Your loan terms change (yo-yo financing) The short answer is: You can still refuse the deal. To unwind the transaction, you must bring the car back to the dealer, who should then return your trade-in and down payment. Each state has its own laws about how this should happen.
If you have been approved for car finance but have not yet taken possession of the vehicle, you may still have the option to decline the offer without it affecting your credit rating, depending on the terms of your loan agreement.
For the most part, once the contract has been signed, you cannot return the vehicle. That said, there are some used car dealerships, such as CarMax, that have a 30-day return policy, but those are the exception rather than the rule.
You changed your mind
Once you sign the sales contract, you're responsible for paying the note as promised. Although the FTC has a “cooling-off rule” — a rule where you have three days to cancel a sale made at your home, workplace or seller's temporary location — a vehicle purchase is among its exceptions.
No. You're actually still responsible for whatever the remaining balance on the loan is. It will hurt your credit if you walk away. You might also get sued if the remaining balance is large enough.
Ask for a Voluntary Repossession
Voluntary repossession allows you to return a car you financed without being subject to the full repossession process. This could spare you some credit score damage, though a voluntary repo could still be reported to the credit bureaus.
Since you can't really cancel an auto loan, it's good to know how to get out of a vehicle loan properly in order to avoid negatively affecting your credit reports and score. These impacts could, in turn, affect your ability to get another car loan.
You can sell your car to get rid of it without hurting your credit. This is easiest if the value of your car is close to or above the balance of your loan. You could also transfer your current loan to another person if they're approved for financing and agree to take it over.
If You've Signed Papers but Not Taken Delivery
In this circumstance, call the dealership as soon as possible. If your salesperson isn't helpful, ask to speak to the manager and tell them you'd like to cancel the sale. The fact that you haven't taken possession yet may work in your favor.
Although the likelihood of it happening for a legitimate reason is very low, you can get denied a car loan even after driving off the lot. Here are some common reasons why: You lost your job. The lender will likely verify your employment when processing your application for financing.
There is a federal law (and similar laws in every state) allowing consumers to cancel contracts made with a door-to-door salesperson within three days of signing. The three-day period is called a "cooling off" period.
Definition and Example of the 3-Day Cancellation Rule
The three-day cancellation rule is a federal consumer protection law within the Truth in Lending Act (TILA). It gives borrowers three business days, including Saturdays, to rethink their decision and back out of a signed agreement without paying penalties.
Take your time. Make sure the contract is really what you want. It is ok to change your mind before signing or agreeing to a contract. Make sure to get a copy of the signed contract and keep it.
Returning a financed car without damaging your credit is possible by following specific steps. It's important to assess your financial situation, communicate with the lender, and explore alternatives such as voluntary repossession or selling the car.
Can You Apply for a Loan and Not Accept It? Yes. If a lender has approved your application for a personal loan, you're not required to take it. This is an important distinction from credit cards, where your account is opened immediately upon approval.
Note: Except as provided under statutes described above, consumers do not have a general three-day right to cancel a contract or purchase. For example, consumers do not have the right to cancel the purchase of a motor vehicle.
New Jersey law provides that sales that are performed and completed on a door-to-door basis are cancelable within three days. This is a specific law which contradicts the basic contract principles.
It has an impact on your credit mix.
If the auto loan was your only installment loan, then paying it off and closing the account could decrease your credit mix.
When you return a car you can't afford to the lender, it's called voluntary repossession. It still hurts your credit.
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.
Absolutely. If you've gone through the necessary steps to apply for an auto loan and been approved, you're not obligated to accept the offer. Auto experts advise borrowers to seek preapproval with multiple lenders to find the best offer, then use that as a backup at the dealership.
Lowering your credit score
Paying off your auto loan early eliminates the auto loan from your mix of credit accounts, which can cause a slight decrease in your credit score. However, any dip in your credit score should be temporary, as long as you don't have other negative factors affecting it.
Being accepted does not mean that you have to accept the money. Instead, it simply means the lender has accepted your application and is willing to loan you the funds you applied for in the form of a loan. Fortunately, choosing not to accept a loan that you are approved for does not yield any consequences on your end.