Do you still owe the balance on a car loan if you voluntarily have your car repossessed and the bank now owns it?

Answer 1

Cars, especially new ones become less valuable very quickly. A new car may suddenly lose thousands in re-sale value the moment you drive it off the lot. Also, during the early part of the repayment period, most of the payments are consumed by interest charges, so the consumer's equity will grow very slowly. The loan often becomes greater than the resale value of the car. Repossessed cars are typically sold quickly and cheaply at auctions, for amounts that will not cover the balance owing on the loan. The difference between the actual sale price and the higher loan balance is known as the "deficiency", and you the consumer is liable for this amount. The creditor may then file a lawsuit and obtain a "deficiency judgment" and go after your other assets, such as bank accounts, and may garnish your wages. This can happen even if you voluntarily returned the car. So Yes, you are responsible for the balance. For more info about credit check out Phil Turner's Credit Bible that will explain everything you'll ever want to know about credit.