How do you get rid of car that you owe more on than it is worth?

Asked by: Dr. Timmy Powlowski  |  Last update: January 10, 2023
Score: 4.6/5 (33 votes)

How to Get Out of an Upside-Down Car Loan
  1. Calculate Negative Equity. The first step is to know just how underwater your car loan is. ...
  2. Contact Your Lender. ...
  3. Continue Making Payments. ...
  4. Make as Many Payments as Possible. ...
  5. Refinancing an Upside-Down Loan. ...
  6. Selling Your Upside-Down Vehicle.

How do you get out of a car you owe more than it's worth?

You can get out from under a payment you can no longer afford.
  1. Refinance if Possible. ...
  2. Move the Excess Car Debt to a Credit Line. ...
  3. Sell Some Stuff. ...
  4. Get a Part-Time Job. ...
  5. Don't Finance the Purchase. ...
  6. Pretend You're Buying a House. ...
  7. Pay More Than the Specified Monthly Payment. ...
  8. Keep Up With Car Maintenance.

Is it possible to get rid of negative equity on a car?

To get rid of your auto loan's negative equity, you could pay it off all at once, out of your own pocket. For example, if you owe $12,000 on your vehicle and the dealer offers $10,000 for the trade-in, you would make up the $2,000 difference to your lender.

Can I refinance if I owe more than car is worth?

Refinancing Your Upside Down Auto Loan

If you have been suckered into a car loan in which you owe more money to the lender than the car you bought with the loan is worth, otherwise known as an upside down car loan, a good way to get yourself out of this hole is to refinance your upside down auto loan.

How do you get rid of your car if you still owe money on it?

If you simply can't afford your car payments any longer, you could ask the dealer to agree to voluntary repossession. In this scenario, you tell the lender you can no longer make payments ask them to take the car back. You hand over the keys and you may also have to hand over money to make up the value of the loan.

Trading In Your Car When You Still Owe

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Can I give my car back to the finance company?

If you financed your car with a Personal Contract Purchase loan and you've already paid off at least 50% of the amount owing, you can hand it back to the lender. Keep in mind that this 50% figure also includes fees and interest.

Can I sell my car back to the dealership?

You can sell your car to a dealership even if it's on finance from another dealership or lender. It doesn't matter if it's a HP or PCP agreement either, as the process for selling your car is the same for both.

How can I get rid of my car without hurting my credit?

What to Do if You Can't Make Your Car Payments
  1. Sell the vehicle. If your car is worth as much as or close to the balance on your account, selling it could enable you to pay off the loan without harming your credit. ...
  2. Allow someone else to take over payments. ...
  3. Refinance the loan.

Does CarMax buy cars that are upside down?

Will CarMax Buy an Upside Down Car? Yes, CarMax will buy your car even without you buying any car from them. If your loan is upside down, it's much more difficult to catch up on your repayments because your car's value continues to decline over time.

Does voluntary repossession affect your credit?

The simple answer is yes, a voluntary repossession affects your credit score. Even if a borrower does give up their vehicle voluntarily, their credit score still takes a hit.

How do I get rid of negative equity?

If paying off the car's negative equity in one fell swoop isn't on the table, pay a little more each month toward the principal. For example, if your monthly car payment is $351, round up to $400 each month, with $49 going toward the principal. The more you can pay, the faster you'll get rid of the negative equity.

What is a voluntary repossession?

When you know you can't afford your car anymore and the repo man is closing in, you have the option of doing what's called a “voluntary repossession” or “voluntary surrender.” You take your vehicle back to your lender or dealership before it's taken from you.

Will CarMax pay off negative equity?

If your pay-off amount is more than our offer for your car, the difference is called “negative equity.” In some cases, the negative equity can be included in your financing when you buy a car from CarMax. If not, we'll calculate the difference between your pay-off and our offer to you and you can pay CarMax directly.

Can I sell my car to Carvana if I still owe on it?

Yes. Until the sale of your car to Carvana is final, continue to make your normal loan payments to avoid late payment penalties with your lender. Any overpayments will be reimbursed to you.

Can I sell my car to CarMax if I'm behind on payments?

Yes! CarMax will buy a car with a loan on it in most cases. Unless you're way too far upside down on the loan, CarMax is likely to purchase the car from you. If you want to sell a vehicle to CarMax that still has a car loan on it, schedule a meeting or walk into a branch near you.

How much does a voluntary surrender affect your credit?

A voluntary repossession will likely cause your credit score to drop by at least 100 points. This point drop is due to a couple of factors: the late payments that cause the repo and the collection account that is likely to result from it.

How do you give a car back to the bank?

How to Give a Vehicle Back to the Bank
  1. Contact the Lender Directly. Call the bank that holds your auto loan. ...
  2. Negotiate With the Supervisor. Ask for a supervisor if you know you owe more on the loan than the car is worth. ...
  3. Arrange a Ride Home. ...
  4. Turn Over the Appropriate Items. ...
  5. Request Proof of the Transaction.

What if my trade in is worth more than the car I'm buying?

If your car's trade-in value is more than your current loan balance, then you're all set—you can just pay off the old loan and apply the difference toward the cost of your new vehicle.

Will a car dealer settle my finance?

Will a car dealership settle my finance? Another short answer: yes. This is a popular process for people looking to upgrade or change their car before paying off the total outstanding finance.

Is a voluntary surrender better than a repo?

Voluntarily surrendering your vehicle may be slightly better than having it repossessed. Unfortunately, both are very negative and will have a serious impact on your credit scores.

What happens if you finance a car and want to return it?

If you return the car to the lender, 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.

How do you trade in a car with negative equity?

When trading in a car with negative equity, you'll have to pay the difference between the loan balance and the trade-in value. You can pay it with cash, another loan or — and this isn't recommended — rolling what you owe into a new car loan.

Can a co signer voluntarily surrender a car?


If you signed a vehicle loan with a co-borrower, you and the co-borrower have full responsibility for the loan and equal ownership rights to the vehicle. If you are behind in the payments, either one of you can surrender the vehicle to the lender or authorize a repossession.

How does a voluntary surrender work?

A voluntary surrender occurs when you contact the lender on your own to let them know you can no longer make payments and make arrangements to give up the vehicle. You still lose the vehicle, but surrendering it voluntarily allows you to avoid the stress and potential embarrassment of a repossession.

Can you buy a house with a repo on your credit?

In most cases, you should be able to get a home loan even if you have a repossession on your credit report. But it will not be easy, especially since the current mortgage market has tightened because of the economic effects of the coronavirus. You may have to shop around and look harder than usual.