Yes, you can voluntarily surrender your car to the lender if you can no longer afford payments, which is often called a voluntary repossession. This allows you to avoid the stress, surprise, and extra fees (like towing and storage) associated with a forced, involuntary repossession. However, it still hurts your credit, and you are responsible for any remaining balance.
The difference is, in a repossession the lender or a repo agent hired by the lender comes and takes the vehicle from you. In a voluntary repossession you turn the vehicle back in before they come to take it from you. There's no real difference credit wise. A repo is a repo.
Summary: To perform voluntary repossession, inform the lender of your inability to pay, arrange voluntary repo, record details of the surrender, and pay off any sale-loan difference and fees.
A voluntary repossession might be your best option if you can no longer afford your car loan or lease and don't see any other way forward. But there are serious drawbacks to consider, and a voluntary repossession will have a negative effect on your credit score.
If you surrender the car, you won't owe the lender for the car loan or any deficiency balance from a repossession. When you surrender the car, the remaining balance on the loan becomes unsecured debt. This means it's no longer tied to the car, so the lender can't take any other property to collect the debt.
The reduction in a debtor's credit score following a repossession might be more or less than the average decrease, depending on an individual person's credit history. On one hand, voluntary surrender is slightly preferable to involuntary repossession in that it demonstrates a willingness to work with your creditors.
However, the lender has absolutely no obligation to do so. Even though you want to surrender the vehicle the lender won't pick it up.
The "6 month rule" in Georgia primarily refers to Joshua's Law restrictions for new teen drivers (Class D license), meaning for the first 6 months, they can only have immediate family members as passengers (no friends), with curfews (no driving midnight-5am) and limits on other young passengers increasing in the second 6 months and after a year. Separately, a 6-month license suspension can occur for certain DUI offenses or point accumulation for younger drivers.
A voluntary repossession can stay on your credit report for seven years. This is true of both voluntary and involuntary repossession. Both voluntary and involuntary repossession can negatively impact your credit score for up to seven years; however, the impact will lessen over time.
Voluntary termination of car finance is a legal right that allows you to end your car finance agreement early under certain conditions. It can be a useful option if you find yourself struggling with monthly payments or want to return the car and end the agreement.
If you can't afford your car payment, your best options are to contact your lender immediately for hardship programs, deferrals, or modifications, refinance the loan for lower payments, sell or trade in the car for something cheaper, or voluntarily surrender it to avoid repossession, but always get agreements in writing to protect your credit.
How Voluntary Repossession Works
Be sure you completely understand the terms when you make the voluntary surrender. The lender will resell the vehicle, and the proceeds will go toward the balance you still owe on the loan. If there is still a balance remaining after the sale and you don't pay it, it could be turned over to a collection agency.
Your lender may offer a voluntary repossession option if you explain that you can no longer afford your financed car. Voluntary repossession may help with your financial situation but can still cost you money and affect your credit after the process is complete.
When paying off the car loan makes no financial sense for you because the car simply isn't worth the balance you owe, it may make no financial sense to the lender either. Sometimes the cost of repossessing, repairing, storing, and reselling is more than the fair market value of the car for the lender as well.
If you agree to a “voluntary repossession,” you might pay less in fees. But even if you return the car voluntarily, you're still responsible for paying the difference between what you owe on your contract and what your lender gets for selling the car. The lender might call that the “deficiency”.
For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.
Repossession Affects Your Credit
It is best for you to proactively address the situation and work with your lender to avoid repossession. But, if you have no other options, remember this is not the end of the world, and there are ways to rebuild your credit.