contacting your state's department of consumer affairs or attorney general's office.
Legal Intervention
If you believe that your legal rights have been violated, you can contact an attorney for guidance. Your attorney will determine what rights you have, can negotiate with the leasing company for you and seek compensation if personal items found in your car were not returned to you. If your financial situation is dire, an attorney can advise you about your bankruptcy options. If you cannot afford an attorney, your state may be able to help you through a local office of the Department of Housing and Urban Development or housing authority.
Considerations
Once your leased car has been repossessed, you can do damage control by seeing how that information was reported on your credit reports. Negative information as well as errors can affect your chances of getting new credit or drive up the interest rate on new loans, according to the Federal Citizen Information Center. You can obtain one free copy of your credit reports annually from AnnualCreditReport.com.
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