Returning a Financed Car Back to Dealer: What are Your Options?

Can You Return a Car to the Dealer?

The hard truth is that most auto dealerships aren’t going to let you return a vehicle that you're financing. Some dealers have a return policy – sometimes around a seven-day guarantee when you’re financing a car sight-unseen without a test drive – but most don’t offer one. It doesn’t hurt to give your dealer a call and ask, but most franchised dealerships don’t have return policies.

When you finance a vehicle with an auto loan, the car’s title has a lien on it, which names the lender as the lienholder. This prevents you from selling the vehicle until the loan is paid off. If you need to get out of the auto loan before your loan term is over, you can sell the vehicle privately or to a dealership and pay off the car loan with the profit.

Options for Getting Out of a Financed Vehicle

If you need to get out of your current auto loan you typically have a few options:

Selling Your Financed Vehicle

Selling the vehicle to a private party may get you enough money to pay off the auto loan pretty easily, but if not you have to pay the remaining balance out of pocket. Trade-in values are typically less than a vehicle's actual cash value (ACV), so if you try to sell it back to the dealership, they typically don't offer you as much as you can get through a private sale. Be sure to get a few quotes from dealers and online valuation sites before accepting the first offer.

If you're in a negative equity position where you owe more on the car loan than the vehicle is worth, you may have a difficult time selling the car to repay your loan.

Rolling Over Your Auto Loan

Some auto lenders offer loan rollovers, where you add the remaining balance of your current car loan onto your next one.

While you still get to sell your vehicle and get into something else, you’re starting your new loan with a lot of negative equity. If you need to sell the next car for something else, the cycle continues. This is called the trade-in treadmill, and once you get on it, it’s hard to get off.

Rolling over negative equity onto your next auto loan should be considered one of the last resorts if you need to sell your vehicle.

Voluntary Repossession is the Last Resort Option

If you can’t sell the vehicle to a private party, a dealer won’t buy it, and you don’t have the option to roll over your auto loan, then you may have to consider voluntarily surrendering the car to the dealership.

This is commonly called voluntary repossession. A voluntary repossession should be considered the last resort. It will mean having a repossession listed on your credit reports and the possibility to still owe your lender money after the auction. You may be better off making the payments on the vehicle since a repo can make it difficult to get into another auto loan with most lenders for at least a year or two.

Refinancing Your Car Loan

If you’re thinking about returning your car to the dealer because you can’t afford the payments, but still want to keep the vehicle, consider refinancing the auto loan after one year. Most refinancing lenders consider a car loan for refinancing after hitting that one-year mark.

Refinancing is replacing your current auto loan with another one, hopefully with better terms. Nearly everyone who refinances is looking for a more affordable monthly payment. Refinancing can give you a chance to qualify for a lower interest rate than you initially got, and can allow you to extend your car loan, which lowers the monthly payment as well.

To refinance, you must have had your auto loan for at least one year, and lenders typically require that you haven’t had any missed or late payments on the loan. Generally, your vehicle should have less than 100,000 miles and be less than 10 years old to qualify, too.

Want Help Finding Refinancing?

If you think refinancing is the right path for you, we want to help. Simply fill out our fast, free auto loan refinancing request form to find out what options you may have.