How to Perform Voluntary Repossession (Step-by-Step Guide)

Falling behind on car payments is stressful. You might worry about losing your vehicle.

Banks can repossess your car without warning when you default on your auto loan. Most loan agreements include language allowing them to take the vehicle without going to court.

But you have another option. You can return the vehicle yourself through voluntary repossession.

What Is Voluntary Repossession?

Voluntary repossession happens when you return your vehicle to the lender. You choose to give it back because you can’t afford the payments anymore.

The process differs from involuntary repossession. You maintain control over when and how you surrender the vehicle.

How Does Vehicle Repossession Work?

Lenders don’t need to notify you before taking your car. They can enter your property to reclaim the vehicle legally.

Most lenders hire a towing service to collect the car. The tow truck takes your vehicle to a storage facility.

You pay for both the towing and storage fees. These costs add up quickly and increase your debt burden.

Steps to Voluntarily Surrender Your Vehicle

Follow these steps to complete a voluntary repossession:

• Contact your lender immediately when you know you can’t make payments
• Explain your financial situation and request voluntary repossession
• Ask about the deficiency balance you’ll owe after the vehicle sells
• Request written documentation of all agreements and remaining loan terms
• Schedule a specific date and time to return the vehicle
• Remove all personal belongings from the car completely
• Take photos of the vehicle’s condition from multiple angles
• Record the date, location, and contact person for the surrender
• Get written proof that you returned the vehicle
• Create a payment plan for the deficiency balance and fees

The lender will sell your car at auction or on the open market. You’ll receive a statement showing the sale details.

You must pay the difference between the sale price and your loan balance. Our partner Solo can help you negotiate this deficiency balance if the lender sues.

When Voluntary Repossession Makes Sense

Consider voluntary repossession if you can’t catch up on missed payments. You need to evaluate whether you’ll afford future monthly payments.

Here’s a real example of when voluntary repossession was the right choice:

Example: Matt owned a 2016 Hyundai Elantra worth only $4,000 to $9,000. He owed $15,000 on the car with a 28% interest rate. As a college student, Matt couldn’t afford his car payments and insurance anymore. He contacted Santander to voluntarily surrender the vehicle. Matt understood he’d still owe the deficiency balance. With a low credit score and no refinancing options, voluntary repossession became his necessary last resort.

Benefits of Voluntary Repossession

Surrendering your car voluntarily offers several advantages over involuntary repossession:

• Avoid repo costs: You eliminate towing fees and impound charges that banks add to involuntary repossessions
• Avoid surprises: You control when and where the surrender happens instead of experiencing a shock repossession
• Avoid losing personal items: You have time to retrieve all belongings before returning the vehicle
• Avoid embarrassment: You prevent the awkwardness of others witnessing a tow truck taking your car

How Voluntary Repossession Affects Your Credit

Voluntary repossession still damages your credit score significantly. The missed payments appear on your credit report for seven years.

The repossession itself also shows on your report. Lenders view voluntary and involuntary repossession similarly when evaluating your creditworthiness.

Both types of repossession harm your ability to get future loans. You’ll face higher interest rates and stricter approval requirements.

You Still Owe the Deficiency Balance

Returning your car doesn’t erase your loan obligation. The lender sells your vehicle and applies the proceeds to your balance.

Most vehicles sell for less than you owe. You remain responsible for paying the difference between the sale price and loan balance.

The lender may sue you to collect this deficiency balance. Our partner Solo can help you respond to a lawsuit and negotiate a settlement.

How to Rebuild Credit After Voluntary Repossession

Your credit score will drop after repossession. But you can start rebuilding immediately with these steps:

• Pay all other bills on time every month without exception
• Keep credit card balances below 30% of your credit limits
• Avoid applying for new credit unnecessarily
• Check your credit report for errors and dispute inaccuracies
• Consider a secured credit card to establish positive payment history

Recovery takes time and consistent effort. You’ll see gradual improvement over months and years.

What to Do If Debt Collectors Sue You

Struggling with car payments often means you have other debts too. Debt collectors may file lawsuits to recover what you owe.

You can fight back by responding to the lawsuit with an Answer. Follow these three steps:

1. Respond to each claim listed in the Complaint document
2. Assert your affirmative defenses against the collector’s claims
3. File your Answer with the court and send a copy to the plaintiff

Never ignore a debt collection lawsuit. Our partner Solo helps you respond to debt lawsuits and settle for less than you owe.