Pay off the car loan
If you are struggling to meet your monthly payments, paying off your loan entirely may not be possible. But if you have the financial backing to pay it off early, you can walk away and get rid of the financial stress. One way to pay off your loan is to pay one large lump sum.
Selling, trading in, refinancing, or negotiating a payment adjustment are usually better options to get out of a car loan without negatively impacting your credit score than running afoul of a knock to your credit.
Voluntary surrender counts as a derogatory or negative mark and will stay on your credit reports for up to seven years.
In some instances, a dealer may accept the return of a financed vehicle if it's necessary to avoid repossession. What's important to keep in mind here is that a vehicle's value depreciates quickly. Even after just a few months of ownership, you may owe more on the car than it's currently worth.
Trade In or Sell Your Vehicle
If you need more than just short-term relief and refinancing isn't an option, it might be worth it to get rid of the car. You could either trade it in to a dealership or sell it to a private party and buy a used vehicle.
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.
How Much Does a Voluntary Repossession Affect Your Credit? Estimates vary, but you can expect a voluntary repossession to lower your credit score by 50-150 points. How big of a drop you will see depends on factors such as your prior credit history and how many payments you made before the repossession.
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.
You will need the title before selling the vehicle to a junkyard. Once you have your title, make sure you can sell the vehicle. If it has a lien placed on it, you'll need to pay off the loan before you can sell your car.
If your lender can't locate your vehicle to do a "self-help" repossession, they can still sue you for the vehicle. This will involve a small claims case, where the judge will order you to give the car to the lender. You might even be compelled to Court to provide testimony about the location of the vehicle.
Return the car
You'll have to pay an early termination fee, usually a set dollar amount plus the difference between the balance on your lease and the car's market value. Be sure to calculate whether the fee would be more than your remaining monthly payments.
Some contracts allow you to give back the car and end the contract, most don't. Usually you will still owe money. If you are allowed to return the car to end the contract you still have to tell the finance company and drop it off where they ask you to. If your car is repossessed that doesn't clear the debt.
You can definitely sell your car back to the dealership, but most likely you'll take a bath on the transaction. Dealerships can often offer a better deal on a trade in and make it up on the sale of the replacement, but since you're not replacing the vehicle you're at a disadvantage.
CarMax buys vehicles that are not paid off. To sell a car you still owe money on to the retailer, you must provide loan information so CarMax can pay off the lender. If you owe more than your offer, you will need to cover the difference.
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.
Church grants are forms of financial aid provided by religious organizations to support individuals and families facing financial hardships. These grants can address various needs, including housing, utility bills, medical expenses, and car payments.
Q: Can you trade in a financed car? A: Yes, you can. If you have positive equity on the car (as in it's worth more than what you currently owe), you can trade it in easily. The dealer will purchase the car and pay off the loan, then they'll put what's left toward the new vehicle price, giving you a major advantage.
You'll get more for your car if you do a private sale (you can advertise on sites like Craigslist or Cars.com), rather than selling it to a dealership. You just need to let the buyer know you'll have to pay off the car loan first before you can give them the title.
If you can't afford your car payments, you can give the vehicle back to your car loan lender. This option is called a "voluntary repossession." But just because you surrender the car doesn't mean that the creditor has forgiven the debt or that it has to.
Though repossession isn't a situation you want to encounter, engaging in the process voluntarily has some advantages, helping you to mitigate the stress, inconvenience, and financial impacts of a sticky situation. Some important benefits include: You avoid the stress and embarrassment of an involuntary repossession.
The Bottom Line. Your car will eventually be repossessed if you don't pay your car loan. Before that point, you'll be charged late fees for your missed payments, your credit score will take a significant hit, and you may be charged fees for repossession.