What Happens If I Turn In My Car?

Turning in a car can mean different things, each with distinct financial and procedural implications. The specific outcome depends on the underlying agreement, whether it is an expiring lease, a decision to sell or trade, or a situation involving financial distress. Understanding the nuances of each scenario is important for managing expectations and navigating the process effectively.

Lease Return Process

Returning a vehicle at the conclusion of a lease agreement involves several steps and financial considerations. Before the lease ends, schedule a pre-inspection with the leasing company, typically offered a few months prior. This inspection identifies potential issues that might result in charges, allowing the lessee an opportunity to address them beforehand. Addressing minor damages or excessive wear and tear independently can often be more cost-effective than incurring fees from the leasing company.

Lease agreements specify mileage limits, often between 10,000 and 15,000 miles per year. Exceeding this allowance results in mileage overage fees, which can range from $0.10 to $0.30 per mile. The vehicle must also meet “normal wear and tear” standards. Anything beyond this, such as large dents, significant scratches, or interior damage like tears or burns, may incur additional charges. Normal wear and tear typically includes minor scuffs, light scratches, and slight interior wear that are considered part of routine use.

Upon returning the vehicle, lessees typically face a disposition fee, ranging from $300 to $500, which covers preparing the car for resale. Some leasing companies may waive this fee if the lessee opts to purchase the vehicle or lease another from them. Lessees should also ensure all original items, such as owner’s manuals, spare keys, and accessories, are present to avoid further charges.

At the end of a lease, several options are available. One option is returning the vehicle, settling any outstanding fees for mileage, wear and tear, and disposition. Another option is purchasing the vehicle at a predetermined residual value, which is specified in the lease contract. If the market value of the vehicle is higher than its residual value, purchasing the car can be a financially sound decision. Lessees can also explore extending the lease for a period, or trading in the leased vehicle if it has positive equity towards a new purchase or lease.

Selling or Trading In Your Vehicle

Selling or trading in a vehicle involves exchanging it for financial value. When selling to a dealership, they appraise the car’s value based on its condition, mileage, market demand, and age. Dealerships often use industry tools like the Black Book, which provides up-to-date wholesale pricing data, for their internal valuations.

Before visiting, prepare your vehicle by cleaning it thoroughly and addressing minor repairs to enhance its appeal. Having all necessary documents, particularly the vehicle’s title and a record of maintenance, can streamline the process and potentially increase the valuation. Dealerships inspect the car for cosmetic and mechanical issues, and may conduct a vehicle history check for accidents or damage.

When selling outright, the dealership makes an offer that can be accepted, declined, or negotiated. If there’s an outstanding loan, the dealership typically handles the payoff directly with the lienholder. If the vehicle’s sale price exceeds the loan, you receive the difference. If the offer is less than the outstanding loan balance, you are responsible for covering the difference.

Trading in a vehicle typically occurs when purchasing another car from the same dealership. The trade-in value is applied as a credit towards the new vehicle’s purchase price, reducing the amount to be financed. This can also offer tax advantages, as sales tax may only be applied to the difference between the new vehicle’s price and the trade-in value, depending on local regulations. While selling to a dealership or trading in offers convenience and speed compared to private sales, the offer received may be lower than a private party sale, as the dealership needs to account for reconditioning costs and profit margins.

Voluntary Vehicle Surrender

Voluntary vehicle surrender occurs when an owner returns a car to the lender due to inability to afford loan payments. This action is distinct from repossession, where the lender seizes the vehicle without direct action from the borrower. Both actions negatively impact credit. The process begins with contacting the lender to arrange the vehicle’s return. It is advisable to obtain written documentation of any agreements made with the lender regarding the surrender.

Once surrendered, the lender typically sells the vehicle, often at a public auction, to recoup losses. The sale price is then applied to the outstanding loan balance. However, the sale price often does not cover the full amount owed, especially given vehicle depreciation and wholesale auction sales. The difference between the outstanding loan balance (plus any fees incurred by the lender for storage and sale) and the sale proceeds is known as a “deficiency balance.”

The borrower remains responsible for this deficiency balance. Lenders can pursue collection, which may involve debt collection efforts or legal action, potentially leading to wage garnishment or bank account freezes if a judgment is obtained.

Voluntary surrender is reported to credit bureaus as a derogatory mark, remaining for up to seven years from the original delinquency date. This negative mark can significantly lower credit scores, potentially by 100 points or more, making it more challenging to obtain new credit or secure favorable interest rates in the future. While voluntary surrender may avoid some fees associated with involuntary repossession, such as towing, the credit impact is largely similar.