What Happens After a Leased Car Is Repossessed?

Leasing a vehicle can be an effective way to drive a nicer vehicle than you could afford through a loan. Your payments are based on the depreciation of the car over the time you drive it, rather than on the entire sale price of the car. However, if you fail to make your lease payments, the lessor may repossess the vehicle. Several events typically occur following the repossession of a leased vehicle.

Right of Redemption Period

After the repossession company takes your vehicle on behalf of the lender, it will typically transport the vehicle to a storage facility. The lessor will send you a letter stating that it has repossessed the car and telling you how you can recover the vehicle, if recovery is permitted by your state. Most states provide a statutory right of redemption period, during which you can recover the vehicle by paying the entire market value of the car, plus repossession costs and any other fees imposed by the lessor. For example, Ohio provides a 20-day right of redemption.

Sale

If you do not redeem the vehicle within the statutory time frame provided by your state, the lessor may keep the repossessed vehicle for its own use or sell it through a private sale or public auction. In most cases, the lessor will opt to sell the vehicle to recover a portion of its expenses. Depending on your state's laws, the lessor may be required to notify you of the date, time and location of sale if it intends to sell the car at a public auction.

Deficiency and Collection

When the lessor sells the repossessed car through a private sale or at a public auction, it may not obtain a sale price sufficient to cover its costs. The lender will send you an invoice for the deficiency, which represents the amount of your unpaid lease payments plus repossession fees, storage costs, auction fees and other expenses incurred by the lessor in repossessing and selling the vehicle. It will then usually send your account to a third-party collection agency to collect the deficiency if you do not pay immediately.

Judgment

If you do not pay the deficiency amount, the lessor may file a lawsuit against you in civil court to obtain a judgment against you. This gives the lessor rights to additional collection strategies, which may include garnishment of your earnings, seizure of your bank account balances and sale of your personal property to satisfy your deficiency.

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About the Author

Owen Pearson is a freelance writer who began writing professionally in 2001, focusing on nutritional and health topics. After selling abstract art online for five years, Pearson published a nonfiction book detailing the process of building a successful online art business. Pearson obtained a bachelor's degree in art from the University of Rio Grande in 1997.