Legal Question in Credit and Debt Law in California
auto lease
I am currently in the 2nd of a 5 year auto lease. I can't afford to make the monthly payments. I have researched the Kelly Blue Book value and it is appraised in ''fair'' condition at $14,000. I called the bank to find out how much it would be to buy out the lease if I took out a loan from my credit union, and I was told it would cost me $25,000. I was then informed I could do a voluntary repossession, but would be responsible for the difference of what they would get for the car at auction and what my present lease value is worth. That could potentially be $15,000-20,000 and I would be in worse shape than I am now because I would be paying for a car I wouldn't have. What if I stopped payments and waited for them to repossess the car? Would the repercussions be any different from a voluntary repossession? I am fine with not having the car anymore and am just looking for the most economically feasible resolution to my problem. Thank you for your time.
2 Answers from Attorneys
Re: auto lease
No, you would still owe the deficiency, and it would reflect even worse on your credit.
The best thing to do is 1)keep the car, or 2)find a buyer for the car at the best price possible, and then sign a note with the bank for the difference. You may be paying for something that you don't have, but you will be saving your credit.
Re: auto lease
As Mr. Koenen mentioned, a voluntary repossession shows responsibility more than an involuntary repo, which is better on your credit report. Have you also considered bankruptcy?
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