A voluntary surrender is like a repossession – only you choose to turn in the vehicle instead of waiting for the repo company to take it away. Here's what typically happens after you voluntarily surrender your car.
A voluntary surrender is like a repossession – only you choose to turn in the vehicle instead of waiting for the repo company to take it away. Here's what typically happens after you voluntarily surrender your car.
After you surrender your car, the lender typically puts it in storage before it’s sold privately or at auction to try to recover the loan balance still left on the vehicle. You’re typically required to pay those storage fees, and many storage companies charge daily.
Before an auction, your lender is required to let you know when and where the car is being sold. You have the right to bid on the vehicle and win it back – but if you win, you’re still responsible for the total loan balance and additional fees associated with the surrender.
Hope the sale proceeds are enough to cover your remaining loan balance – if there’s still a balance (called a deficiency balance) you’re also responsible for paying it. For example: if your car sells for $5,000, but you owe $8,000 on your loan, you still owe the lender that $3,000 plus additional fees associated with the surrender.
The voluntary surrender is reported on your credit reports as a repossession. And if you choose to surrender the car because you defaulted on the loan, the default is also listed on your credit reports. However, a future auto lender may view a voluntary surrender more positively than a traditional repo, because you took initiative and returned the car yourself.
A repossession is reported on your credit reports for up to seven years. You may struggle to get another car loan from traditional and subprime lenders for up to a year after the surrender. However, negative marks on your credit reports have less and less impact on your overall credit rating over time. One year from the surrender date, subprime lenders are more likely to consider you for an auto loan approval as well.
In many ways, voluntary surrender and traditional repossession are similar. Both are reported as repossessions on your credit reports and harm your credit score. However, a voluntary surrender saves you some money.
When a recovery company is hired to tow your vehicle away, someone has to pay for that (hint: it’s not your lender). You’re responsible for paying the recovery company, and this cost can vary, but it’s usually around $200 to $500 per tow.
Another benefit to voluntarily surrendering your car is that you can drop it off at your convenience. Repo companies can take your vehicle from almost anywhere. They could take it while you’re out and about, turning a regular outing into a huge hassle. However, when you surrender your car, you can take time to remove all your belongings, drop it off when it’s convenient for you, and you can plan ahead for future transportation.
If you know that repossession is around the corner, then a surrender can save you some money and a future headache.
A voluntary surrender should be considered a last resort. If you haven’t yet contacted your lender about your options or received notices about an impending repossession, consider these tactics:
At Auto Credit Express, we’ve created a nationwide network of dealerships that are signed up subprime lenders. These lenders assist borrowers in many bad credit circumstances, including a past repo. If you need another auto loan but your low credit score is getting in the way, then we want to help.
Fill out our free auto loan request form, and we’ll look for a local dealer that has the resources to assist with credit challenges.
Senior Auto Financing Editor
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