Many Facing Car Loan Troubles: Worries and Solutions

   When I found information suggesting just returning the car to avoid ‘Difference’, I thought about how the payments felt more like leasing. It sounds like a less painful way out.

   However, many times it’s been shown that even after returning the car, the finance company still files lawsuits to claim the remaining Difference.

   Today, I’m going to share the differences regarding this matter with you.

table of contents

How are Car Seizure and Car Return Different?

Car Returned: Debt Cleared?

Seized Car: Facing Legal proceed?

Costs Involved in Vehicle Seizure

How are Car Seizure and Car Return Different?

Let’s start with the topic of ‘Vehicle Seizure’ and ‘Vehicle Return’ first.

   “Seizing a car” refers to the finance company sending officers or representatives to take the keys and drive the beloved car away, face to face. How can they do this? Well, when the car is in our possession.
The answer is quite simple because “the car is not ours,” that’s it. This is different from a home loan where the house is in our name, and we’re just burdened with “debt” to the bank.
But with a car, the ownership belongs to the finance company until we fully repay the loan and transfer the title.
So, if we breach the contract, they have the right to take back their property.
So, when it comes to ‘returning the car,’ it’s a case where we bring the car back and the finance company agrees to ‘keep the car’ in a manner of terminating the lease agreement.

   If there’s documentation signed by the bank’s employees in this manner, we don’t have to pay any interest, overdue payments, or differences because the contract is considered terminated happily. When they say returning the car ends everything, that’s exactly what they mean.

Car Returned: Debt Cleared?

   If returning the car means the debt is completely cleared, it should be in the case I described earlier, where many have their debts fully cleared according to court rulings. This is because the finance company’s car return documents do not specify any liability limitations. Some may have heard that they should return the car before missing three installments, but it’s rare now because finance companies are aware!

   Even if we’re up to date with payments and decide to return the car, financial institutions will still provide clear documents stating that we are responsible for any price differences after resale. It’s not just a matter of returning the car and easily concluding the contract.

    Or to put it another way, borrowing money from them to buy a car upfront and then paying it off later, with ownership transferred only after full payment. Therefore, even if there’s a car return (where, in principle, the lease agreement is terminated upon asset return and debt suspension), it doesn’t exempt us from the responsibility for the money we borrowed from them to get the car in the first place.

Seized Car: Facing Legal proceed?

   The consequences of car repossession typically constitute a breach of the general contract. The finance company reserves the right to charge interest and reclaim any difference between the amount owed and the actual sale price of the car (at a fair market value). Then, they demand payment of the difference between the outstanding debt and the proceeds from the sale of the vehicle.

   And now, the finance company will typically start with a debt collection letter, informing us of the sale price of the car and the remaining debt we owe. If we don’t pay, they will instruct a lawyer to proceed with legal action against us.
So if the car is repossessed, it’s likely that we’ll be served with a lawsuit if we don’t negotiate to pay the remaining deficiency balance.

   Based on my experience, car prices tend to depreciate steadily (excluding collector cars). Therefore, if we fail to make payments until the finance company repossesses the car, there will inevitably be a difference.

   This doesn’t even include additional costs such as late fees, collection fees, attorney fees, damages, and court costs.

Costs Involved in Vehicle Seizure

   In addition to losing the car we relied on for our livelihood, we’ll also tarnish our reputation.If legal proceedings occur, we’ll incur even more damages.Financial institutions scrutinize every detail of our situation, especially when they have to hire staff to track us down at our homes.

No matter how many times they come to collect from us.

   Therefore, if you’re facing difficulties with car loan payments, I advise you to negotiate with the financial institution to arrange for better repayment terms. This can help reduce damages and legal fees. Ultimately, you’ll still be responsible for covering any additional costs.

   Don’t be discouraged just yet. I have followed the news and seen promotions from several financial institutions in the “Debt-Free Car Return” campaign.
I’m not sure if this promotion is still available now. Try contacting your finance company and discussing with them.