How to Return Financed Car without Penalty

Howdy, Driver? Do you wish to return financed car without penalty? Sincerely, it depends on your lender and the terms earlier in place. That notwithstanding, I will help put you on the proper course to return a car you can no longer afford.

return financed car without penalty


It is alright to sacrifice for the car you most desire. However, it becomes a problem when the car payment exceeds 15% of your income. You quite find yourself restless regarding how to return a car you can’t afford. Now, put your worries aside because there are several legal ways you can give your car back to the finance company without penalty.

Meanwhile, it is reasonable to activate a car loan payment you can see off within 36 months. It favors not just your finance, but the lending company in question.

So, can I return a car that I just financed? How do I get out of a car loan contract while in a financial crisis? You have so many questions that require answers; we have the answers.

Return Financed Car without Penalty

Are you tired of keeping the vehicle as an owner? Then, consider the following measures regarding how to get out of a car loan before it becomes late.

Below are my steps regarding how to return financed car without penalty:

1. Discuss Options with the Dealer

Contact the dealer or lender and ask, “can I return a car that I just financed?” You would get a “Yes” for an answer, but with conditions. If you are willing to trade for a less expensive car, disclose to your lender or dealer.

Most companies have loan-friendly options for every borrower to pay off debt comfortably. However, the dealer expects that the car is still highly valuable. For instance, if the mileage is high, the value or chances of return become slimmer because cars depreciate faster.

Moreover, if you owe $17,000 and your vehicle depreciates to $13,000, you still have the principal payment of $4,000 to pay off.

2. Refinance Car Loan

Several borrowers prefer to make car payments without refinancing. Consider refinancing your loan, although you will not get out of the car loan contract.

We have several options for refinancing a car loan. They include requesting for extended timeline, requesting lower rates, etc. These refinancing options can well prevent repossession.

3. Trade the Car

Consider selling off the car to cover outstanding debt as it is a way to return financed car without penalty. If the car value is less than the principal payment, take a personal loan to sort the outlying difference after repaying the lender.

Make sure not to finance with a credit card unless the interest rate is low enough.

4. Sell Off the Car and Loan

There are buyers out there willing to acquire the responsibility of the car loan payment. Simply advertise the car in a market place like eBay.

In a couple of days, you should secure bids from several willing buyers.

5. Surrender the Car

Since you are unable to make payments, surrendering your car is the better option. You can surrender the car to prevent the high costs of repossession.

However, the lender will not spare you the loss of the deficiency balance. But, it is worth it as it exempts you from repossession that comes with default fees.

How do I voluntarily surrender my car?

First, inform your lender that you will not be able to make payments going forward. Explain to the lender with valid reasons such as job loss, which will make it challenging to fulfill the car payment.

To avoid the penalty of returning your financed car, provide a letter highlighting your current financial challenges and your inability to make payment going forward.

You may request to meet the director in person and ask that your default be pardoned. In some cases, the lender will cut down the default fees, which is better than nothing.

Will the Lender Write Off Car Loan Balance?

No, the lender will not forgo the loan balance. After the lender sells the car you surrendered, he may sue you for balance deficiency.

What is Deficiency in Car Payment

When you surrender the car, the lender will sell it and apply the proceeds from the transaction to your loan balance. In most cases, the sales proceed is not always enough to cover the loan balance. As such, the lender will apply proceeds to your loan balance after reimbursing for the expenses incurred.

The remaining balance after the lender applies the sales proceeds is the deficiency balance. The lender may then decide to query you for the balance. Be careful because it often leads to court cases, and the lender may likely win. Bank levies and wage garnishment are two of the ways that to charge you until the balance is complete.

Does Surrendering Car Voluntarily Affect Your Credit?

Yes, it is traditionally considered a car loan default and can remain on your credit reports for up to seven years. It will likely affect your credit score, especially the automotive credit scores. Now, when next you apply for a car loan, lenders will charge you high interest because your credit report poses a high risk.

how to let a car go back without ruining credit

Nonetheless, it is better to surrender the car rather than risk a repossession voluntarily. Although voluntary surrendering is a default, repossession decreases the chances of getting the right loan next time.

