questions & answers

Question: We fell on hard times and couldn't pay our car payment for a leased vehicle. They repossessed the car, sold it and now are suing us for almost the full price that it was being sold for. are we responsible for the full price of a leased vehicle. Why wouldn't we be responsible for just the remainder of the lease payments? And why should we have to pay them for a vehicle we don't have anymore. We can barely make ends meet now a garnishment would make us homeless.

Answer:

A person is obligated to pay for the contract after default (default is when the person stops paying). In this case, the bank who repossessed the car has an obligation to resell the car in a "commercially reasonable manner." This usually means by auction to wholesellers. The price obtained at these auctions often doesn't cover the purchase price. A used car is worth much less than a new car. Plus, the consumer pays retail (the amount dealers will sell a car for), and these resale auctions are at or near wholesale (the amount dealers will pay for car). Thus, this is not unusual. Add to that the expense of the repossession and resale, the cost for "reconditioning" the car, and the consumer can end up owing much of the original debt. This is why repossession is so hard on consumers.

A consumer may try to challenge the "reasonableness" of the resale but unless something shady or really unusual happened, it will be difficult to prevail. Generally the consumer is responsible for more than the lease payments, because the lease payments don't cover the entire value of the car. Moreover, once a default occurs (whether sale or lease), the consumer is responsible for all remaining debt. If the interest rate on the loan was high, then usually the consumer paid little on the purchase price. In fact, some consumers with really expensive loans can end up owning much more than the purchase price.

To find out how the law applies to your specific situation, or if you believe you are the victim of fraud, you may want to contact a "consumer lawyer" who represents consumers.