Wondering if you can return a financed car to the dealer? Unfortunately, there is no simple yes or no answer. While there are certain situations where a return is possible, there are also cases where it is unlikely.
Therefore, here you will find an overview of when you can and cannot expect to return. We have also collected some alternative options for times when returning your car is not planned.
Unfortunately, you usually cannot return a financed car. While there are a few scenarios where this could be possible (more on that below), these are few and far between. Additionally, even if you meet the criteria for a return, there may be some financial consequences for going that route, including:
- Due to the loan termination costs:Some car loan agreements allow thiscancellation of debtsunder special circ*mstances. However, if you use this clause, your lender may charge a fee. Be sure to read your loan contract to get a better idea of when this clause can be used and what fees you may be subject to.
- If you end up underwater on your loan:Becausecars lose their value over time, you may still owe money on your accountcar loaneven though I sent it back. (For example, if you borrowed $20,000 and the dealer determines that your car is worth $15,000 at the time of repossession, you may still have difficulty paying the remaining loan balance of $5,000.)
But if you're unhappy with your vehicle purchase, it's worth exploring the options available, and it may even be worth taking the risks above. Keep reading to learn more about the different factors that should play a role in your decision.
4 times when it is possible to return a financed car
While it's quite unusual for you to be able to return your car after signing on the dotted line, there are some exceptions. Here are four moments when it is possible to return:
1. Your retailer has a returns policy
There are retailers who sometimes mention a "money back guarantee" and advertise a return policy as part of their marketing strategy. For example,Caravanhas a seven-day policy, whileAutoMaxhas a similar one that lasts 30 days.
If your dealer has such a policy, you should be fine as long as you make sure you return your car within the return period. Please note, however, that dealers sometimes include additional provisions in this policy. For example, you cannot return the car if it is damaged or has any other lien on it, apart from the car loan itself.
2. You have a lemon
Both at the federal and state levellemon loveprotecting car owners under warranty from living with cars with significant defects. Although each Lemon law is slightly different, these laws broadly state that if the manufacturer of a vehicle cannot resolve the problem after attempting to treat it a reasonable number of times while it is under warranty, it is required to refund or replace vehicle.
If you think you have a lemon, contact your stateOffice of the Attorney General. As the Chief Legal Officer in the state, lemon law claims generally fall under their jurisdiction and they can connect you with the appropriate resources to pursue your claim.
3. You fell victim to a bait-and-switch
Signing the papers for a new car is often quick. In the past, dealers could use this period of confusion and heightened emotions to take the bait and offer consumers a different vehicle or financing offer than what they had initially agreed to. Usually one that led to higher profits.
Fortunately, the Federal Trade Commission (FTC) is newCARS-regelprohibits misrepresentations by the dealer and requires it to clearly state all financing offers, optional features and add-ons.
If you believe you have been exposed to fraudulent behavior by the dealer, you should contact usThe FTC's Fraud Division. After you tell them what happened, they will help you figure out the best next steps. If fraudulent behavior is detected, they report it to their police partners, who can open a local investigation.
4. You are sent for military service
Under the Servicemembers Civil Relief Act (SCRA), certain active duty service members may have the right to terminate their employmentbillingwithout paying any early termination penalties or fees.
The provisions of this law apply to those who are called to active duty, receive permanent international transfer orders, or are deployed for 180 days or more. Protection also varies depending on where the duty station is located and whether the lease was entered into before or during active duty.
This law only applies to car leasing and not to car loans.
Next, let's look at some common cases where you may want to return your vehicle, but a return is unlikely to be accepted.
1. You have buyer's remorse
Maybe you've decided that you don't like the color of your car, or you've realized that a minivan is a much more practical option for you than a sedan. Regardless of the reason, if you have buyer's remorse about your vehicle purchase, you'll likely be out of luck when financing comes through.
Dealers are generally not required to provide a grace period during which you can return the car and get your money back. Unless they advertise a service like this as part of their marketing, they are unlikely to honor your return request.
2. You can't pay your payments
Whether your new financing payment is more than you originally depositedyour budgetor your financial situation has changed and your salary is spread more thinly than expected. Unfortunately, being unable to meet your payments is not typically considered an acceptable reason to return a car to the dealer.
If you're in a period of financial difficulty, consider asking your dealer about payment assistance options or refinancing your car loan instead (more on this below).
