Can You Return a Car You Financed?

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If you’ve recently purchased a car and are having second thoughts about your decision, you may be wondering if you can return the vehicle you financed. While returning a car is not as simple as returning a piece of clothing, it is possible under certain circumstances. Understanding your options and the potential consequences of returning a financed car can help you make an informed decision.

First, it’s important to understand how car financing works. When you finance a car, you are essentially taking out a loan to pay for the vehicle. You’ll make monthly payments over a set period of time until the loan is paid off. If you decide to return the car before the loan is paid off, there are several options available to you. However, it’s important to note that returning a financed car can have a negative impact on your credit score and may result in fees or penalties.

Key Takeaways

  • Returning a financed car is possible under certain circumstances, but it may have negative consequences for your credit score and result in fees or penalties.
  • Options for returning a financed car include voluntary surrender, selling or trading in the vehicle, and refinancing the loan.
  • Understanding the terms of your loan agreement, consumer protection laws, and potential legal considerations is important when considering returning a financed car.

4 Ways to Return a Car with a Car Loan

If you can no longer afford to make your car payment you do have options. It is possible to return a car with a car loan to a dealer, however, they may have certain requirements or rules around it. It’s best to talk with the dealer or lender you have for your car loan and figure out your options before returning it. You can face significant fees or damage your credit substantially by walking away.

Before you try to return your car to a dealer, you should look into:

  • A voluntary repossession. A voluntary repossession is when you inform your lender that you can no longer make payments and intend to return the car. The lender will arrange a time and place for you to return the car. A voluntary repossession will still negatively impact your credit score the same as a involuntary repossession. Keep in mind that when the lender sells the car at auction you may be responsible for the difference between sale price and remaining balance on the loan.
  • Selling the car yourself. A private sale, or even a sale to another dealership, is the route most try to take before going to the lender. This is the best option if your car is worth more than you owe on the car with your loan. You will have to handle all paperwork yourself and will not be able to rely on the dealer or lender to do so.
  • The dealership return policy. This is not a common thing but some dealers do have a return policy. These policies require you to return the car with 5 to 7 days after purchase and are usually focused on a defect or large issue with the car.
  • Your “Right to Cancel”. If you’ve recently financed a car then you have a right to cancel the contract within a certain timeframe. This is also known as the “cooling-off rule”. This rule only applies to certain types of contracts and may not apply to every financed car.

Your best option is to not return the car and to continue making your monthly payment to avoid putting yourself in further debt or credit shambles. If you’ve come under some hard times or no longer can afford to pay your monthly payment then you should talk with your lender about your options. There are cases where they can defer payment until you get back to work and may lenders have several other options to help you keep your car.

If you have to return the car then you should opt to try and sell privately or to another dealer to avoid credit issues or issues with the lender. You should only do an voluntary repossession as a last resort.

Alternatives to Returning a Financed Car

Returning your car, voluntary or involuntary, should be your last resort. Before you consider returning your car you should look into other options and speak with your lender about what financial relief options they may have. The main alternatives to returning your car is to trade it in for a cheaper solution or refinancing the current auto loan you have to make it cheaper on your monthly payments.

Trading in a Financed Car

If you’re looking to sell or trade in a car that you still owe money on, there are a few things you need to keep in mind.

Here’s what you need to know:

  • Determine your car’s value. Before you sell or trade in you car you’ll want to know what it’s worth so you can negotiate correctly. You can use online resources, like Kelley Blue Book, to get an idea of what your car is worth. Keep in mind that the value of your car will depend on a number of factors, including its age, mileage, and condition.
  • Check your loan balance. After you’ve figured out what your car is worth you can take that and subtract it from the value and see what you have left to pay to either pay off your loan or roll into a new financed car.
  • Decide whether to sell or trade-in. If you sell the vehicle, you’ll need to pay off the remaining balance of your loan before you can transfer the title to the new owner. If you trade in the vehicle, the dealership will pay off your loan balance and apply the remaining value of your car to the purchase of a new vehicle.
  • Get all the necessary documentation. You’ll need to make sure you have all the necessary paperwork regardless of what your plans are. This includes the title, registration, and loan documents. You may also want to provide potential buyers with a Carfax report or other online reviews of your vehicle’s history.
  • Consider trying to pay off the loan in other ways. This is not always feasible but either getting a second job or finding ways to reduce expenses in other areas could be very impactful. The goal would be to pay off your loan as much as you can before trading in to avoid rolling over your debt into a new loan.

