A reader wants to give up his car and his loan by just driving it to the dealership and leaving it there. Can he?

Question: Last week, you told a woman to buy a used car instead of a new car with a big loan. Well, I already messed that up. A few years ago, I got a new job and decided to buy a new BMW.

But then, no surprise, the company just merged with another one and I was laid off.  I’m working some part-time jobs to pay the bills, but I can’t make these payments — it’s either that or my rent. That doesn’t even include the $5,000 I have on my credit cards that I can’t pay off.

Someone told me I can give my car back to the dealership, and they’d sell it for me. If I’ve learned anything from reading your stuff, it’s when you say, “If it seems too good to be true, it is.” So is this a real thing? And should I do it? 

— Jason in Texas

Howard Dvorkin CPA answers…


It’s a real thing, and it’s not too good to be true — because it’s seldom a good thing to do. Let’s review the facts and see if it’s right for you.

First of all, there’s a name for this. It’s called a voluntary repossession, or voluntary repo. You can’t afford the payments, so the lender (in your case, the dealership) agrees to sell your car at an auction. if you’re lucky, the sale price is enough to cover your loan — but if it doesn’t, which is most of the time, you have to pay the difference.

Even worse, this move affects your credit score, and not in a good way. Still, in some cases, it’s coded differently than an involuntary repossession, which is even more damaging.

Just like you (hopefully) did when you bought the car, you can haggle over the terms of giving it back. That might seem odd, since you’re not exactly bargaining from a position of strength. However, it’s always been my mantra, “You can’t win if you don’t play.” The worst that will happen is the dealer says no.

However, dealers are sometimes open to negotiating because the cost of a voluntary repossession now is much less than an involuntary one later.

So what do you ask for? As I wrote in my first book, Credit Hell

For example, in addition to asking the lender to forgive any loan delinquency that may remain after your car has been sold, ask it to agree not to report the voluntary repossession to credit bureaus or at the very least, to waive all late fees associated with your delinquency.

So what should you do? First, you could try selling the car yourself. It’s quite likely you’d get a better asking price than the dealer, who will sell it at auction for a lesser price just to unload it. You can use that money to pay down the loan, and hopefully, you’ll have a new job by then.

Second, you need to take care of that credit card debt. A debt management program may help you consolidate your bills and significantly lower your monthly payments.

Third, you’ve obviously learned a valuable lesson about taking on debt. Call one of our certified credit counselors at 1-800-810-0989 for a free debt analysis. There may be more options than I can delve into here. Just know, Jason, that help is always available. You were smart to ask about this, so keep asking questions.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC