Buried inside New York City’s sanitation code is a clause that reads like a guest list for a Concours d’Elegance. Rolls-Royce. BMW. Mercedes-Benz. Jaguar. Porsche. Lamborghini. Ferrari. Lexus. The city didn’t put those names in its rulebook to celebrate them. It put them there because it keeps getting sued over how it destroys them.
On July 23, Mercedes-Benz Financial Services USA filed a new federal lawsuit against the City of New York, arguing that its derelict vehicle removal program lets sanitation workers declare a financed car worthless and send it off to be crushed without ever notifying the bank that holds the title. The case, filed in the Southern District of New York and assigned to Judge Loretta Preska, is not a fender-bender of a lawsuit. It’s the latest round in a fight that’s been running since 2021, and the paper trail behind it explains a lot more about how cities handle cars than any press release ever will.
MBFS already has a case against the city that’s been open for five years, over a different city towing operation called the Arterial Tow Program, which sweeps disabled and abandoned cars off highways and parkways. Volkswagen Credit’s retail and leasing arms filed nearly identical suits. So did Santander Consumer USA, another major auto lender. Last October, a federal judge ruled on Santander’s case and split the decision: the city won on the Fourth and Fifth Amendment claims, but Santander won outright on due process. The judge found that New York’s notice procedure violated the Fourteenth Amendment, and ordered the city to negotiate compensatory damages and build a version of the Arterial Tow Program that could pass constitutional muster.
New York did fix it, at least on paper. In March, the city added a new rule, 16 RCNY Section 1-05.2, spelling out exactly what an abandoned vehicle program now owes a lender: certified mail notice to any interested party with a lien on the car, a ten-day window to respond, and a hearing scheduled within 72 hours of a request. It’s a legitimate due-process fix, the kind of thing that should have existed the whole time.
Except that fix only applies to vehicles the city legally defines as abandoned. There’s a second, older category sitting right next to it in the same section of the code: derelict. And derelict vehicles are explicitly excused from all of it. Under 16 RCNY Section 1-05(j), any vehicle reported to the Sanitation Department by the NYPD as derelict can be declared worthless and valueless by the Commissioner and disposed of at a city facility or through a private contractor, no notice to anyone required. Whether a wrecked, financed sedan gets the protected abandoned-vehicle process or the no-notice derelict one comes down to a checklist.
That checklist is real, it’s public, and it’s oddly specific. A sanitation employee measures things like whether a car has body damage longer than twelve inches, whether the hood and grille are missing, or whether it’s seriously burned. A car five to seven years old needs less damage to qualify as derelict than an older one. Then there’s the part that reads like it was written directly in response to litigation: vehicles eight years or older normally qualify as derelict with just one category of damage, except for eight specific luxury brands, Rolls-Royce, BMW, Mercedes-Benz, Jaguar, Porsche, Lamborghini, Ferrari, and Lexus, which require more damage before they can be scrapped, and even then get routed to something called the Derelict Vehicle Office for special handling.
Here’s the detail that should worry anyone with a car loan, luxury brand or not: plates matter more than paperwork. Under the same rule, any vehicle with a license plate attached, in any condition, gets referred to the NYPD Rotation Tow Program instead of the derelict pipeline. Pull the plates off a wrecked or stripped car, whether a thief did it or they simply came off in a crash, and it can be fast-tracked into the no-notice, worthless-vehicle lane. The Auto Wire has covered New York’s ongoing fight with plateless ghost cars and the luxury theft rings that specifically target financed vehicles because they’re easier to flip before a lender notices they’re gone. This is the other half of that story: what happens after the car is found, not before it disappears.
MBFS didn’t build its new complaint on secondhand accounts. Attached to the filing is an exhibit the court docket lists simply as the city’s Freedom of Information Law request response. A captive lender with a compliance department bigger than most city agencies had to file a public records request just to find out what New York does with its own collateral. That, more than any dollar figure, is the real finding here: the process is so opaque that even the people with a recorded legal interest in the car have to sue their way into an answer.
None of this is unique to New York, and none of it is really about Mercedes-Benz. Every city with a sanitation department has some version of a derelict or abandoned vehicle ordinance, most of them written decades before auto loans routinely ran 72 to 84 months and negative equity became the default condition of the American car payment. Those ordinances were built to answer a simple question: who gets to make a junk car disappear? They were never built to ask the question that matters more today: who still owes money on it? A parked car with expired plates looks the same to a sanitation crew whether it’s paid off or three years into a seven-year loan. The lien doesn’t show up on the windshield.
That’s the actual story sitting underneath this lawsuit. It isn’t about a bank being sentimental over crushed Mercedes-Benzes. It’s about municipal junk-removal law colliding with an auto finance industry that now treats nearly every car on the road as someone else’s collateral, and a legal system that’s forcing cities to fix that collision one narrow program at a time instead of all at once. New York patched the Arterial Tow Program after Santander won. It’s now defending a lawsuit over the derelict vehicle program that patch never touched. It’s a pattern worth remembering next time a legal filing gets flattened into a headline, the same way it was worth remembering when Grupo Antolin’s bankruptcy-court paperwork turned out to hide a very different story than its filings implied. Whichever city program gets sued next, expect the same sequence: quiet rule change, narrow scope, one more door left open.
It doesn’t take a repo man to end a car loan in New York City. It just takes a sanitation worker with a checklist, thirty days, and a car with no plates on it.