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Want to Return a Financed Car? Here’s When You Can Do

  • Auto Refinance
  • Nova Kainen
  • 8 minutes

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 As most people do, you may have financed a vehicle out of your dream to get your own car. But it can happen that due to unforeseen reasons, you might have to decide to return your financed car. What can you do in such a situation? Can you return a financed car without penalty? This blog will help you know about the possibility of returning your financed car.    

What are the possible reasons for returning your financed car?

People opt to return their financed car for several reasons; some of these are: 

  • Difficulty affording the monthly payments. 
  • Relocation to a new area where the vehicle seems to be of no use 
  • Found out that the car is a lemon 
  • Regret of having overpaid for the car    

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Is it possible to return a financed car to the dealer?

If your vehicle does not meet your needs or you can’t afford the payments, you will consider returning your financed car. Here are the laws and policies you should be aware of before planning to return your car. 

Lemon laws

These laws mandate that if a vehicle is proven to have a manufacturing defect that adversely affects the vehicle’s value, safety, or utility, the buyer may request a refund or a replacement.

The protections offered to differ by state, so you must be aware of the laws in your state. Even though lemon laws are most commonly associated with brand-new vehicles, some states apply them to used vehicles. 

Dealer return policies

Dealer return policies are one of the factors you should know about. You will be able to return your financed car if: 

  • The dealer from whom you’ve brought the car allows returns. 
  • You follow the terms of the policy, which includes certain time limits and mileage restrictions. 

If the dealer does not have a return policy, it is entirely the dealer’s discretion whether to accept the return.  

In certain cases, dealers might be willing to accept the return to avoid repossession, but you should be aware of the level of depreciation before making a final decision. 

What are the penalties associated with returning a financed car?

According to the auto financing system, you can’t just admit your inability to pay and give back the automobile without any hassle. When trying to return a financed vehicle, you may be hit with penalties due to the declining value of vehicles, lenders’ policies, or other factors. Cancellation fees usually will be around $200 to $500.  

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Replacement of a vehicle may result in additional charges and a drop in credit score. You’ll still owe the bank money if the insurance company tries to sell the car at an amount less than what you owe.  

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Does returning a financed car affect your credit?

When you are ready to go with voluntary repossession of your refinanced car, even after paying the difference amount, there are chances that the lender will report the repossession to the credit bureaus. Even though it is required to do so, there are chances that your lender will do so.  

If such a thing happens, it can hurt your credit scores and credit history and could stay on for up to seven years.  

What are the alternatives to returning a financed car?

Here are the different alternatives that you can take into consideration when returning your car is not possible. 

Find someone who can take over the payments 

You can find potential buyers who are ready to buy your car and take over your loan payments via Craigslist or other marketplaces. The buyer must have good credit to assume ownership of the vehicle. 

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Refinance your auto loan 

Before planning to return the car due to the difficulty in affording the monthly payments, try to refinance your car loan. But remember, if you choose a longer loan term, then your monthly payments will be low, but you will have to pay more interest over the life of the loan.  

Sell Your Car 

Another alternative to returning a vehicle is selling it and using the money to settle the loan. If your car’s current value is less than the amount you still owe on it, you may need to borrow money to make up the difference, either from the lender or from a personal loan.  

It is always wise to pay off the loan balance before selling the car to transfer the title to the new owner easily. 

Voluntary repossession 

If the above alternatives won’t work for you, your last resort is to have your car voluntarily repossessed. By doing so, you can avoid paying the lender’s repossession fees which you would have to pay if the lender repossessed your vehicle. If the lender sells the car for an amount less than what you owe on loan, you will be responsible for paying the difference.  

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How can you return a leased vehicle?

Rather than a financed car, if you want to return a leased vehicle before the end of the lease period, you will have to pay an early termination fee. In addition to losing the initial payment, you will also have to pay the outstanding lease balance. 

You can transfer the lease to a different person to avoid these termination penalties. Most finance companies do not have any objections to transferring the lease.  

Here are the different ways to return a leased vehicle: 

Use lease-swapping sites

You can find potential buyers via lease-swapping sites, but you will have to make some payments both to the trading website and the leasing company. Before you register with the website, you need to confirm whether your leasing firm allows transfers, and once the lease is transferred, will the buyer take full financial liability for the lease, and will the website perform a credit on the new buyer if you maintain some responsibility for the lease after the deal. 

Buy, sell, or trade-in

Other options available for you are selling the vehicle or trading it in. To sell it, you must buy the vehicle before the end of the lease term. If the leasing company permits you, you can go with it. But you may need to pay a termination fee. If your idea of selling the vehicle is less expensive than this fee, you can go with this option. 

Another way is to trade it in and exchange it with a different model if your leasing company permits. In this case, too, there will be a termination fee, but you will get more time for the repayment. 

Bottom line

 You should realize that you have choices if you have trouble with your financed vehicle. It’s not uncommon for people to fall behind on car payments, but many manage to keep their wheels. You’ll be able to decide if it’s better to return the automobile to the dealership or negotiate with your lender after considering the matter. 

Make sure you’ve done your research before going out to look at cars. This could prevent you from having to return the automobile. 


What happens if I want to return a financed car? 

If you want to return a financed car, you may be hit with penalties due to the declining value of vehicles, lenders’ policies, or other factors. Other than returning your car, you can refinance your auto loan, sell the vehicle, go for vehicle repossession or find someone to take over the payments. 

Can you return a financed car to the dealer the next day? 

If the dealer allows returns and if you have followed the mileage restrictions, you will be more likely to return the financed car the next day. Return or refund is also possible if you find the car is a lemon, i.e., it has manufacturing defects that adversely affect the vehicle’s value, safety, or utility. 

How much does it cost to return a financed car? 

Loan cancellation fees will usually be between $200 to $500. You’ll still owe the bank money if the insurance company tries to sell the car at an amount less than what you owe. It can also affect your credit score. 

Is there a return policy on financed cars? 

Not all car dealers have a return policy, but if there is a return policy, there are greater chances for you to return the car. So, you must check the policy before going on with the car purchase.  

return financed car without penalty

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