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Buying a car is probably one of the biggest and most expensive expenditures you’ll ever make. But what happens if you buy a car and quickly realize it’s not something you can afford? Or what if the car isn’t what you expected, or it’s a total lemon? Can you return it?
Let’s get into more detail about how to return a car you can’t afford or no longer want.
While you might have an easy time returning a sweater or purse, such is not the case with a car. If you just bought a car from a dealership, the odds are you won’t be able to take it back for a refund. In fact, most lenders don’t accept returns at all.
The moment you drive the car off the lot — especially if it’s brand new — it loses its value to some degree. By accepting a return, the dealer would be taking a loss, which is why they usually don’t do it.
There may be some exceptions in which the dealer may accept a return, though it depends on the specific dealer and their policies.
But this is uncommon, and many dealers and lenders don’t offer it. In fact, as mentioned, most don’t accept returns at all. If you have a quick change of heart, you’ll either be out of luck or you’ll have to make arrangements to sell it.
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If you’re having financial troubles that are getting in the way of you making timely car loan payments, you may be able to return the car to the lender through voluntary repossession.
Repossession is typically involuntary, which means the borrower doesn’t want to lose their asset but is in a position in which the lender has the right to take it back to recoup their losses. With voluntary repossession, on the other hand, you’re voluntarily giving up your vehicle in an effort to avoid more dire consequences, such as bankruptcy.
If you can’t afford to make your car payments anymore, you can ask your car lender to take back the car. Here you’ll voluntarily hand over the keys and car, which may save you from experiencing the involuntary repossession process.
Do note, that the repossession may not entirely cover the outstanding loan balance. When the lender takes your car back, they’ll try to sell it to recoup their losses. The money the lender collects from the sale will be deducted from your loan balance. But if it doesn’t quite cover the balance entirely, you’ll still have to pay the difference.
Keep in mind that voluntary repossession of your car may still have a negative impact on your credit. A repossession, whether voluntary or not, will still count as a loan default and will be noted on your credit report, which may hurt your credit scores.
While returning your car may alleviate your financial burdens, you could be faced with certain drawbacks when you try to return your financed vehicle, such as the following:
Your first step is to get in touch with your lender or dealer to see if returning your vehicle is even a possibility. Depending on your exact situation, they may be willing to work with you to come up with an arrangement to help you with your financial issues.
Lenders may be open to working with you if you’ve lost your job, had your work hours reduced, or can no longer work because of a health issue. In these cases, your lender may suggest an affordable repayment plan that works for both of you. If you’ve been making timely payments up to this point, you may be in a better position to ask for some help.
These suggestions only make sense if you’re experiencing temporary financial troubles. Otherwise, if your financial woes will be long-lasting, these short-term measures will be of no value. Instead, you may need to voluntarily surrender the car or take steps to sell it.
There are several reasons why you might decide to return your car shortly after buying it, including the following:
If your dealer won’t let you return your car, there are other alternatives to consider:
You may be able to refinance your car loan to help save you money. Refinancing involves taking out a new loan and replacing your old one. The new loan will ideally have a lower interest rate to help make the loan more affordable.
Or, you could refinance into a loan with a longer term to give you more time to repay the loan and keep your monthly payments lower. Keep in mind, however, that a longer loan term will likely mean you’re paying more in interest overall.
Some auto manufacturers will let you trade in your car for a different model. Keep in mind that you may have to pay early termination fees, though they may be rolled into your new car payments.
If your dealer is unwilling to take the car back, consider selling it. The money you make on the sale can be put toward paying off the outstanding loan.
There’s a good chance that you may not be able to get as much for the car as what you paid for it. In this case, you could come up short and may still have a difference to pay on the original car loan you took out.
Whether you quickly discover that you can’t afford your car payments or simply had a change of heart, returning your car isn’t easy. That said, it may be possible. Even if your dealer refuses to take it back, there are plenty of alternative options that may be available to you to get your car — and your loan — off your hands.
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Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
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