Bobcat S86 Skid Steer Financing: What Happens If the Repossession Sale Doesn't Cover What You Owe

Bobcat S86 Skid Steer Financing: What Happens If the Repossession Sale Doesn't Cover What You Owe

The Bobcat S86 is a mid-size skid steer loader, a dependable, widely financed machine for landscaping, hardscape, and general-contracting work. Most financing conversations about the S86 focus on getting the loan approved, not on what happens if things go badly wrong down the line. But if a financed S86 is ever repossessed and sold, there's a real financial question that follows the borrower afterward: what happens if the sale doesn't bring in enough to cover what's still owed? That shortfall is called a deficiency judgment, and it's worth understanding before it's ever a live possibility.

What a Deficiency Balance Actually Is

After a lender repossesses and sells a financed S86, the sale proceeds are applied against the remaining loan balance plus any allowed repossession and resale costs. If those proceeds don't cover the full amount owed, the difference is called a deficiency balance -- and under UCC Article 9, the lender generally has the legal right to pursue the borrower for that remaining amount, separate from having already lost the machine itself.

How a Deficiency Judgment Happens

A deficiency balance becomes a deficiency judgment when the lender takes the borrower to court to formally establish and collect that remaining debt, rather than simply writing it off. Not every lender pursues every deficiency balance to judgment -- it depends on the size of the shortfall, the lender's internal policies, and practical considerations like whether the borrower has assets or income a judgment could realistically reach. But the legal right to pursue it exists regardless of whether a specific lender chooses to use it.

Why the Sale Price Matters So Much

The size of any deficiency depends heavily on what the S86 actually sells for after repossession -- and a rushed liquidation sale, whether at auction or through a quick wholesale disposal, often brings in less than the machine's real market value would in a normal sale. UCC Article 9 requires the lender to dispose of repossessed collateral in a "commercially reasonable manner," which is a real legal standard, not just a formality -- and a borrower facing a deficiency has standing to challenge a sale that clearly wasn't conducted that way.

What "Commercially Reasonable" Actually Means

There's no single bright-line test for commercial reasonableness, but courts generally look at whether the method, timing, and manner of the sale were consistent with how similar equipment is typically sold -- a quick, poorly advertised liquidation auction with little notice can be more vulnerable to challenge than a sale through an established equipment auction house or dealer network with reasonable advance notice. This is a real legal protection for the borrower, not just a theoretical one, though exercising it generally requires legal counsel.

Can a Deficiency Judgment Actually Be Avoided?

The most reliable way to avoid a deficiency judgment is to avoid repossession altogether -- communicating with the lender early if payments become difficult, exploring a voluntary surrender with a negotiated understanding of the deficiency treatment, or in some cases arranging a private sale of the S86 directly rather than letting the lender liquidate it. Once repossession has already happened, options narrow considerably, but they don't disappear entirely.

How State Law Can Affect the Outcome

Deficiency judgment rules aren't uniform nationwide -- some states impose specific notice requirements before a lender can pursue a deficiency, and the details of what the lender must prove about the sale's commercial reasonableness can vary by jurisdiction. This is exactly the kind of situation where consulting an attorney familiar with the applicable state's commercial law matters, rather than assuming the same rules apply everywhere.

What This Means for Personal Guarantees

If the S86 financing included a personal guarantee -- common for a newer business or thinner credit file -- a deficiency judgment can potentially reach the guarantor's personal assets, not just the business's. That's a meaningfully higher stakes outcome than a business-only deficiency, and it's part of why understanding the guarantee terms at the time of financing matters well before any default ever becomes a possibility.

The Honest Rent-vs-Own Comparison

A rental carries none of this risk -- no loan, no collateral, no deficiency exposure if the business hits a rough stretch. But for a contractor running an S86 as a standing production tool, ownership through a properly sized loan remains the stronger long-term position for most businesses; the deficiency question only becomes relevant in a genuine default scenario, which sizing the loan realistically against the business's actual cash flow is meant to help avoid.

Who Actually Faces This Situation

This scenario is most relevant to a contractor who financed an S86 during a strong season and then hit a sustained slowdown, or a newer business whose cash flow didn't ramp up as quickly as the loan was underwritten to expect. It's rarely about bad faith -- it's a real financial hardship colliding with a secured debt, which is exactly why early communication with the lender changes the outcome more than almost anything else in this situation.

What the Lender Must Account For Before Collecting a Deficiency

Beyond the commercial-reasonableness standard, a lender pursuing a deficiency generally has to provide the borrower with an accounting of the sale -- what the S86 sold for, what costs were deducted (repossession, transport, reconditioning, sale fees), and how the remaining balance was calculated. A borrower has the right to see this breakdown, and reviewing it closely is a legitimate step, not an unusual one, since errors or inflated cost deductions do happen and are challengeable.

How This Differs From a Simple Default Without Repossession

It's worth distinguishing a deficiency judgment from the broader category of default consequences. A borrower who falls behind but cures the default within the applicable notice period never reaches a repossession sale at all, and therefore never faces a deficiency question -- the deficiency scenario is specifically what happens after the machine is already gone and sold. That's one more reason the earlier stages of a default (the cure window, voluntary surrender negotiations) matter so much: every step taken successfully at that stage is a deficiency scenario avoided entirely.

Negotiating a Deficiency Balance After the Fact

Even after a deficiency balance is established, it's sometimes negotiable -- a lender may accept a reduced lump-sum settlement rather than pursue a full judgment and the cost and uncertainty of collecting on it, especially if the borrower's financial situation makes full collection unlikely regardless. This isn't guaranteed, but a borrower facing a real deficiency balance has more room to negotiate than the number on paper might suggest, particularly before a formal judgment has actually been entered.

Why a Mid-Size Skid Steer Like the S86 Has a Fairly Liquid Resale Market

One factor that can work in a borrower's favor: the Bobcat S86 sits in a popular, widely used size class with broad demand across landscaping, hardscape, and general contracting -- which generally supports a more competitive, better-attended resale process than a highly specialized or niche piece of equipment would see. A liquid resale market doesn't eliminate deficiency risk, but it does tend to narrow the gap between what the machine owes and what it actually brings at sale, compared to equipment with a thinner buyer pool.

Working Through Financing the Right Way From the Start

BFC works with landscaping, hardscape, and general-contracting businesses nationwide, startups and established fleets, any credit profile, and the best protection against ever facing a deficiency judgment on a financed S86 is realistic loan sizing from day one, paired with a lender willing to talk through options the moment payments become difficult -- long before repossession is the only path left.

For more on this, see our our working capital vs. asset-based loan breakdown on a financed Kubota SSV65, time-in-business financing on a startup's first Bobcat S76-2, and our skid steer financing page.

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