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When you can’t afford your car anymore and are in danger of losing it to repossession, you can give the vehicle back to the lender before it’s taken. This is called a voluntary surrender or voluntary repossession.
If you’re in this situation, you’re not alone. The rate of car owners paying 60 days late or more is up 31% since before the COVID-19 pandemic, according to Equifax.
Monthly payments on cars are getting higher, and many consumers are feeling the pressure. The average new vehicle price was $49,814 in 2025, up 39% since 2017.
Voluntary surrender is a direct alternative to involuntary repossession, when a car can be taken without warning, at any time and place, potentially causing emotional distress and leaving you and loved ones stranded.
In many states, a lender can repossess your car as soon as your payment is late.
» Know your rights when it comes to car repossession
How does voluntary repossession work?
Voluntarily surrendering a car involves informing your lender that you can no longer make payments and intend to return it.
The creditor will resell the vehicle, and you’ll receive a statement with the details of the sale.
You will have to pay the difference between what the car sold for and what you owed on the loan, or the “deficiency balance.” For example, if you owe $10,000 on your car and the lender sells it for $7,000, you must pay the $3,000 difference.
You will have to pay the difference between what the car sold for and what you owed on the loan, or the “deficiency balance.” For example, if you owe $10,000 on your car and the lender sells it for $7,000, you must pay the $3,000 difference.
You also might still have to pay fees associated with the car loan, such as late payment charges.
Once you're ready, empty your car of all personal items and arrange the time and place to drop off your car and hand over the keys.
Keep records of when, where and with whom you dropped your car off in case your lender asks for these details.
Pros and cons of voluntary repossession
Pros
May avoid some fees tied to involuntary surrender, such as towing and storage costs.
Shows the lender you took a proactive approach, which could reflect more positively in the future.
Gives you more control over how and when you return the vehicle.
Cons
Remains on your credit reports for up to seven years as a derogatory mark.
You may still owe a deficiency balance if the car sells for less than what you owed.
If unpaid, the deficiency balance could be sent to collections, causing further credit damage.
Does voluntary repossession hurt your credit?
Yes. Both voluntary surrender and involuntary repossession pose harm to your credit score, but the former may give you more control of your situation.
Voluntary surrender counts as a derogatory or negative mark and will stay on your credit reports for up to seven years. This stain on your credit reports might prevent you from being approved for new credit and your terms, like interest rates, will probably be higher.
When it comes to your credit score, repossession of any kind is detrimental — but exactly how dramatic depends on the state of your credit. The higher your score, the bigger drop you’re likely to see.
Voluntary repossession: What Redditors say
We sifted through Reddit to get a pulse check on how users feel about voluntary repossession. We used an AI tool to help analyze the feedback. People post anonymously, so we cannot confirm their individual experiences or circumstances.
Most users describe voluntary repossession as a last resort. Redditors say that a voluntary surrender looks no different than an involuntary repossession on your credit reports and to lenders. It can tank your score by 100 points or more, which is a big challenge to overcome.
It does give you a bit more control over the process, some posters say, and helps avoid some of the fees associated with a “repo man.”
Selling your car privately or to a dealer could be far less damaging than a repossession, according to some Reddit users. Even if you have to take out a personal loan to cover the difference between what the car sells for and what you owe on the loan, you’re avoiding the credit damage.
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How to avoid voluntary repossession
If you're struggling to make your car payments, there may be alternatives to voluntary repossession:
Talk to your lender
Check to see whether you qualify for options that would allow you to keep your car, like a repayment plan or more time to make a payment. Ideally, you’d do this before you fall behind on payments.
See if you qualify for relief
Job loss, divorce, a medical emergency and other types of financial burdens could qualify you for an auto loan hardship program. Not all lenders offer them, but it’s worth looking into.
» MORE: Auto-loan debt relief options
Transfer your car loan payments
It may be possible to have someone else you trust, like a parent, assume responsibility for your car by transferring the loan to them. This way, you can still use the car and pay the person back over time. Contact your lender first to see if this approach is allowed.
Refinance your car loan
If you have good credit, you may be able to refinance your car loan to lower the interest rate. This could reduce payments and make them more affordable. You can learn more about how to refinance your car loan using our guide.
Sell your car
You might be able to sell your car and get enough to cover your loan in full. You might even have money left to put toward a less expensive car.
How to rebuild your credit after voluntary repossession
While waiting for a voluntary repossession to age off your credit report, here are some ways to restore your credit:
- Pay your bills and existing lines of credit on time. Strive to pay more than the minimum payment to avoid accruing debt and paying interest.
- Keep your credit card balances low. When you use 30% or less of your credit limits, that helps keep your credit utilization low, which can elevate your score.
Consider credit-building alternatives. Sign up for a rent reporting service or a program like Experian Boost, where your on-time utility and streaming service payments might give your credit an extra bump.
Can you get another car after a voluntary repossession?
Yes — but it might be harder, especially at first. A voluntary repossession can lower your credit score, which might mean fewer financing options because many lenders will see you as a high-risk borrower.
Give your credit time to rebound and work on building it through on-time payments and paying down existing debt. These habits, done consistently over time, should give you a better chance at another car in the future.
» NEXT: 9 ways to build your credit fast
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- 1. Equifax. Auto Insights for 2026: The State of the Auto Industry and Key Trends to Watch. Accessed Apr 23, 2026.
