Voluntary Car Repossession: What You Need to Know before Surrendering Your Car

A voluntary repossession involves turning your car over to your lenders or creditors instead of waiting for the car to be forcibly repossessed. Consumers who voluntarily turn over the keys to their vehicle have either already fallen behind on car payments, or are aware of financial trouble that will likely force them to default on the car loan.

Repossession Fees

The primary reason to opt for voluntary repossession is that you avoid all of the fees charged when the creditor has to seize your property. Avoiding extra debt on top of the balance of the car loan is a responsible and practical decision, considering in the event of an imminent repossession you’re already in a shaky financial situation. Aside from feeling like you are in control over losing your vehicle, by turning the car over yourself you save yourself from incurring additional loan related expenses.

Contact the Lender

The first step in initiating a voluntary repossession of your car is contacting your lender directly. In most cases, once you inform your financing company that you wish to turn the car over, they will work with you toward a solution that allows you to keep the car and continue making payments. Remember, lenders make their money when you make payments toward the principal and the interest they charge. It is in their best interest to keep you locked into a loan, even a modified and more affordable version of the loan. Before you call, have a bottom line in mind. Meaning, do not accept any loan modification or refinancing offers aside from one that you predetermined would be manageable. If the answer is you simply cannot make car payments at all, be firm on that and insist on the repossession.

Credit and Loan Balance

There are two serious and common misconceptions about the difference between a voluntary and involuntary vehicle repossession.

The first is that your credit is less affected by turning the car over yourself versus having it seized. This is not true. As far as your credit report is concerned, both kinds of car repossession look the same. Both situations indicate that, at one time, you were unable to make payments you had committed to making. The repossession will stay on your credit report for seven years, whether or not it was voluntary.

The second misconception is that turning the vehicle over lessens your obligation to finish paying off the difference between the loan balance and the car’s value. In most cases, the current market value of a car will not cover all of the leftover loan balance. You need to pay the remainder, even if you turn the car in for repossession voluntarily.

In the event you cannot continue making your car loan payments, voluntary repossession may be your best course of action. By turning the car over you avoid costly seizure fees; and by simply initiating the conversation with your lender you may be able to alter your monthly payments to a more manageable amount.

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