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. 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. 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.Does selling your car back to the dealership hurt your credit?
Will returning a car hurt my credit?
What will happen if I give back my financed car?
If you can't make your car payments, there are some clear advantages to voluntary surrender compared with involuntary repossession: You can avoid some of the penalties and fees imposed during an involuntary surrender, like towing and storage fees.
Ask about voluntary repossession: Voluntary repossession involves asking the dealer to take back your car because you can no longer afford the payments.
A voluntary surrender is turning your vehicle over to the lender because you're unable to make your auto loan payments—and it will hurt your credit. However, voluntary surrenders may not look as bad on a credit report as a repossession, so they may be a better option if offered.
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.
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.
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.
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.
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.
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.
The name makes it sound less severe, but a voluntary repossession is essentially the same as an involuntary one as far as your finances go. You'll still have to pay for the costs of the auction. You may still face a deficiency, a collection lawsuit, and wage garnishment.
If you financed a vehicle purchase through the dealer, they may have specific rules about when you can and can't return a car. Leasing agreements may include clauses for returning a vehicle early, though you may pay a penalty to do so. Returning a car you financed may have negative impacts on your credit score.
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.
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.
Rebuilding Your Credit
Here are some tips to rebuild your credit after repossession: Pay remaining debts on time to establish a positive payment history. Use secured credit cards to slowly rebuild your credit score. Check your credit report regularly for errors, and dispute any inaccuracies.
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.
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.
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.
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.
Trade-In Value Determination: The dealership will provide you with an offer for your trade-in based on their appraisal. Negotiate: If the trade-in offer is acceptable to you, you can negotiate the terms of the deal, including the price of the cheaper car you wish to purchase.