I Can Make the Car Payments, or I Can Make the Repair Payments, I Can’t Afford Both
Often times the defects, which occur shortly after the purchase, can be very expensive to repair. If the dealership refuses to honor its warranty, the consumer must bear these expensive repair costs in order to keep the vehicle operating. Most consumers budget their car expenses. These unanticipated repair costs can make it very difficult to meet the monthly payments to the finance company.
When these costs become overwhelming, when you believe that your car is a lemon but no one will help you, a voluntarily repossession of the car may seem like your only way out of a hopeless situation.
The Impact of Voluntary Repossession:
Under these circumstances, do not surrender the car without further investigation into your consumer rights. A voluntary repossession is often made because the consumer is frustrated and feels helpless or is simply angry. When a consumer returns the car to the dealership and walks away, the car is repossessed by the finance company. Your credit report is immediately impacted because the finance company files a notice of voluntary repossession. In otherwords, the credit bureaus now know the loan will not be paid and they enter that information into your credit report.
After taking possession of the car, the finance company sells it at auction. It is guaranteed the car will sell for less than the loan balance. The difference between the loan payoff amount and the selling price is called a deficiency. You are obligated to pay this deficiency to the finance company. You may owe the finance company several thousands of dollars for a car you no longer have. If you do not pay off the deficiency, the finance company will sue you in court. The judgment will appear on your credit report. Your credit score will drop tremendously and any future loans, if granted at all, will be at very high interest rates.
Don’t Do It — The Law May Be On Your Side
California Lemon Laws & Consumer Protection Laws
You may have alternatives to voluntary repossession if you purchased a defective car. If your car was sold to you with a warranty provided by the dealership, even if as little as 1 month/1,000 miles, the law may be on your side.
When a warranty accompanies the sale of a vehicle, the seller is representing that the car is merchantable and fit for the purpose promised. If the car exhibits defects and the dealership refuses to repair or cannot repair those defects, you may have rights under California Lemon Laws.
Whether or not the car had a warranty at the time of purchase, if the defects were concealed by the dealership, you may have rights under California’s consumer protection laws.
For example, if you discover that the car you purchased has prior accident damage which was not disclosed at the time of purchase, you may have causes of action against the dealership. Even if the car was sold “as is!”
The Impact of Lemon Laws & Consumer Protection Laws:
Rather than suffer all of the negative consequences of a voluntary repossession, take the time to explore the benefits of the California Lemon Laws and the California Consumer Protection Laws. If your defective used car was misrepresented to you in any way, the dealership may be forced to repurchase the car. That means that the dealership will reimburse you for your down payment, the monthly payments you have made to date and any out of pocket costs for repairs. In addition, the dealership will pay off the balance of the loan to the finance company on your behalf. Not only do you not have to pay off the loan deficiency for a car you no longer have, but also you may have money in your pocket and your credit score is not damaged.
If you choose a voluntary repossession, you will owe the money to the finance company.
California law provides you certain rights if your vehicle is determined to be a lemon.
Hyde & Swigart
Lemon Law Attorney
Consumer Protection Attorney