Figures from the New York Fed are balances outstanding, not sale prices. Bands cited from DebtMarket’s pricing study are conversation ranges, not offers. This note is education for operating companies and creditors. It is not legal advice.
An auto deficiency is the amount left after the vehicle is sold and the net proceeds are applied to the contract. Buyers are not buying the car. They are buying that remaining balance, and only if the file shows how the number was calculated.
What has to be in the account
| Piece | Why it is in the price |
|---|---|
| Retail installment contract or lease | Shows the obligation and the creditor. |
| Deficiency letter or equivalent notice | Shows the balance after sale of the collateral. |
| Sale proceeds and expenses | Lets a sample test whether the deficiency is arithmetic or a rounded claim. |
| State and dates | Charge-off or deficiency date, last payment, and the state on the contract. |
Do not blend it with cards
A seller who adds deficiency balances to a bankcard tape and asks for one price is asking buyers to underwrite two products at once. Split them. The card band on the pricing study is not the auto band. Quote a media percent for deficiency letters the same way you would quote a media percent for card statements.
Known insurance payments, settled accounts, and bankruptcies belong in the exclusion flags as of the cut-off. Leaving them in the face and planning to “adjust later” is how the true-up becomes an argument.
The sale path for the holder is debt for sale. The field list is the data tape.
A sample that changes the number
Forty deficiency accounts. The seller’s flag says a letter exists on 70 percent. You open the rows. Twenty-two letters show a sale price, expenses, and a remaining balance that matches the tape within a few dollars. Six letters show a balance that includes add-on fees the tape called principal. Four accounts have no letter at all. The bid uses the twenty-two that match, names the fee issue, and drops the four. That is a deficiency underwriting, not a card underwriting with a car key on the cover.
Write the deficiency from the letter, then check the tape
Take one retail installment account as an illustration, not as a price. The vehicle sells for $14,000. Allowed expenses on the letter are $1,800. The loan payoff on the letter is $19,200. The deficiency on the letter is $7,000. The tape should show $7,000 of unpaid deficiency, or it should show the three inputs and the same result. When the tape shows $9,400 because later fees were folded into “principal,” that row fails the match. Price the rows that match. Name the fee issue on the rows that do not.
A lease-end residual uses a different worksheet. The contract states how the residual is set and which charges may be added. Treat a lease deficiency as its own product code, even when the same finance company holds the retail paper. The pricing study does not use the credit-card band for either of them.
Title to the vehicle and title to the deficiency
The deficiency is the remaining receivable after the sale of the collateral. The buyer of the deficiency is not, from that fact alone, the buyer of the vehicle. The letter should already show that the vehicle was sold and how the net was applied. Missing letters come out of the bid the same way missing card statements do. Forty accounts, twenty-two letters that match, six letters with fee differences, four with no letter: the bid uses the twenty-two, names the six, and drops the four. That count belongs in the bid email before the wire.