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Whether you need to replace one that is no longer repairable or you're looking to add to your current vehicle collection, purchasing a car is an exciting time in your life. What most people don't find as exciting though, is adding another monthly bill to their current rotation in the form of a car payment. If you're like the majority of car buyers, that's exactly what you'll be doing because few people have tens of thousands of dollars sitting around so they can purchase a car outright.
What happens if you go through all the trouble to secure financing and you realize that you don't actually want or need the car after all? Can you take the car back to the dealership? Does it matter if, after driving the car for a few days, you realize that it is woefully unsuitable for your needs? What are your options for voluntarily surrendering your car? What about if you realize that you've purchased a car that's way out of your budget? Do you have any options for returning the car and getting a fresh start?
If you're like most people, you probably never thought you would be thinking about returning a car -- much less one that you financed. We're here to walk you through some of the most common questions and scenarios regarding returning a financed car to the dealership.
Can you return a financed car within 30 days?
There is no blanket law or requirement that allows you to return a financed car within 30 days. Unlike retailers who have return and/or exchange policies that could only be described as generous in comparison, most dealerships and car companies don't offer you a way out of your contract should you change your mind. That being said, there are some instances when you might be able to do so anyway.
Some car companies and dealerships have a policy that allows you to return a vehicle within a certain time frame -- and for any reason. There is no industry standard and the return period could be as little as three days or as much as 30 days after the sale of the vehicle. It's important to carefully read your contract before you sign it -- or go back and reread it now to determine if there is any mention of a return period in it.
A notable exception to the above is something known as the lemon law. Each state in the country has this consumer protection law in effect. It allows you to return a vehicle that is so seriously flawed that it is basically irreparable and receive a full refund. The onus of proof is on you though, and the requirements for a car to qualify as a "lemon" are strict.
How do I voluntarily surrender my car?
If you realize that you are unable to keep up with your obligation to pay for your car, you can voluntarily surrender it instead of waiting for the dealer to repossess it. There are certain steps you should take so that the car dealer is aware of your intentions.
1. As soon as you realize that you are unable to make your payments and that you no longer want the vehicle, contact the car seller.
2. Inform the dealer that you are no longer going to make payments on the vehicle and that you are bringing it back.
3. Set up a convenient time when you can bring the vehicle back. Don't forget to bring a ride home!
Because this process is voluntary, you have a great deal more control over it than if you simply stopped paying on the car loan. In that case, the dealer would eventually come and repossess it. This could happen at any time of the day or night. It might even happen while you are at work -- which is likely to result in significant embarrassment for you.
Voluntary surrender of the vehicle allows you to not only get out of paying a car loan that you can no longer afford, but it also gives you the time to make other arrangements for transportation. It's an easier experience overall and it might save you money compared to a traditional repossession.
Is voluntary surrender better than repossession?
Many people wonder if they should voluntarily surrender their vehicle instead of waiting for the dealer to take it away unexpectedly. You might be thinking that perhaps if you brought the car back on your own, then your credit wouldn't take as big of a hit.
Unfortunately, the answer is that if you voluntarily surrender a vehicle the effects on your credit will still be about the same if it was repossessed by the car dealer. Because you didn't uphold your end of the agreement you had with the car dealership, a repossession will show up on your credit report for as long as 7.5 years.
One bright spot to note in this scenario is that a voluntary surrender and a repossession will appear differently on your credit report. A repossession will be listed as such and so will a voluntary surrender.
Though there is no guarantee, it's possible that a future lender will look more favorably upon a voluntary surrender than a repossession if you should try to get a loan agreement in the future. Still, be prepared for your credit score to be lower and to have more difficulty securing new loans or lines of credit in the future.
Does it matter if it's a used car or a new one?
When it comes to voluntarily surrendering your car, it generally doesn't matter if the car is new or used. That being said, sometimes car dealerships will offer a time period when you can return a new or certified pre-owned car within a certain time frame. This option might not be available if the vehicle is used or if it is purchased from an individual though.
Your credit will still take a nosedive\ and you might have a hard time getting approved for loans, apartment rentals and lines of credit for some time afterward. Still, choosing a voluntary surrender over repossession allows you to have more control over the situation and less anxiety tied to it. You can decide when and where to give up the vehicle so that you'll have time to make other arrangements.
Communicate with the dealer
The best thing you can do if you are unable to make your car payments is to call the car dealership as soon as possible. They might be able to defer payments if your money situation is temporary, or they might offer other options. The bottom line is that you won't know what your choices are if you don't communicate with them about what's happening.
You may find this post interesting too: Can you pay off a car loan early to avoid interest?