In Arizona, repossessions are regulated by both federal law and state-specific legislation. Here is what happens when borrowers default on their loan or fail to pay their financial obligations on time.

Missed Payment and Default

A borrower is in default when they fail to make a payment on their car loan or lease. This period starts based on the loan agreement’s specific terms.

Right to Cure

Some jurisdictions compel lenders to issue borrowers with a “Right to Cure” notice, providing them the option to keep their current loans before repossession. However, under Arizona law, no notice is required before repossession.

Peaceful Repossessions

Lenders in Arizona have the right to repossess a car as soon as the borrower defaults on the loan, without notice to the borrower. This repossession must be carried out without “breach of peace.” This means there should be no physical force, threats of force, or entering a locked garage or gated area without permission.

Selling the Vehicle

If the borrower fails to redeem the car, the lender has the option to sell it. The sale might be public or private, but it must be “commercially reasonable.” This implies that the car is sold in a fair market manner, matching its fair market value.

Deficiency Balance in Repossessions

If the selling price of the car does not cover the outstanding loan debt as well as the costs of repossession and sale, the lender has the right to sue the borrower for the difference. If the sale makes a profit, the excess must be refunded to the borrower.

Communication with the Creditor

It’s best for the borrower to contact their lender as soon as they realize they may miss a payment. Many lenders would be willing to create a new payment plan with the borrowers. This will help avoid repossession completely.