The sequence
Missed payments, then a default notice, then repossession. Timelines vary by state and by agreement, and titled vehicles can move faster than you expect.
The equipment is sold, typically at auction, and auction prices are well below what you would get selling it yourself with time.
The proceeds reduce the balance. Whatever remains, plus recovery and legal costs, is the deficiency and is generally still owed.
Why the deficiency catches people out
There is a widespread assumption that handing back the asset closes the matter. On a financing agreement it usually does not; that is closer to how a true lease behaves.
A personal guarantee makes the deficiency personally enforceable, so it survives the business.
Repossession also removes the thing that generated the revenue, which is why it so often precedes closure rather than following it.
What to do first
Contact the funder before missing a payment. Deferral and restructure are far more available before default than after, and this product is more amenable to it than an advance.
Consider selling the asset yourself. A private sale almost always raises more than an auction, and with the funder's agreement it can clear the balance where repossession would not.
If the equipment is genuinely surplus, say so early. A funder would usually rather agree an orderly sale than pay to recover a machine.
Take advice before signing a forbearance. These agreements frequently add terms materially worse than the original.