What Happens to a Towed Vehicle When You Still Owe Money on a Loan?
If you've received a notification that your car has been towed due to outstanding charges, it can be a stressful time. Especially when you still owe money on your car loan. It's important to understand what happens next and how to proceed. Here's what you need to know about the tow company's rights, the auction process, and your legal rights.
Loan Status and Lien Holder
Your car loan is secured by a lien, which gives the lender a legal claim to the car until the full loan amount is paid. When a tow company takes possession of your car, they must address the outstanding lien before selling or auctioning it off. Typically, the tow company can only recover their costs, such as towing and storage fees. If the auction price exceeds these costs, the excess may go to the next lien holder, but if the auction falls short, the tow company cannot keep the vehicle.
Tow Company's Rights
The tow company is entitled to charge you for the towing and storage fees. If these fees are not paid, they may have the right to sell the vehicle. However, they must usually notify the lienholder (your lender) before they can auction the vehicle. Consider this scenario: if the towing company decides to sell the car to recover their costs, they may auction it off, but if there's a surplus, it won't go to your lender; it would likely go to them or be returned to you or the next lien holder.
Communicating with Your Lender
Given that there is still an active loan on the vehicle, it is crucial to communicate with your lender to discuss your situation. They may provide guidance on the best course of action. Some lenders might be willing to work with you on settling the towing fees and releasing their lien in exchange for you acquiring the vehicle.
Negotiation with the Tow Company
You might consider negotiating with the tow company. If you are prepared to relinquish the car to them, they could potentially release their claim in exchange for you settling the towing fees. This can be a pragmatic solution, especially if the car is damaged or in need of significant repairs.
Legal Advice
If you're unsure about your rights or the best course of action, it may be beneficial to consult with a legal professional specializing in automotive or consumer law. They can provide you with the clarity and guidance you need to make informed decisions.
What Usually Happens if You Ignore the Towing
Ignoring the towing can result in serious consequences. The bank or lender will want possession of the car, and the tow company will sell your debt through an auction or other means to recover costs. If the car is in good condition, the tow company can sell it to recover their fees, you can pay off what you owe, and the lender can make some money off the sale.
Conclusion
While the tow company can take possession of the vehicle, they will need to address the existing loan and lien before they can auction it off. Always check local laws as regulations may vary by state or region. Take proactive steps to resolve the situation, and communicate with both the tow company and your lender to find a mutually beneficial solution.