Handing a car back is your legal right, so has no effect on your credit rating.
Who you sell the car to, or whether you sell the car at all, won't have any effect on your credit. What affects your credit is paying off the car loan. That might raise your score, or it might reduce it, depending on what else is in your credit report.
Having your car repossessed or surrendering it voluntarily is seen as a major negative event by lenders. They'll view you as high-risk. Expect your credit score to take a big hit, maybe over 100 points or more. That makes getting approved for financing in the future much harder.
A car repossession can significantly damage your credit score, potentially causing a drop of up to 100 points or more depending on your overall credit history.
Voluntary return is just calling the finance department and telling them you're not going to pay. It just lets them know it's gonna be an easy repo...which brings us to... It's still repossession. They will sell the car at auction for pennies on the dollar and you will owe any remaining balance.
Voluntary surrender counts as a derogatory or negative mark and will stay on your credit reports for up to seven years.
Car dealerships are much more likely to take back a used vehicle. This is because a new car is no longer "new" as soon as you drive it off the lot. If the dealership takes back the car, they'll then need to sell it as a used vehicle, and they'll likely lose money on the transaction.
Voluntary car repossession is only a slightly better option than involuntary repossession. You may be a bit more prepared and have some control over when you surrender your car if it's voluntary. Avoiding some of the extra fees that can come with involuntary repossession can be helpful, too.
Consider a Voluntary Repossession
When you agree to a voluntary repossession, you start by informing the lender that you can't make the monthly payments anymore. The lender will provide a time and place to meet for surrender. Keep a record of when and where you dropped the vehicle off and who took possession of it.
When the dealer buys back the car, they refund the consumer all the money spent on the vehicle minus a “usage fee” calculated based on how long the consumer drove the vehicle before returning it to the dealership.
Voluntarily Surrender the Car
A voluntary surrender allows you to return the vehicle to your lender on your terms, and while it can damage your credit, it won't have as big an impact as a repossession. You'll also be able to avoid certain repossession-related costs, which lenders may choose to add to what you owe.
Note: If you're selling a car with an active loan, you're still the one responsible for paying it off, so the remaining balance on the loan will likely be subtracted from the price the dealer offers you. So if you owe more than what the dealer offers, you'll need to pay the difference to the lienholder.
Selling a financed car to a private buyer or dealership likely won't hurt your credit. However, if you have negative equity, you might need to refinance your auto loan or take out a personal loan to cover the difference between your car's value and what's left on your loan.
In conclusion. Buyer's remorse is a difficult feeling, but once the paperwork is signed, your ability to back out of a car purchase is very limited. Returning a car after the purchase is generally not an option, as most dealerships do not have a return policy once the sale is finalized.
A repossession stays on your credit report for seven years, starting from the first missed debt payment that led to the repossession. In the credit world, a repo is considered a derogatory mark.
A voluntary repossession will remain on your credit report for up to seven years, but it's better than having multiple missed car payments and an involuntary repossession. Unfortunately, while the voluntary repossession remains on your credit report, you'll have a harder time obtaining a new auto loan.
Ask about voluntary repossession: Voluntary repossession involves asking the dealer to take back your car because you can no longer afford the payments.
If you return the car to the lender in a voluntary repossession, the lender will likely sell it. It will apply the proceeds of the sale to your car loan balance, after reimbursing itself for the costs of sale and certain fees.
Unfortunately, it's not possible to just give back a car and end the financing agreement as though it never happened. Plus, every path to getting out of an auto loan will have its own unique pros and cons.
Make sure the financing is final before you take the car home. A clause in many contracts allows the dealer to renegotiate the deal after you drive the car off the lot. Some dealers allow customers to take their new vehicle home before the loan has been finalized or fully approved by the lender.
You can renegotiate, refinance or sell your vehicle to get out of a car loan you can't afford. Refinancing can be a good option if your credit score has improved since you initially took out the loan. When trying to exit a lease early, be aware of potential fees and consider transferring the lease to someone else.
What Happens if I Voluntarily Surrender My Car? If you voluntarily surrender your car, you can avoid some of the extra costs associated with repossession, such as towing and storage fees. But you'll still be responsible for paying the deficiency balance if the car is sold for less than the amount you owe on the loan.
In most instances, yes, you can trade in a car with a loan, and some dealers might roll your remaining balance into a new loan. But trading in your car doesn't make your loan disappear. You will still have to pay off the remaining loan balance that your trade-in amount doesn't cover.