Because most consumers cannot pay cash for a new car, they often finance the purchase. Financing a vehicle usually allows a consumer to borrow the money for the vehicle. In exchange for the loan, consumers usually pay an affordable monthly payment that includes principal and interest on the loan. Under Oregon law, to secure the loan, creditors retain a security interest in the vehicle, which makes the vehicle collateral for the loan. That means Oregon law permits creditors to repossess the vehicle in the event the consumer stops making payments or otherwise violates the sales contract.
Creditors must perfect their security interest in a vehicle upon execution of a loan agreement. Perfection is a means for recording the creditor’s lien against the vehicle’s title and acts as the basis for repossession. Creditors must have their security interest in the vehicle noted on the car’s title. This notation acts as a lien on the car’s title. To have their lien noted on the title, the creditor must apply to the Oregon Department of Vehicles.
If a creditor has perfected its interest in the vehicle and has a valid sales contract with the consumer and the consumer defaults, the creditor can repossess the vehicle. The sales contract will typically state these facts explicitly. The sales contract will typically define a consumer’s “default” as failing to make a timely payment. In practice, a creditor may not immediately attempt to repossess the vehicle. In some cases, the creditor may try to work with the consumer. However, legally, once a single payment is missed or late, the consumer is technically in “default” and the creditor can repossess without a court order so long as it does it peacefully.
The creditor and the consumer each have certain enumerate rights under Oregon law once a creditor repossesses. The creditor can resell the vehicle at public or private auction so long as the sale is reasonable. The consumer can redeem the vehicle and get it back by curing all of the consumer’s contract violations as well as paying the creditor’s reasonable costs and expenses incurred because of the repossession. Once the creditor resells the vehicle, the proceeds from the sale apply to the debt the consumer owes the creditor. For example, if the consumer owed $7,000 to the creditor upon default and the creditor sold the vehicle for $6,000, that $6,000 would apply to the consumer’s debt. However, the consumer remains liable for the $1,000 difference plus any reasonable costs and expenses incurred in repossessing the vehicle under Oregon law. That difference is called a “deficiency.”