Generally, you cannot simply return your car to the dealership if you can no longer afford the payments. Most dealerships do not allow returns based on a change in your financial circumstances after the sale is finalized.
However, if you find yourself in a position where you can't afford your car, there are several practical alternatives to consider for managing your financial situation and the vehicle.
Dealership Return Policies Explained
Once you drive a car off the lot, it's typically considered a final sale. Dealerships are businesses, and allowing returns for affordability issues would incur significant losses for them, as the car immediately depreciates in value and they would have to re-process the sale and financing. While some states have specific "cooling-off" periods for certain purchases, these usually do not apply to car sales.
Alternatives When You Can't Afford Your Car Payment
If returning the car isn't an option, you still have several avenues to explore to alleviate the financial burden.
1. Selling the Car
Selling your car can be a viable way to get out of your loan obligation, especially if your car's market value is close to or more than what you owe on your loan.
- Private Sale: Selling the car yourself can often yield the highest price, allowing you to pay off your loan and potentially have some money left over. Be aware of the process for transferring the title, especially if you still owe money on the car.
- Trade-in to a Dealership: While you might get less than a private sale, trading your car in is a convenient option if you need a cheaper vehicle.
- Selling to a Car Buying Service: Companies like Carvana, Vroom, or local dealerships that buy cars outright can provide a quick offer and streamlined process.
Important Consideration: If you owe more on the car than it's worth (negative equity), you'll need to pay the difference out of pocket to satisfy the loan.
2. Refinancing Your Auto Loan
Refinancing involves taking out a new loan to pay off your existing auto loan, often with different terms. This can be a smart move, especially after you've made a few months of payments, if:
- Interest Rates Have Dropped: Lower rates mean lower monthly payments or a shorter loan term.
- Your Credit Score Has Improved: A better credit score can qualify you for more favorable loan terms.
- You Need a Longer Loan Term: Extending the loan term will reduce your monthly payment, though you might pay more in interest over the life of the loan.
Steps to Refinance:
- Check Your Credit Score: Lenders will use this to determine your eligibility and interest rate.
- Shop Around for Lenders: Compare offers from banks, credit unions, and online lenders.
- Gather Necessary Documents: You'll typically need your current loan information, vehicle details, and personal financial information.
- Complete the Application: Once approved, the new lender will pay off your old loan.
3. Exploring Lemon Law Claims
While not related to affordability, if your inability to afford the car stems from unforeseen, significant mechanical issues that make the vehicle unreliable or unsafe, you might have grounds for a "lemon law" claim. These laws protect consumers who purchase vehicles with substantial defects that the manufacturer cannot repair within a reasonable number of attempts or time.
- Key Criterion: The defect must substantially impair the use, value, or safety of the vehicle and not be due to owner abuse or neglect.
- Remedy: If successful, a lemon law claim could result in a buyback of the vehicle or a replacement.
Note: This option is specific to manufacturing defects and cannot be used if your issue is purely financial.
4. Voluntary Repossession
As a last resort, if all other options are exhausted and you simply cannot make payments, you might consider voluntary repossession. This involves informing your lender that you can no longer afford the car and will return it.
- Consequences: While it avoids the vehicle being forcibly repossessed, it still has a significant negative impact on your credit score, similar to a regular repossession. It will appear on your credit report for up to seven years, making it difficult to secure loans or credit in the future.
- Deficiency Balance: You may still be liable for any "deficiency balance" – the difference between what you owe on the loan and what the lender sells the car for at auction, plus repossession and sale fees.
Summary of Options
| Option | Description | Pros | Cons |
|---|---|---|---|
| Selling the Car | Selling privately, trading in, or to a car-buying service. | Ends loan obligation; potentially recoup some investment. | May have negative equity; requires effort; not immediate. |
| Refinancing Auto Loan | Replacing your current loan with a new one, often with better terms. | Lower monthly payments; better interest rate; improved cash flow. | May extend loan term; credit score required; not always possible. |
| Lemon Law Claim | Legal claim for defective vehicles that cannot be repaired. | Potential buyback or replacement of the vehicle. | Only applicable for significant manufacturing defects, not financial hardship; complex legal process. |
| Voluntary Repossession | Informing lender you cannot make payments and returning the vehicle. | Avoids forcible repossession; immediate relief from payments. | Severe damage to credit score; potential for deficiency balance. |
Before making any decision, it's advisable to communicate directly with your lender. They may be able to offer temporary solutions like deferring payments or adjusting your payment schedule.