Alternatives to returning a financed car to the dealer
Now that you know when you can and cannot return a car to the dealer, let's look at some alternative options. Like any financial decision, each decision has its own pros and cons. We've outlined them below for your consideration:
| Alternative method | Benefit | Cons |
|---|---|---|
| Discuss the options for emergency assistance with your lender | Can be useful if you experience temporary financial difficulties, such as job loss. | Not all lenders offer emergency assistance options and you will still owe the same amount on your loan. The loan conditions can only change. |
| Refinancing your car loan | Refinancing allows you to keep your car and protect your credit score. | You may be charged an upfront fee for the refinance and still owe the same amount on your loan. You will probably pay it off over a longer period of time. |
| Trade in your car | By trading in your car, you can find a car you like while lowering the total amount you owe to the dealer. | Depreciation can cause the value of your car to be less than your loan amount, leaving you owing money on a car that you can no longer drive. You may also owe money on your trade-in, depending on the car you choose. |
| Sell your car | Selling your car allows you to pay off your financing immediately, without having to go through the dealer. | At the end of the transaction, you will no longer have a car and you may still owe money on your car loan due to depreciation. |
| Ask your dealer about voluntary take-back | Voluntary repossession can be a last resort before your car is repossessed by the lender. | While the consequences aren't as bad as a full repossession, voluntary repossession still negatively impacts your credit score and makes it more difficult to borrow money in the future. |
- Discuss the options for emergency assistance with your lender:Some lenders offer repayment assistance options if you experience periods of temporary financial difficulty. These programs usually include some form ofdebt consolidation, such as deferment of payment, postponement or modification of the loan.
- Refinance your car loan:Refinancing your car loaninvolves taking out a new loan, usually with better terms, and using it to replace your old one. However, this method usually involves some upfront costs to close the new loanstart-up costs.
- Change your car:As the name suggests,trade in your carmeans replacing your current vehicle with another one. Keep in mind that there will likely be a price difference between your old car and your new one, so you may still owe money on your car loan once the trade-in is complete.
- Sell your car:In the meantimesell your carcan be an efficient way to pay off your car loan, possibly without ever having to involve the dealer. However, at the end of the agreement you will be left without a car, and if you are not careful you could end upup and down on your car loandue to depreciation.
- Request for voluntary takeover:In a voluntary seizure, the dealer is asked to repossess your car because you can no longer afford the payments. While this may seem like an ideal solution, it should be viewed as a last resort. It can damage your computercreditworthinessand make it much more difficult to re-qualify for funding in the future.
Since the above alternative options are likely not ideal, it is best to avoid having to return a car where possible. Here ishow to buy a carthat will meet your needs for the foreseeable future.
- Find a reputable dealer:Not all car dealers are created equal. Make sure the dealer you want to work with has an excellent reputation before you start shopping. Read reviews online and checkBetter Business Bureau (BBB)to see the overall rating and any complaints from consumers.
- Research different brands and models before purchasing:There are so many options when buying a car that it can be a good idea to research different makes and models before purchasing a car. Use websites likeConsumer Reportsto read about other user experiences and industry guides such asKelley Blue Book (KBB)ofEdmundsto get a feel for itthe value of the carwhen you're ready to commit.
- Check the condition of the car when purchasing a second-hand car:If you are buying a used car and have a specific vehicle in mind, research the condition of the car before going to the dealer. You can useused car websites, such as Carfax, to access a detailed vehicle history report.
- Take it for a test drive:When you're ready, take the vehicle for a test drive. This allows you to visually inspect the car and get an idea of how it works. Pay close attention to how the car drives and how you feel when you are in the driver's seat.
- Have it investigated:If you are satisfied with the results of your test drive,have the car inspectedby an independent external technician. They will help you identify any major problems with the vehicle. If any problems arise during the inspection, ask the seller to resolve them before you take ownership.
- Take your time to decide:Don't let a dealer pressure yousales tacticsCome to you. Buying a car is a big decision. Take the time to weigh your options and calculate your new purchase. However long it takes, make sure you are happy with your decision before moving forward.
Unfortunately, there are not many situations where it is possible to return a car to a dealer. However, there are alternative options – such as selling your car or discussing relief options with your lender – that can help you achieve the outcome you want without needing an acceptable reason to return.
Whether returning a car will hurt your credit depends on the method you use to facilitate the return. For example, if your dealer has a return policy and you return your vehicle during the return period, it should not affect your credit score. However, if you voluntarily return your car, it will likely have a negative effect.
Yes, it is possible to trade in your car while still making payments on it, but keep in mind that this route will likely increase the total amount you owe. In this case, you will likely be encouraged to convert your existing loan balance into a new car loan that will also cover the cost of the new vehicle.
