Below is an example scenario which happens to many people when their car is repossessed.
A) Car value £25,000
B) Deposit £5,000
C) Loan Amount £20,000
D) Repayments £5,000
E) Still Owed £15,000
F) Car Auction £8,000
G) Deficiency £7,000
A) In this example, £25,000 is the sale price for a new car.
B) The buyer puts down £5,000 deposit.
C) The loan amount borrowed from the finance company is £20,000.
D) The buyer begins to make repayments, lets say for example they make £5,000 worth and then run into financial difficulty and are unable to make further payments. The lender goes ahead and repossesses the car.
E) The amount still owed to the finance company is 15,000 after the car is repossessed.
F) After repossession, the finance company opts for a quick sale through a car auction and sells the repossessed car for £8,000.
G) The Deficiency is the amount the loan company will look to recover after the car has been repossessed. In this case the deficiency amount will be £7,000.
If your car has been repossessed in this way, you can expect the loan company to chase you in order to recover the deficiency amount. you can also expect your credit rating to be affected if repayments are not made or even face bankruptcy.