What Happens if You Voluntarily Repo Your Car

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If you voluntarily repo your car, you turn it in to the dealer instead of having them repossess it. You save some money but your credit still takes a hit and you'll probably still owe something.

When you feel flush, you treat yourself to a hot new car, but then everything goes to hell in a hand basket. You lose your job or have to take on other, unexpected debt, and the car payments become impossible to make. You want to do a voluntary repossession, but you aren't sure of the implications. It's hardly an ideal scenario, but it may be slightly better than your other alternatives.

TL;DR (Too Long; Didn't Read)

If you voluntarily repo your car, you return it to the dealer instead of having them repossess it. You save some money, but your credit still takes a hit and you'll probably still owe something.

Voluntary Repossession

If you can't make your car loan payments and you don't take any action toward retiring the debt, the lender will repossess the car. When you bought the car and took a loan on it, you signed over the title as security for the loan, so if you don't meet your payments, the lender takes back the car and sells it. If they sell it for as much as you owe on the loan, you're off the hook. Usually, that is not the case, and you end up owing an amount still due on the loan.

It's bad for your pocketbook, with all those repo fees, and very bad for your credit. But unless you win the lottery, you may not have many alternatives. But you do have one – voluntary repossession. It works like this: You call the dealer to explain that you can't make the loan payments any more and want to return the vehicle. You arrange a time to drop off the car, and if you want, offer to help advertise the sale.

Advantages of Voluntary Repo

If you return the car voluntarily, you'll save a little money. If it is repossessed, you have to pay repossession fees that you avoid by doing it on a voluntary basis. You can also count on doing the drop-off at a reasonable time of day, rather than having the repo people visit your home in the middle of the night to take the car or remove it from your place of work. You also can feel a certain amount of satisfaction in having taken action to deal with a debt you could not pay.

Hard Truths About Voluntary Repo

But in almost every other particular, voluntary repo is the same as a regular repossession. You end up without a car, owing the difference between what they collect and what you owe, and your credit takes a hit. Both regular and voluntary repossession are negative credit events and stay on your record for seven years. And you are not very likely to be able to buy another car on credit with a repo, voluntary or otherwise, on your record.

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About the Author

Teo Spengler earned a J.D. from U.C. Berkeley's Boalt Hall. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an M.A. and an M.F.A in creative writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.