I Owe More Than My Car Is Worth – When buying a new car, it can be tempting to go beyond the base model and splurge on a few extras. This can include things like DVD players, navigation systems or anything automatic. With the average price of a new car rising to over $40,000, it’s important to make sure you can afford your car.
An unexpected layoff or job loss, or another situation that affects your ability to make car payments, may have you wondering what options you have to foreclose. Specifically, you might ask yourself: Can you return the car you financed? The answer is that it depends.
I Owe More Than My Car Is Worth
If you are taking out a car loan to finance the purchase of a new or used car, there are several options to pay it off and get out of the loan agreement or make your loan payments more manageable.
How To Trade In A Car That Is Not Paid Off
There are several reasons why you might want to return a used car. Repatriation of a car may be justified in any of the following situations:
Trading in your car for a cheaper one is something to consider if you still need a car but can’t afford what you have. You still have car loan payments. However, if the car is cheaper, the new payment may be more beneficial to your budget than before.
Lemon laws vary from state to state, so if you’re trying to repossess a car because it’s a lemon, find out what time limits may apply.
You may have to return the car if you can’t pay the bills. But before you return it, you can talk to the seller to find out what help they can offer. For example, if your financial problems are temporary, the seller may allow you to skip one or two payments and add them to the end of the loan term.
Signs Your Car May Be More Trouble Than It’s Worth
If you financed the purchase of a car through a dealer, you can return it. However, this will depend on the seller’s return policy and rules. Like lemon laws, there may be a time limit on how long you can return a financed car to the dealer.
In some cases, a dealer may accept the return of a used vehicle if necessary to avoid a refund. The important thing to remember here is that the value of a car depreciates quickly. Even after just a few months of ownership, you may owe more than the car is worth. This may mean giving money to get out of the car and getting a loan.
If your car is worth $20,000 and you still owe $25,000 on it, for example, you have to pay the $5,000 difference even if your dealer agrees to take it back. So this is something to consider when weighing up whether repossessing the car is the best option.
If the seller refuses to work with you, consider filing a complaint with the Better Business Bureau, your state attorney’s office, the Federal Trade Commission, and/or the Consumer Financial Protection Bureau.
Things To Avoid When Buying A Used Car
If you can no longer afford your car payments, you can ask the dealer to accept a voluntary repossession. In this scenario, you tell the lender you can’t make the payments, ask them to return the car. You hand over the keys and may have to hand over the money to pay off the loan.
Voluntary repossession allows you to return the vehicle you financed without going through the full repossession process. A voluntary repo will still be reported to the credit bureaus, although it will save you some credit score damage.
Ask about any penalties or fees you may have to pay for a voluntary repossession and how to report them to the credit bureaus.
If your dealer won’t let you return your car because it’s too old or your reason for returning it isn’t covered by the return policy, there may be other things you can try.
Can I Buy A Car With No Money Down?
If affordability is an issue with monthly payments, you may want to look into refinancing your car loan. Getting a new loan with a lower interest rate can save you money and potentially lower your monthly payments.
However, it is important to consider the new loan period. If you refinance the loan for a longer term, your monthly payment will be lower. However, you may end up paying more interest compared to choosing a shorter car loan. Be sure to check out the best car loan rates before going this route.
Another option you can consider instead of returning a car is to sell it and use the proceeds to pay off your loan. You may not own a car, but you don’t have car loan debt hanging over your head.
If the vehicle is now worth less than what you owe, you may need to get a personal loan to cover the difference if you don’t have the money to fill the gap with the lender. Financing the difference with a credit card is generally a bad idea, unless the card offers a very low interest rate.
Sell My Car
Finally, you can try to find someone to replace the car loan payments. You can advertise on marketplaces like Craigslist and eBay Motors to find potential buyers.
The person who buys the car owns the car and is also responsible for the loan. But the seller may require them to apply for financing along with a credit check before getting the loan. If they do not have strong credit, this option may not be available.
Read your loan agreement carefully to see if your lender allows someone else to take over your loan payments.
If you’re renting a car, you’re in a slightly different situation. Obviously you can’t sell it. You can return the car to the dealer, but if the lease hasn’t expired, you’re likely to face some steep early termination fees. In addition, you will owe the remainder of the rent, and to add insult to injury, you will lose the payment that was originally paid.
Can I Use My Car As Collateral For A Loan?
However, drivers who want to end their contract early can take heart: There are several options that allow you to avoid the usually harsh termination penalties. One of the ways that is often overlooked, and often the cheapest option, is to transfer the lease to someone else.
This is how it works. Let’s say you have two years left on a three-year lease. Your tenant agrees to make the remaining payments each month. While some financial companies do not allow such transfers, most do. The trick is to find someone who is interested in taking the reins for you.
Fortunately, many websites make this task very easy. Sites like Swapalease and LeaseTrader offer listings that help match current renters with potential lease buyers.
These trades can also be beneficial for renters. First, they don’t have to pay a huge down payment on a car that the original lessee has already built for them. In addition, some people only need the car for a short period of time, such as a year or two. Leasing is an ideal way to get a new car in such a limited time.
Totaled Car Value More Than Whats Left On The Loan???
Note that renting is usually not free. Using a merchant site to facilitate the transaction typically costs between $100 and $350. However, this is a fraction of what most rental companies will charge if you decide to return your car early. Some finance companies assess a lease transfer fee (usually around $300) when you arrange an exchange.
To sweeten the pot, you might consider offering an upfront incentive, such as $500, to reduce the payments your transferee must make.
Before you decide to sign up for a rental marketing website, it’s important to do your due diligence on the company that owns your rental and the website itself. Here’s what you want to know:
Depending on your financial situation, there are other possible ways to unload your rental car. This includes:
I Had A Visitor Today; Worth More Than My House.
Sometimes manufacturers will allow you to trade in your current vehicle for a different model. This option is a mixed bag. In many cases, you will still have to pay early termination fees, even if they are included in your new fees. In other words, the pain is spread over a longer period of time.
Usually, leasing companies allow you to buy the car before the end of the lease period. This is a course you’ll want to take if, for example, you’ve exceeded your lease mileage allowance and want to keep the car for a long time. The company should have a payment plan that shows how much you will pay to own the car.
Another option, if allowed, is to buy the car mid-lease and sell it to another party. Caution: The payment amount may be higher than the market value of the vehicle and this may result in the loss of the transaction. But if selling the car is cheaper than stopping it early
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