It’s a frustrating situation: you’re stuck with a car that won’t start, and the repair bills are piling up. On top of that, you’re still making loan payments on a vehicle that’s doing nothing but taking up space. You might be wondering, “Can I just give this car back?” The answer is yes, you can voluntarily surrender a car that doesn’t run, but there are important things to consider before you do.
Understanding Voluntary Surrender
Voluntary surrender, sometimes called voluntary repossession, is when you willingly give your car back to your lender because you can no longer keep up with the loan payments. This is different from a repossession, where the lender takes the car without your consent, usually after you’ve fallen behind on payments. While surrendering a car might seem like a quick solution to get rid of a non-running vehicle and the debt associated with it, it’s crucial to understand the implications.
Steps to Voluntarily Surrender Your Non-Running Car
If you’re considering voluntary surrender for your broken-down car, here’s a general outline of the process:
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Contact Your Lender: The first step is to communicate with your auto lender. Explain your situation – that your car is not running and you can no longer afford the payments or repairs. Inquire about their voluntary surrender process. Lenders often have specific procedures you need to follow.
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Arrange the Surrender: Work with your lender to schedule a time and place to return the vehicle. Since your car doesn’t run, you’ll likely need to arrange towing it to a location specified by the lender, such as the dealership or a repossession lot. Confirm who is responsible for the towing costs. Sometimes, the lender will cover it, but it’s important to clarify this upfront.
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Complete the Paperwork: Your lender will provide paperwork to formalize the voluntary surrender. Read these documents carefully before signing. Ensure they accurately reflect the terms of the surrender agreement, including the date of surrender and any fees you might be responsible for.
Considerations and Consequences
While voluntary surrender removes the immediate burden of car payments and a broken vehicle, it’s not without its downsides:
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Credit Score Damage: Voluntary surrender will negatively impact your credit score, though generally less severely than a full repossession. It will be reported on your credit history and can stay there for up to seven years, making it harder and more expensive to borrow money in the future.
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Deficiency Balance: After you surrender the car, the lender will sell it, often at auction. If the sale price doesn’t cover the remaining loan balance, you’ll be responsible for paying the “deficiency balance,” which includes the difference between the loan amount and the sale price, plus repossession and sale costs. With a non-running car, the sale price might be significantly lower, potentially leading to a larger deficiency balance.
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No More Car: This might seem obvious, but surrendering your car leaves you without transportation. Consider how this will impact your daily life, especially if you rely on a vehicle for work or essential errands.
Alternatives to Voluntary Surrender
Before you decide to voluntarily surrender your non-running car, explore these alternatives:
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Selling for Parts or Scrap: Even if your car doesn’t run, its parts or scrap metal may have value. You could sell it to a junkyard or private buyer for parts. This could give you some cash to offset the loan balance or put towards a new vehicle.
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Car Donation: Consider donating your car to a charity. You can receive a tax deduction for the donation, and it gets rid of the vehicle. Some charities accept non-running vehicles, but check their specific requirements first.
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Negotiate with Your Lender: Talk to your lender about other options like loan modification or a temporary payment plan. They might be willing to work with you, especially if your financial difficulties are temporary.
Conclusion
Voluntarily surrendering a car that doesn’t run is possible and might seem like a relief. However, it’s a serious financial decision with long-term consequences for your credit and potential for further debt in the form of a deficiency balance. Carefully weigh the pros and cons, explore all alternatives, and consider seeking advice from a financial advisor before making this choice. Understand all aspects of voluntary surrender to ensure it’s the right path for your situation.
