Once upon a time, you loved your car. You loved it so much that you agreed to the payment terms and drove it home from the dealer or, dare we say, a private seller. But now, that love has grown cold and you wish youâd never laid eyes on it. And to make matters worse, youâre bound to its existence and monetary depreciationâthanks to that sweet-little-pain-in-the-butt payment book. Or at least, thatâs what youâre afraid of.
If youâre wondering if you can return your unwanted car without any more financial obligation, read on. Weâll discuss whether itâs possible and what you can expect.
Readers have asked us if they can just âgive the keys backâ and get a car that is reliable and without unanticipated problemsâspecifically, a vehicle they can confidently drive with their family, friends, or pets in tow. The short answer is yes, but thereâs a variety of potential repercussions and unseen problems.
Before you do anything, find out the following:
If you can answer âyesâ to either of these questions, look into these options further to see if your circumstances apply and what youâre entitled to.
However, if you have no recourse under your stateâs lemon law and your situation doesnât qualify for a dealershipâs return policy, returning the car is going to be a little tricky and could have credit implicationsâwhich youâll want to consider, especially if you plan to lease or purchase another car once you give the other one back.
Despite how liberating and freeing a car return may feel, giving the vehicle back to the dealer wonât erase your debt. In fact, the consequences could be just as frustrating as the junk car itself.
âTechnically, if you give the car back, it is the same as a repossession,â Matt Briggs, co-founder and CEO of RentTrack, explains. âKeep in mind you have a legal obligation to pay the terms of the loan and the car dealer is typically not the finance company who holds the loan (unless they are âbuy here pay hereâ). Either way you cannot simply âgive backâ the vehicle to a dealer and walk away.â
So look at it this way: to simply give the car back is to consent to automobile repossessionâmeaning the car would be sold at auction, and you would be responsible for the difference in what the car brought at auction and the amount you still owe on the car.
Plus, youâd be on the hook for expenses involved in this process, such as repossession, towing, title and sale, and storage. So if you leave the car at the dealership, you still owe the debtâwhich could total to more than the dang clunker is worthâand youâre out a working vehicle.
Concerned about what could happen to your credit score? According to Experian, a car repossession stays on your credit report for seven yearsâeven after the original account goes delinquent. You can see how your debt has affected you by getting a free credit report summary on Credit.com, which will explain what factors influence your credit score.
There is a way, however, to force a dealer to âeat steel,â says Eugene Melchionnne, a Connecticut bankruptcy attorney. To do so, you can surrender the car and discharge the debt in bankruptcyâbut then youâd have to apply for bankruptcy. âThere is also a process for âcramming downâ the debt to the value of the car in bankruptcy, and in a Chapter 13 case, you can spread the balance owed over an extended period of time,â he says.
âFor example, if the car loan is for $20,000, but the car is worth $10,000, the loan can be reduced to $10,000, and if there are, say, four years left to pay at $500 per month, the payments can be spread out to a maximum of five years on the lowered balance, resulting in $330 or more a month savings,â Melchionne explains.
With all that said, it might be simpler and cheaper to sell the vehicle yourself or trade it in for something else, which is what Matt Briggs suggests you do.
â[At] most repossession auctions, the cars sell for a much lower price than the retail value, so you may end up owing more than you would if you sold it [as a] private party (using a website like AutoTrader, eBay, or Cars.com) or if you traded it in on a different vehicle.â
The Bottom Line
For most of us, simply driving the car back to the dealership and handing over the keys, however tempting, is not a workable strategy. So after you dig yourself out of this mess, do as much due diligence as possible before you buy next time.
âBottom line,â Briggs said, âyou have a legal obligation to pay the car loan in full, so make sure you are getting a good deal before you sign on the dotted line.â
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