Will I owe money after my car is repossessed in Florida?

Find out if your car lender can sue you for a deficiency after car repossession in Florida.

Question

I bought a car in Florida over four years ago. I had only three payments left when I lost my job. The loan balance at that time was $1,200, but the lender repossessed it anyway. I’ve heard that even if the lender takes your car, it can still sue you for the loan balance. Am I on the hook for the last $1,200? I won’t have any money until I find a new job.

Answer

You are in luck because your loan balance at the time you stopped paying was under $2,000. Normally, a car lender can demand that you repay the “deficiency” (the difference between the loan balance and the fair market value of the car) after car repossession. But Florida law makes an exception: If your unpaid balance at the time of default is less than $2,000, the lender can't go after you for a deficiency.

What Is a Deficiency After Car Repossession?

If you fall behind in your car loan payments, your car lender can arrange to have your car repossessed. When this happens, the car repossession company simply takes your car—it doesn’t need your permission. Although in some states it must provide some type of notice first. (To learn about car repossessions, how they work, how to avoid them, and your options if it happens to your car, see Car Repossession Laws: An Overview.)

In most cases, the car lender then sells your car at an auction or private sale. If the sale price is not enough to cover the remaining balance on your car loan and the lender’s repossession and auction costs, in most cases you will owe the difference—called the deficiency. (Learn more about deficiency balances after car repossession.)

Example. Let’s say you bought a car for $12,000, putting $2,000 down and financing $10,000. Several years later, after you default on the loan, the lender pays a repossession company $500 to repossess your car. At the time, you still owe $7,000 on the car loan. The lender sells your car to a used car dealer for $5,000. In this case, you would still owe $2,500 (the deficiency balance). And because the unpaid balance at the time of default was greater than $2,000, the lender could come after you for this amount. Here’s the calculation: $7,000 (loan balance) + $500 (lender’s costs in repossessing and selling the car) - $5,000 (sale price at auction) = $2,500 (amount of deficiency).

If, on the other hand, the sale price is more than your loan balance plus costs, there won’t be a deficiency. Instead, the lender would have to turn over any surplus money to you. Unfortunately, in most car repossession situations, the former car owner ends up owing a deficiency.

When Is a Florida Car Lender Prohibited From Collecting a Deficiency?

If at the time of default—when you stopped paying, for example—the unpaid balance is less than $2,000, the car lender can't try to collect a deficiency from you. (Fla. Stat. Ann. §516.31(3)).

The car lender has to follow Florida laws when repossessing the car and conducting the sale. If it doesn’t, you might have a defense to the deficiency even if your unpaid balance was $2,000 or greater at the time of default. (Learn more in Can a Car Lender Collect a Deficiency After Repo?)

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