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Can I Give My Car Back To The Bank?

Last modified: Nov 20, 2022

Did you know that 88% of Americans own their car? And if you are one of that 88%, the chances that you are still paying off a loan are high. So here, we'll answer your most asked question: can I give my car back to the bank? Stay with us!

Can I Give My Car Back to the Bank?

When you first get your car, you are 100% you can make payments on time on your auto loan. But as time goes by, other expenses become more critical, and one day you might find yourself unable to make the monthly $550 on your auto loan. Can I give my car back? Can I take another loan to finance the vehicle? Well, the good thing is that you can return the financed car without penalty. There are some options you might take when willing to return the vehicle to the bank. 

Contact the Lender Directly

If you're having trouble making payments on your vehicle loan, contact your lender directly. Be truthful with your lender or bank. First, explain why you wish to return the car and can no longer afford to pay the loan. Then, after confirming a day and a location where you may drop off the vehicle, ensure it gets returned on time. 

Negotiate With the Supervisor

Many are looking for the answer to how to return a car they can't afford. If you cannot make payments on your car loan, your next step should be negotiating with the supervisor. Sometimes, they will be willing to work with you to create a new payment plan that fits your budget. However, some banks don't want to negotiate a better deal with you because they want to avoid the hassle of repossessing and selling your car. Therefore, the supervisor may offer a lower interest rate on your loan. In this situation, lenders will try everything they can for you to keep your car. 

  • Repossession

If you cannot agree with the bank or lender or miss a few payments, they may eventually decide to repossess your vehicle. 

But how many missed payments before the repo? Two or three missed payments in a row can lead to repossession. Repossession is their last resort and should only be done if you have stopped making payments entirely. If your car is repossessed, the bank will sell it at auction and use the proceeds to repay your loan. Any remaining balance will be your responsibility to pay. 

  • Voluntary surrender

If you know that you can no longer make payments on the auto loan, you can go with voluntary surrender. This is typically done when the loan balance is very high and you cannot sell the car for enough money to pay off the debt. The good thing about voluntary repossession is that your credit score won't be affected as much and it's usually still reported to credit bureaus.

In case of voluntary surrender, you hand over the car but keep in mind that you might need to give them money to make up for the loan value.

  • Proof of the Transaction

Once you have decided how to proceed, you will need to get everything in writing. This includes a letter from the bank or lender confirming that they have accepted your return and released you from the loan. You will also need proof of the transaction, such as a bill of sale or receipt. Be sure to keep all evidence if the lender makes a mistake claiming that you didn't return the car, which might lead to you being subject to towing fees.

The title loan value of my car

When looking for ways to return a car you can't afford, you might consider a title loan, but it's more complex. Keep in mind that this is just a loan and that it can only help you on the way to returning your car.

The title loan value of your car is where you can borrow up to 50% of the car's value at the expense of keeping your car as collateral. The lender will hold on to your car's title until you pay off the loan's total amount. But to qualify for this type of loan, you need a qualifying auto with sufficient equity, and there are two types of equity:

There are a few factors to consider, such as the make and model of the vehicle, the current condition the car is in, the current mileage amount, and the year of production, to name a few. 

Reasons for Returning a Vehicle

There are various reasons why you want to return the financed vehicle and return the financed car without a penalty: 

  • You can no longer afford the payments
  • You are not satisfied with the vehicle
  • You need a different type of vehicle 
  • You need to move to a new location (probably where public transport is more accessible).
  • You changed your mind about the car
  • You believe that you overpaid for the vehicle 

Whatever the reason, it is crucial to understand the consequences of each option before making a decision.

How to Avoid Voluntary Surrender

Suppose you are looking for a way to avoid the voluntary surrender of a vehicle. In that case, there are other things you can try, such as selling your car, allowing someone else to take over the payments, or simply refinancing the loan. 

Sell the vehicle

If you are thinking of returning the car but are unsure how that will go, consider selling your car to pay off the loan. With 17 million vehicles sold in the US alone in 2019, the number of traded cars has grown since 2019, meaning you won't be the only one selling your car to pay off the loan. 

