Before you decide to return your vehicle, call your lender to find out if you can avoid repossession; your lender may be able to help you. You might have other options as well. Repossession substantially affects your credit rating. If keeping your car isn't an option, consider returning your car voluntarily.
Call Your Lender Immediately
Call your lender to find out if it can help you avoid repossession. Banks stand to lose money from repossessing a car. For this reason, your lender might have a program that offers relief to distressed borrowers. In some cases, you can defer your loan for several months, which allows you to skip payments and avoid penalties usually associated with non-payment, such as late fees or negative credit reporting. Your lender might also offer an opportunity to resign your loan contract for an extended term, which can lower your monthly payment amount.
Pursue Other Options
Consider other options available to you to avoid the repossession process. Transfer your loan to another lender, known as a refinance, to lower your monthly payment by as much as $100 per month. Payment difference will depend on your current and approved interest rates. If you do not qualify for a refinance because of recent non-payment issues, try to find a cosigner. Selling your vehicle may be another option. You must sell the vehicle for the loan's payoff amount, or you may have to borrow money to cover the balance due.
Avoid Involuntary Repossession
If all other avenues fail, you can call your lender to return your vehicle voluntarily. An involuntary repossession occurs when the bank sends a repossession company to take the vehicle back. This can prove an embarrassing situation if you're still driving the vehicle or have neighbors close to your home. The vehicle can be towed from just about anywhere, such as at your place of employment or a parking lot while you are shopping at a store. A voluntary repossession allows you to set the time and date for the vehicle's return.
Prepare to Pay
Once the bank collects the car, it will sell it at auction for wholesale price or sell it privately for retail price. Wholesale pricing is thousands lower than retail price. The vehicle's sales price is then deducted from the loan balance and you must pay the amount due. Your bank can---and will---exercise its legal rights to collect payment. The bank may not pursue payment immediately, but expect the bank to sue you and eventually garnish your wages unless you settle the balance. If you settle, the IRS considers the canceled balance as income, and you must pay taxes on it. You may have to pursue bankruptcy to avoid future payment.
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