Refinancing a Car Loan

Another options many pursue during financial hardships is to refinance their current auto loan. By refinancing you can help reduce your monthly payment and interest rate which make it more affordable to own your car and keep up with your payments. A refinance will replace your current loan and you will get a new interest rate, payment amount and terms. In many cases some will refinance for an extended loan term to reduce the overall amount they pay but will end up paying a lot more for the car over time.

You will need to find a lender who is willing to offer you a new loan with better terms than your existing loan. You can do this by shopping around and comparing different lenders and their offers. You can also check with your existing lender to see if they offer refinancing options.

Before you rush to refinance for a lower payment you will need to answer one major question: Will this refinance save you money in the long run?

For the average car buyer it very rarely makes sense to refinance your car loan unless you have fallen on very hard times. A typical car loan will last around 5 years and for the first 1-3 years you will be paying mostly on interest and very little on the actual principal of the loan you took out. This means that your car’s value will likely be much lower than what you owe on the car if you try to refinance before you hit the midpoint of your loan term.

The other major consideration is your current financial and credit standing. Since most who try to refinance a car are trying to do so to lower their monthly payment they aren’t always in the best financial situation. Because the value of the car often is much lower than the amount owed the lenders are taking on a considerable risk. Many lenders will require an above average credit score and sizable down payment to refinance your existing auto loan.

Consumer Protection and Legal Considerations

When it comes to returning a financed car, there are several consumer protection and legal considerations to keep in mind. These considerations can vary depending on your state’s laws, the terms of your sales contract, and the condition of the car.

One important consideration is your state’s lemon laws, which provide legal protection for consumers who purchase defective vehicles. If your car has significant mechanical problems that cannot be fixed after a reasonable number of repair attempts, you may be eligible to file a lemon law claim. However, it’s important to note that lemon laws vary by state, so you should research the specific laws in your state to determine your eligibility.

In addition to lemon laws, there are also federal and state consumer protection laws that can provide legal recourse if you feel you have been ripped off or treated unfairly by a car dealer. For example, the Consumer Financial Protection Bureau is a federal agency that helps protect consumers from unfair, deceptive, or abusive practices by financial institutions, including car dealerships.

Your state’s attorney general may also be able to provide guidance and assistance if you have been ripped off or believe your rights as a consumer have been violated. It’s always a good idea to research your state’s consumer protection laws and contact your attorney general’s office if you have any questions or concerns.

When it comes to returning a financed car, your sales contract is also an important consideration. The terms of your contract will dictate whether or not you are able to return the car and under what conditions. Be sure to read your contract carefully and understand your rights and obligations before signing.

Fees and Penalties for Returning a Car

When returning a financed car, it’s important to understand the fees and penalties involved. Here are some of the most common fees and penalties you may encounter:

As with most things related to finance, returning a car can lead to quite a few fees and penalties.

If you have to return your car for any reason you will likely face the following fees:

  • Early Termination Fee: A fee for returning your car before the end of your term. You may be charged a percentage of the remaining balance and depending on how much you still owe it could be quite substantial. It’s important to review your loan agreement documents for any early termination fees and how much they may be.
  • Remaining Balance Fee: A fee that is the remaining amount of your car loan that you have. Even if you return the car you will still owe the balance on your loan as that is a financial agreement you made with the lender. This is the amount you borrowed minus the payments you’ve made so far.
  • Deficiency Balance Fee: A fee for the balance remaining on your loan after the lender has sold the car at auction. This is the most common fee you may face when returning your car or having it repossessed. This may be a significant amount of money if there is damage to the car or the value of the car has dropped considerably with market changes.
  • Damage Penalties: Depending on the condition of the car you may be liable for any damages. For example, if you remove the brand new tires and swap them for excessively used tires before returning it they may charge you a fee to replace the tires.

Impact of Covid-19 on Car Financing

The Covid-19 pandemic has had a significant impact on car financing. With many people struggling financially due to job losses and reduced income, car loan delinquencies and defaults have increased. According to recent data, over 7% of all car loans in the US are currently in some sort of deferment program due to the coronavirus recession and record levels of unemployment.

