To begin with, we are not lawyers and do not give legal advice.

That being said, if you have not yet turned in the car you need to call the lender to discuss your situation. There is a possibility that they might be able to extend the loan.

If you have managed to save any money, now would be a good time to offer it as a good faith payment if they can modify your loan by extending it (based on the lender agreeing to a loan modification).

If they have or do repossess the car, in order to get it back the lender will probably require that you pay the balance of the loan plus any repossession or storage fees. If this is the case, however, you may also be able to negotiate to get the car back by requesting a loan modification from the lender (again, good faith money at this point might go a long way towards convincing the lender to do this).

Finally, if the vehicle has already repossessed and sold at auction you may also be able to negotiate a settlement with the lender so you both can avoid legal fees (during any of these negotiations, see if you can convince the lender to mark the account “paid as agreed” or “paid in full”).

Without knowing the exact details such as the payoff amount and loan term, chances are you owe at least $9,000 on a car that might be worth $7,000. Your best bet at this point would be to continue paying on it for at least another 16 months or so. If you do, your credit will be better and you will probably qualify for a lower interest rate. Even if you do have the cash to cover the negative equity, from a financial standpoint you would be better off putting it in the bank and keeping your current car.

Let me first point out that we are not lawyers and do not give legal advice – just our opinions.

A repossession will stay on your credit report for seven years, although the older it is the less it will affect your credit and your credit score. Once the lender sells the car, you’re responsible for any deficiency balance (the difference between what the car sells for and what you owe on the loan contract) plus any repossession and storage fees.

But at this point in time in order to get the car back, the lender may require you to pay the entire loan balance, plus any repossession and storage fees.

Another issue for you to consider is what the value of the car actually is. If you owe more than the car is worth, there is no way you can sell it since the loan would have to be paid off for the title to be transferred to the new owner. In this instance, you would be throwing good money at a bad situation.

That being said, your best bet would seem to be to contact the lender see if you can settle on an amount once the vehicle has been sent to auction. It is possible that the bank would take a settlement on the deficiency balance and then make a notation on the credit like “paid not as agreed” or “paid settlement.”

Your interest rate on any new auto loan would be higher to start with but, as stated above, as time went on and you offset this bad credit with a new car loan, the repossession would be behind you fairly quickly – that is to say, within a few years.

Best of luck to you.

Stop whatever you’re doing right now and please rethink what you are contemplating…..a repossession either voluntary or not is not a good thing to have on your credit. All the hard work you have done to maintain what is obviously a good credit score (Toyota only leases to what it considers its “best” customers) will go down the tubes. Is this a new car or a used car? Is the 425 value a payment value?

My word, think before that DING haunts you for a long time……whew.

A repossession will usually remain on your credit report for 7 years from the time the account was paid. The good news is that as time passes it will have less of an affect on your credit score. There is, however, something that you can do right now to try and minimize its impact.

Right now, it is in your best interest to notify the credit bureaus that the account has been paid in full. First, you need a receipt from the lender that says the account is paid in full. If you don’t have it, get one from them. Next, send a letter to the credit bureau, along with a copy of the receipt, stating that the account is paid in full and refuting the fact that the report shows you have an open repossession.

At this point in time, by the way, we could get you approved for a car loan.