If you go with this option - you'd have no vehicle and no car debt, which is a win-win situation if you stop and look at the bright side. One thing worth noting is that the car's value tends to depreciate quite quickly, so when you sell the car– it might be worth way less than what you owe on car loan debt. Therefore, you might need a personal loan to cover the difference.

Allow someone else to take over the payments.

Another thing when wanting to avoid voluntary repo is finding a person willing to take over the payments. In this case, the person who purchases the vehicle also claims ownership and takes full responsibility for the car loan. The lender or the bank may require the person to apply for financing and go through a credit check. After the lender carefully goes through everything that needs to be checked, they may decide that the person is not the right candidate and decline their option of taking over the payments. But if they present a great credit score, the bank will likely approve the person to take over the expenses. By showing an excellent credit score, they show that they won't be a risk to the bank and that they'll make payments on time. 

Refinance the loan

If you want to avoid voluntary repossession, consider refinancing as an option. When you refinance a loan, you usually get a lower interest rate. If you refinance for a longer loan term, your monthly payments will be lower, but you might end up overpaying the loan. So make sure you fully understand how refinancing works and carefully choose the new loan term with the interest rate and monthly payment depending on your financial status.

If you want to refinance your car, see the difference between leasing and buying

How to Return a Leased Vehicle

Can you return a financed car to the dealer with a leased car is not that straightforward. 

If you have a leased car, you might be in a bind. You can't sell the vehicle or go back to the dealership. I mean, sure, you can return it, but you'll have to pay termination fees that will eventually total up to a lot of money. But those willing to get out of their contract can take a few options, including transferring the lease to someone else. When they take over the lease, they agree to take over the payments. 

Lease-Swapping Sites

Lease swapping sites facilitate the transfer of a car lease from one person to another. This can be a good option if you need to get out of your lease early and want to avoid paying termination fees. In addition, these lease-swapping sites don't require a sizable down payment which works great for those taking over the lease. And some people are only looking for a car for a short time, so taking over a lease is an excellent way for them to get a new car for a few years. 

But using the sites will cost you between $100 and $350, which is only a fraction of what you'd pay to the leasing companies. 

When it comes to deciding whether or not to use a lease-trading website, you should do your research on both the firm that holds your lease and the site itself. 

How does returning a car affect your credit?

We already talked about the alternatives to letting a car go back without ruining credit, but we didn't talk about how your credit score will be affected if you go with voluntary surrender. 

Voluntary surrender damages your credit score. When you surrender your vehicle, you will have a substantially negative impact because you didn't fulfill the original loan agreement. But don't worry, voluntary surrender is way less damaging than repossession because it shows that you want to work with the lender to resolve your situation since you cannot afford to make payments. The good news is that you come back from the damage you'll receive in a few simple steps. 

How Can I Rebuild My Credit After I return my car to the bank?

Sadly, you cannot always avoid voluntary surrender, and you must know by now that voluntary repossession affects your credit score. But here's the good news: you can rebuild your credit score immediately. Here are some ways to start rebuilding your credit score.

  • Make all your payments on-time

One way to rebuild your credit score is to make payments on time. If you have other credit accounts - make sure everything is paid on time. This will show future lenders that you can make payments on time, even after returning a car.

  • Pay off debt

You will still need to pay off a deficiency balance when you return your car. But, if you pay off the debt, future lenders may be willing to extend credit. The less obligation you have, the more attractive you'll look to lenders. 

Bottom line 

The article's main question was can I give my car back to the bank. We tried our best to provide you with an appropriate answer. Next, we explained how to return your purchased and leased car and avoid voluntary surrender. Lastly, we explained how to rebuild your credit score after giving the car back.


How much does a voluntary repossession affect your credit?

 Voluntary surrender will damage your credit score by 50-150 points, but you can start rebuilding it immediately. 

How long does a voluntary surrender stay on credit?

 A voluntary surrender can stay on your credit report for seven years. 

Is a voluntary surrender better than a repo?

 Yes, because a voluntary surrender is an agreement between you and the lender, whereas a repo is a legal process that can involve fees and damaged credit. 

Can You Return a Financed Car to the Dealer?

To answer the question: can I give my car back to the bank- in most cases, no. Once you have signed the contract and taken possession of the vehicle, it is yors. But if you give them enough reasons why you need to return the car, they might take the car back. 


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