If you are struggling to keep up with your car loan payments, it is important to take action as soon as possible. Ignoring the problem will only make it worse, and you could end up defaulting on your loan, which can have serious consequences for your credit score and financial future.

If you are at high risk of defaulting on your car loan, there are several options available to you. For example, you may be able to refinance your car loan to reduce your monthly payments or get a lower interest rate. This can help you save money and make your car loan more manageable.

Another option is to voluntarily surrender your car to the lender. This means giving the vehicle back to the lender before they have to repossess it. While this can have a negative impact on your credit score, it may be a better option than defaulting on your loan and having your car repossessed.

It is important to note that the impact of Covid-19 on car financing will vary depending on your individual circumstances. If you are struggling to keep up with your car loan payments, it is important to speak to your lender as soon as possible to discuss your options. They may be able to offer you a deferment or forbearance, which can give you some breathing room to get back on your feet.

In summary, the Covid-19 pandemic has made it more challenging for many people to keep up with their car loan payments. However, there are several options available to you if you are struggling, including refinancing, voluntary surrender, and speaking to your lender about deferment or forbearance.

Other Considerations When Returning a Financed Car

Returning a financed car can be a complicated process, and there are several other factors you should consider before making a decision. Here are some things to keep in mind:

Your Credit Score

Returning a financed car can negatively impact your credit score. When you return a car, the lender may report your account as “voluntarily surrendered,” which can be seen as a negative mark on your credit report. This can make it harder for you to get approved for credit in the future, and may result in higher interest rates on loans and credit cards.

Your Debt

If you return a financed car, you may still owe money to the lender. When a lender repossesses a car, they will sell it at auction to recoup their losses. If the sale price of the car is less than what you owe on the loan, you will be responsible for paying the difference, also known as a deficiency balance. This can be a significant amount of money, and you may be sued by the lender to collect the debt.

Your Options

If you are struggling to make your car payments, there may be other options available to you besides returning the car. For example, you could try to refinance your loan to lower your monthly payments, or negotiate a payment plan with the lender. You could also consider selling the car yourself to pay off the loan. Before making a decision, it’s important to explore all of your options and weigh the pros and cons of each.

Your Lienholder

If you have a lien on your car, you will need to contact your lienholder before returning the car. Your lienholder has a legal interest in the car, and they may have specific requirements for how the car should be returned. In some cases, they may require you to pay off the loan in full before returning the car.

Your Manufacturer

If you have a new car that is experiencing mechanical issues, you may be able to return it to the manufacturer under a lemon law. Lemon laws vary by state, but typically require the manufacturer to replace or refund the car if it has a significant defect that cannot be repaired after a certain number of attempts.

Your Towing Fees

If you return your car to the lender, you may be responsible for towing fees. The lender may require you to return the car to a specific location, and you will need to pay for the cost of towing the car to that location. This can be an additional expense that you will need to factor in when deciding whether to return the car.

Frequently Asked Questions

Can I return a car if it has problems?

If you have just bought a car and it has problems, you may wonder if you can return it. The answer depends on the dealer’s return policy and the specific problem with the car. Some dealers may allow you to return the car if it has significant problems that were not disclosed to you at the time of purchase. However, if the problems are minor or normal wear and tear, the dealer may not accept a return.

How many days after buying a car can I return it?

The number of days you have to return a car after buying it depends on the dealer’s return policy. Some dealers may allow you to return the car within a few days, while others may not accept returns at all. It’s important to ask about the return policy before buying a car so you know what your options are if you change your mind.

Can I trade in a financed car?

Yes, you can trade in a financed car. However, the trade-in value may be less than the amount you owe on the car, which means you will still have to pay off the remaining balance. If you plan to trade in a financed car, it’s important to understand your loan balance and the trade-in value of your car before making a deal.

How do you get out of a financed car?

If you want to get out of a financed car, you have a few options. You can sell the car and use the money to pay off the loan, trade in the car for a new one, or refinance the loan to get a lower interest rate or lower monthly payments. However, it’s important to understand the terms of your loan and any penalties for early repayment before making a decision.

What happens if I’m not happy with my new car?

If you’re not happy with your new car, you may be able to return it or trade it in for a different one. However, the dealer’s return policy and the specific problems with the car will determine your options. It’s important to address any issues with the dealer as soon as possible to find a resolution that works for you.