When you surrender voluntarily, endeavor to restore your credit for the adverse credit mark to resolve. Do so by paying your bills on time and being timely with every other charge pointing to your credit score.

What a Leaser Should Do

You can’t sell the car if it is on a lease, but you have the option of returning the car to the dealer. However, if you return the car before the expiration of the timeline, you may be charged for default. Worse still, you have to pay the remaining balance, and you may lose the initial upfront payment.

Nonetheless, if you still wish to get out of the car loan contract before the timeline, you can escape without penalties. How? Simply shift the leasing responsibility to a willing buyer, and you are off the hook. The buyer will then be responsible for the months left on the calendar while you walk away.

You may have to discuss the shift with your leaser as it may be against their policies. Be rest assured that your leaser will agree because they wouldn’t want to remain stuck in the deal.

Sites You Can Shift a Vehicle Lease

Sites such as LeaseTrader and Swapalease can easily match you with lease buyers via their listings. Don’t worry about buyers assuming your vehicle lease because several persons out there need a car for short term purposes.

Moreover, they get to enjoy the benefit of evading a possible down payment, which you paid off already.

You may choose to offer an upfront incentive as high as $400 to lower the principal amount for the new car renter. It is a form of encouraging the person to proceed with the trade.

Transferring your lease responsibility comes with a price, a low price, nonetheless compared to what your lender may charge for default. The leasing website can charge anything between $100 and $350 to match you.

Note: Some leasers’ policies may demand that you make an additional payment for lease transfers.

Consider Transferring Car Lease if:

  • The buyer takes full responsibility for the car payment.
  • Your leaser is comfortable with the lease transfer.
  • The lease-trading site checks the credit of the lease buyer.

Lease-Swapping Alternatives

Sell the Car

If it is part of the company’s policy, you can buy the car while the lease is in progress. Sell off the car and pay off the outstanding amount. Nonetheless, if the value of the car is lower than the payoff amount, do not proceed with the deal.

Trade for Another Car

Can I voluntarily surrender my leased car for a less expensive car? Yes, you can if the dealer permits. However, you may have to pay the early termination fees.

Buy the Car

Confirm whether the leasing company permits you to acquire the car while the lease is in progress. It will mainly be cool if you have exceeded the mileage allowance of the contract and wish to own the vehicle. Contact the leaser and request the amount you have to pay to acquire the vehicle. You may dispute the price if you deem it fit.


What Happens to My Car Loan if I Lost My Job

Your lender dislikes when circumstances force you to default your loan. Contact your lender early and discuss the situation. Most lenders offer return policies that may include interest rate reduction, payment deferment for up to two months, etc.

If you fail to console the loan adjustments, your lender may repossess the car, and you will still pay for default. This article highlights measures regarding how to get out of a car loan contract during emergencies such as job loss, consider each of them early enough.

What Happens if I Return My Financed Car

The lender or dealer will sell the car and apply the proceeds to your loan balance after reimbursing for the expenses incurred. If there is an outstanding balance, that will serve as the deficiency balance, which the lender expects you to pay off.

In such a case, you may be penalized, which is why you must understand how to return financed car without penalty.

Can I Give My Car Back to the Finance Company

Yes, you can give your car back to the finance company if their return policy permits. It is just like asking, “Can I return a used car I just financed.” You can comfortably give back your car, but with a default fee. If the car is on the lease, your lender will charge you for terminating the contract before time.

The Bottom Line

It is rather harsh driving the car back to the dealer or lender than keeping the car. Moreover, it is not your fault that tough times hit you hard. Besides, there are several alternatives you can employ to escape not being able to afford car loan repayment. The earlier you analyze and understand the situation, the better it will be for you and the dealer or lender in question. Take a swift step now before it becomes too late to get out of a car loan contract.

Finally, consider voluntarily surrendering your car to avoid repossession. Although voluntary surrendering and repossession are both not friendly with your credit report, it is better to volunteer to return. If need be, trade the car for a less expensive car and save yourself the troubles.

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