Are you struggling to keep up with the payments on your car loan? If you find yourself in a negative equity position with your car, you might consider returning it to the dealership. However, keep in mind that this is only possible if you owe the dealership for the car. If you owe money to the lender, you will have to return the car to the company that holds the loan, a process known as voluntary repossession.
If you choose to return the car to the dealership, it might be willing to purchase the car from you to avoid repossession. Some car dealerships even advertise that they purchase cars, even if you did not buy the car from them.
What Should I Expect When Returning a Car to the Dealership?
Before you go to the dealership, it’s essential to research the value of your car using tools such as NADA, Kelly Blue Book, Edmunds, AutoTrader, Consumer Reports, and CarFax. This information will help you determine the fair value of your vehicle, so you are prepared to negotiate with the dealership.
If the dealership agrees to purchase your car, it will calculate what it believes to be a fair price. However, it’s important to keep in mind that this price may or may not be fair. If you owe money on your car, the dealership will only pay you the net amount to purchase your car. The net amount equals the agreed-upon price less the payoff of all loans on your car. For example, if the dealership agrees to pay $15,000 for your car, and you owe $10,000 on the car loan, the dealership gives you a check for $5,000.
However, if you have negative equity in your car, you will owe money to sell your car. In other words, if your car is worth $10,000, and you owe $15,000, you will have to pay the dealership $5,000. If you cannot afford your car payments, taking your car to a dealership with negative equity will not help.
Returning a car to a dealership can be a complicated process. Be sure to research your options and the value of your car before making any decisions.
Understanding Voluntary Repossession: Returning Your Car to the Lender
Voluntary repossession is the act of returning your car to the lender, which could be a local bank or loan company, to avoid repossession. The lender sells the vehicle and applies the money towards your outstanding loan balance. If the sale generates more money than what you owe, you may receive the proceeds left over after paying off the loan.
However, cars sold at repossession auctions often go for less than their fair market value, meaning the lender may not receive enough money to pay off the loan entirely. In this case, you will still owe the remaining balance to the lender. If you fail to repay the debt, the lender may resort to legal action to collect what you owe.
It’s important to note that you cannot simply abandon the car in a parking lot and leave the keys at the front desk. The lender must accept possession of the vehicle, or you will remain responsible for the debt, even if the car gets damaged or stolen. If the lender does not accept possession of the vehicle, you will have to wait until it repossesses the car if you cannot sell it or pay off the loan.
Legal Options After Voluntary Repossession: Lawsuits and Bankruptcy
If you’ve undergone voluntary repossession and still owe money to the lender, it may file a debt collection lawsuit to recover the remaining amount. The lender may seek a judgment against you, allowing it to take legal action to collect the debt, including wage garnishment and asset seizure.
Responding to the lawsuit is crucial to protect your interests. You should demand a full accounting of the debt and documentation of the repossession sale. This will ensure that the lender followed the law and applied all funds to your account without charging unlawful fees or costs.
Alternatively, filing for Chapter 7 bankruptcy may be a better option than voluntary repossession. In a Chapter 7 bankruptcy case, you can discharge all the debt you owe on your car loan. This will prevent the lender from pursuing a debt collection lawsuit seeking a deficiency judgment, which is the amount owed after the sale proceeds for the car are applied to the loan balance.
However, to file for Chapter 7 bankruptcy, you must meet income qualifications and may have to liquidate some of your assets.
In Summary
Voluntary repossession is the act of returning a car to the lender to avoid repossession when you can no longer make the payments. If you owe the dealership for the car, you can return it to the dealership. Otherwise, you’ll have to return it to the company that holds the loan on the automobile. The lender sells the vehicle and applies the money towards your outstanding loan balance. However, cars sold at repossession auctions often go for less than their fair market value, meaning the lender may not receive enough money to pay off the loan entirely. If you owe money after the sale, the lender may file a debt collection lawsuit against you to recover the remaining amount. Alternatively, you may consider filing for Chapter 7 bankruptcy, which allows you to discharge all the debt you owe on your car loan.