If you return the car to the lender, the lender will likely sell it. It will apply the proceeds of the sale to your car loan balance, after reimbursing itself for the costs of sale and certain fees.
What happens when you give a car back to the dealership?
When you find yourself unable to make your car payments and ultimately choose to return the vehicle to the dealer (which is known as voluntary repossession), the dealer usually turns around and attempts to re-sell the vehicle. The proceeds from that sale would then go towards repaying the original loan.
What happens when you return a car to the dealer?
Once you return the vehicle, it’s considered a default because you’re no longer making payments. The car is then prepped to be sold at auction, and the proceeds from that are applied to your remaining loan balance. If the loan isn’t completely paid off, called the deficiency balance, you still owe that to the lender.
Can a car loan holder voluntarily return a car?
If you have a vehicle loan or lease that you can no longer afford your car loan payments, you can return the vehicle to the loan holder before it is repossessed. Voluntary repossession must be done correctly and has financial implications if there is a deficiency.
What happens when a car is taken to auction?
Once the vehicle is picked up it will be taken to auction and sold. Usually the amount the car is sold for, minus selling costs, is not enough to repay the remainder of the loan and there is a deficiency.
What happens to your car after a repossession?
After taking possession of your car, the lender begins the process for recouping the money you still owe on the car loan, plus any fees incurred — think towing, storage of the vehicle, re-keying the car and legal fees. The best way for the lender to get that money is to sell the car, often through an auction.
