Why Do I Still Owe the Loan?
Watching an impounded vehicle disappear into the auction process is bad enough. Finding out afterward that the car is gone and the loan may still be very much alive can make an already expensive situation considerably worse.
It sounds backward. If you no longer have the car, why would you still have to pay for it? Because the vehicle and the loan attached to it are two different problems.
When you finance a vehicle, you agree to repay the money you borrowed according to the terms of your loan. If that vehicle later gets impounded and eventually sold because it was never recovered, an auction does not automatically erase the financing agreement. In fact, depending on what happens next, you could end up without the vehicle while still owing thousands of dollars.
The Auction Price Is Not Your Loan Payoff
One of the biggest misunderstandings is assuming that if an impound lot auctions the vehicle, the sale proceeds simply pay off the lender. It usually isn't that simple.
Money generated by an auction may first be subject to towing charges, storage fees, administrative costs, auction expenses and other legally permitted charges. There may also be a lienholder with rights to the vehicle or proceeds. Exactly how everything is handled depends on the circumstances and applicable state law.
Most importantly, an auction price and your outstanding loan balance are not the same number.
Consider a simplified example:
| Before the Auction | Example Amount |
|---|---|
Remaining auto loan |
$17,500 |
Vehicle auction sale |
$9,000 |
Tow/storage/other costs |
Varies |
Loan automatically erased? |
No |
The actual outcome can be more complicated, but the lesson is simple: don't assume an auction will magically make a $17,500 debt disappear because somebody bought the car for $9,000.
You Could Be Left With a Deficiency Balance
If the lender ultimately receives less than the amount required to satisfy your loan, you may be responsible for what is commonly called a deficiency balance, depending on your loan agreement, applicable law and how the vehicle was disposed of. That means the worst-case scenario isn't simply, “I lost my car.” It can become, “I lost my car, I don't have transportation, and I still owe money on a vehicle I no longer own.”
And while all of this is happening, an impound bill generally isn't becoming friendlier with age. Storage charges can continue accumulating while the vehicle sits. That's why ignoring an impounded financed vehicle can be particularly dangerous. Waiting doesn't solve the loan problem, and it can make the impound problem more expensive.
Don't Wait for the Auction to Make the Decision for You
If your financed vehicle is currently sitting in an impound lot and you're struggling to afford its release, find out what your options are before it reaches auction.
OUTPOUND helps vehicle owners deal with exactly these situations. Depending on the vehicle and circumstances, there may be an alternative to simply abandoning the car and waiting to see what happens.
The earlier you act, the more opportunity you may have to understand the payoff, determine what the vehicle is worth, address the growing impound charges and explore whether our team can help get the vehicle out of the situation.
Your car being auctioned doesn't necessarily mean your loan disappears with it.
Before the tow yard's deadline makes the decision for you, contact OUTPOUND.com and find out what options may still be available. The car may be stuck behind a fence today, but that doesn't mean you should leave your finances stuck there with it.