You can return your car to the lender before you finish paying off your loan. Called a voluntary repossession or surrender, this is better than vehicle repossession, but can still seriously damage your credit scores. You're having trouble making your car payments and want to get out of your auto loan.
Returning your car to the lender before you are finished paying it off is called a voluntary surrender or voluntary repossession. In terms of your credit, a voluntary surrender is considered derogatory and will have a substantially negative impact on your scores, so it should be a last resort.
Quick Answer. If you need to get out of a car loan you can't afford, options to consider include negotiating with your lender, refinancing your loan, selling the car or voluntarily surrendering it to avoid repossession.
If you can't afford your car payments, you can give the car back to your car loan lender in a "voluntary repossession." But think carefully before you do this—you might still owe the lender money. If you can't afford your car payments, you can give the vehicle back to your car loan lender.
7 possible ways to get out of a title loan
Voluntarily returning the vehicle, however, shows that you took responsibility and worked with the lender rather than forcing it to pursue a repossession. For this reason, lenders may consider a voluntary surrender to be slightly less negative than a repossession.
This process is known as voluntary termination. If you've yet to pay off half of the loan, you'll need to make up the difference before you can hand the car back. It's worth bearing in mind that, if you've paid off more than 50%, you won't get that extra money back if you cancel the contract.
A voluntary surrender is slightly better than a repossession because it indicates to lenders that you're cooperative and accepting responsibility. However, it's still considered defaulting on your debt, and can make lenders reluctant to work with you in the future.
Voluntary car surrender (AKA voluntary repossession) basically requires you, the borrower, to willingly return the vehicle to the lender. The process involves choosing to inform your lender that you can no longer make payments and intend to return the vehicle.
You could get out of your current car loan by refinancing, selling your car or by giving it back to your lender as a voluntary repossession. Voluntarily repossessions negatively impact your credit score for up to seven years. Refinancing or selling it might be your best options.
Simply walking away from a car loan isn't an option without consequences. If you stop making payments, you will still owe the lender the remaining balance. Not making payments could lead to the lender taking action like repossessing the car, which can negatively impact your credit score for up to seven years.
So, can you sell your car back to the dealership if it's still under finance? Yes, you can. However, there are specific steps you need to follow to ensure the process is legal and smooth.
How can I get out of a car loan without hurting my credit? Selling your vehicle will get you out of your loan while preventing damage to your credit score, but only if you're able to sell the car for the balance of the loan or pay the difference yourself.
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”.
Financial Alternatives to Returning Your Car
If you want to return your car because the payments are too high, you could try to refinance your car loan. Refinancing may help you keep your car under more manageable loan terms. As a last resort, you could also opt for voluntary repossession if you have no other choice.
You may owe money
After surrendering a vehicle, you could stop financing it but might still owe money to the lender. The new amount due is normally the difference between the outstanding loan balance and what the lender receives from selling the vehicle. This is called the “deficiency.”
What about if you can no longer afford the payments? Unfortunately, there is no cooling-off period for cars, which means that when you've bought one, you can't just change your mind and return it within a certain period.
Ending your car finance deal early
You can return a car and end the contract if you've paid at least half its value. This is called 'voluntary termination' and is one of your legal rights under the Consumer Credit Act.
If you buy or lease a car that has a serious flaw or defect in violation of the manufacturer's warranty or certified used seller's warranty, California's Lemon Law protects you. Defects that can trigger Lemon Law protections include anything that substantially affects the use, value, or safety of the vehicle.
Keep your car in a spot where people aren't free to go.
Repo men can't enter your house, and may not be allowed to get into places like detached garages or other enclosed spaces, provided that the space is locked. Even a fenced-in area might be safe from intrusion.
All it takes is one missed payment and your lender can repossess your car. That's the law in most states. The only variable is how many days after a missed payment your vehicle can be taken. Some states allow immediate repossession.
Jump to:
You can end your car finance early if you've covered half of what you owe on your car. You'll need to speak to your lender about your specific situation and talk through your options.
Losing your car can hurt your credit quite a bit unfortunately. 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.