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Voluntary Repossession

Voluntary Repossession

When financial hardship strikes and you find yourself unable to keep up with your car loan payments, voluntary repossession may seem like a viable solution.

However, it’s important to understand the pros and cons of voluntary repossession before making such a big decision.

Below, I want to lay out what voluntary repossession is, how its done, along with advantages, disadvantages, and alternatives.

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What is Voluntary Repossession?

Key PointsDescription
DefinitionVoluntary repossession, also known as voluntary surrender, is the process of proactively returning your vehicle to the lender when you can no longer make the required payments.
PurposeBy voluntarily surrendering your car, you avoid the lender forcibly repossessing it, which can be a stressful and potentially embarrassing situation.
What is Voluntary Repossession

How Does Voluntary Repossession Work?

The process of voluntary repossession usually involves the following steps:

  1. Contact the Lender: Inform your lender about your financial difficulties and express your intention to voluntarily surrender the vehicle.
  2. Arrange the Surrender: Work with the lender to schedule a time and location for returning the vehicle. Ensure you have all the necessary documentation, such as the keys and any personal belongings from the car.
  3. Document the Surrender: Obtain written documentation from the lender confirming the date, time, and location of the surrender. This documentation can be useful if any disputes arise in the future.
  4. Vehicle Sale: The lender will attempt to sell the vehicle, typically through an auction or private sale, to recover the outstanding loan balance.
  5. Deficiency Balance: If the sale proceeds are insufficient to cover the remaining loan balance, you may be responsible for paying the deficiency balance, which is the difference between the sale price and the outstanding loan amount, plus any additional fees or charges.

Pros and Cons of Voluntary Repossession


  • Avoidance of Embarrassment: Proactively surrendering the vehicle can help you avoid the potential embarrassment and stress of having the car forcibly repossessed from your home or workplace.
  • Potential Cost Savings: Voluntary repossession may help you avoid certain fees associated with involuntary repossession, such as towing and storage charges.
  • Cooperation with the Lender: Demonstrating a willingness to cooperate with the lender may improve your chances of negotiating a settlement or future credit opportunities.


  • Credit Score Impact: Both voluntary and involuntary repossessions can severely damage your credit score, potentially making it difficult to obtain future loans or credit. According to Experian, one of the three main consumer credit bureaus, a repossession can remain on your credit report for up to seven years as a derogatory mark.
  • Deficiency Balance: You may still be responsible for paying the deficiency balance, which can be a substantial financial burden. A study by the Consumer Financial Protection Bureau found that the average deficiency balance after a repossession is $7,155.
  • Transportation Challenges: Losing your vehicle can create transportation difficulties, potentially impacting your ability to commute to work or fulfill other obligations.

Voluntary Repossession and Your Credit

While a voluntary repossession may be noted differently on your credit report than an involuntary one, the impact on your credit score is typically the same.

Lenders view both types of repossessions as serious delinquencies, indicating a high risk of default on future loans.

However, by communicating and cooperating with your lender during the voluntary repossession process, you may be able to negotiate more favorable terms, such as having the lender agree not to report the repossession to the credit bureaus.

Keep in mind that credit bureaus can still demand this information from the lender, so there’s no guarantee that the repossession won’t appear on your credit report.

Related Article: How Long Does a Voluntary Repo Stay on Your Credit

Can You Voluntarily Surrender a Car That Doesn’t Run?

Yes, you can voluntarily surrender a car that doesn’t run. However, it’s essential to communicate with your lender about the vehicle’s condition and discuss any potential impact on the deficiency balance you may owe after the car is sold.

Do You Have to Pay If You Voluntarily Surrender Your Vehicle?

In most cases, yes. Voluntarily surrendering your vehicle does not automatically erase your debt.

If the lender sells the car but doesn’t make enough to cover the outstanding loan balance, you could still be liable for the difference—known as the deficiency balance.

Additionally, you may be responsible for any fees associated with the repossession process, such as storage or selling costs.

Alternatives to Voluntary Repossession

Before considering voluntary repossession, explore alternative options that may help you avoid this drastic measure:

  • Loan Modification: Contact your lender and discuss the possibility of modifying your loan terms, such as extending the repayment period or temporarily reducing the monthly payments.
  • Refinancing: If you have improved your credit score or financial situation, you may be able to refinance your auto loan at a lower interest rate, potentially reducing your monthly payments.
  • Selling the Vehicle: If the vehicle’s value exceeds the outstanding loan balance, consider selling it privately and using the proceeds to pay off the loan.
  • Debt Consolidation: Explore the possibility of consolidating your debts, including your auto loan, into a single monthly payment with a lower interest rate.
  • Bankruptcy: In extreme cases, filing for bankruptcy may be an option to discharge your auto loan debt, although this should be considered a last resort due to the long-lasting impact on your credit.

Rebuilding Your Credit After Voluntary Repossession

If you have undergone a voluntary repossession, focus on rebuilding your credit:

  • Make Timely Payments: Ensure you make all future payments on time, whether it’s for credit cards, utilities, or other bills.
  • Reduce Debt: Work on paying down any outstanding debts, as high debt levels can negatively impact your credit score.
  • Monitor Your Credit Report: Regularly check your credit report for errors or inaccuracies and dispute them promptly with the credit bureaus.
  • Consider a Secured Credit Card: Applying for a secured credit card can help you establish a positive payment history and gradually improve your credit score.
  • Be Patient: Rebuilding credit takes time, but with consistent responsible financial behavior, the impact of the repossession will gradually diminish over the years.

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Key Takeaways

  • Voluntary repossession is the process of proactively returning your vehicle to the lender when you can no longer make the required payments.
  • While voluntary repossession may help you avoid the embarrassment and stress of a forced repossession, it can still have a significant negative impact on your credit score and financial well-being.
  • You may be responsible for paying the deficiency balance and any fees associated with the repossession process, even if you voluntarily surrender your vehicle.
  • Before considering voluntary repossession, explore alternative options such as loan modification, refinancing, selling the vehicle, debt consolidation, or bankruptcy.
  • Rebuilding your credit after a voluntary repossession takes time and requires consistent responsible financial behavior, such as making timely payments, reducing debt, and monitoring your credit report.

The Final Verdict

Voluntary repossession is a significant decision that should not be taken lightly.

While it may temporarily relieve financial stress, it can have long-lasting consequences for your credit and financial well-being.

Before going this route, carefully evaluate your alternatives and seek professional advice if necessary.

Remember, proactive communication with your lender and responsible financial management go a long way toward keeping the lender from aggressively pursuing a repo.


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Picture of Steve Momot - Author

Steve Momot - Author

Steve, a seasoned expert in the automotive industry, formerly held a car dealer license in Florida. With extensive experience spanning across car trading and mechanical work, he founded Autohitch. His mission? To guide both buyers and sellers through the intricate maze of car purchasing, ensuring a seamless and informed experience. Outside of the automotive world, Steve has a passion for fishing and capturing the beauty of nature through photography.


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