How to Return a Car You Can’t Afford

When Can You Return a Car?

While returning a car isn't always possible just because you can't afford it, there are a few other circumstances that may apply to your situation and might make returning it easier.

Your Dealer Allows Returns

Many dealers won't let you return a car you can't afford, but some will. Contact the dealer to find out what its return policy is. Be aware that you might need to plead your case to a higher-up rather than a salesperson.

In some cases, the dealer may let you swap the pricier car for a less expensive car. Keep in mind that the final decision rests with the dealer, not with you.

Your Car Is a Lemon

Each state has its own "lemon law." Most state lemon laws cover new and leased cars, while some also cover used cars. Generally, you must give the dealer several opportunities to fix a lemon car that's under warranty. Even if the car is no longer under warranty, you can still ask the dealer to repair the defect.

If the defect can't be reversed, then you may be able to return the car. For example, under the lemon law in Texas, a purchased or leased new or used car that can't be fixed after a certain number of attempts typically is eligible for a return or replacement, or for a cash settlement that enables you to keep the defective car.

You Were Misled About the Purchase

If a dealer deceived you during the car purchase, you typically can return the car. Situations that might qualify for a return include:

• The dealer failed to share details about the car's history, such as previous accidents.
• The dealer charged you more for the car than the advertised or agreed-upon price.
• The dealer lied about aspects of the car like the condition of the engine.
• The dealer misrepresented the lending terms, such as the interest rate on your car loan.

Unfortunately, the dealership likely may not honor these disputes automatically, and you may need to enlist the help of an attorney to set things right. Before contacting legal help, gather any supporting documents you believe can help prove you were deceived.

Learn more: Can You Return a Car You Just Bought?

How to Return a Car You Can't Afford

If you're unable to return the car and walk away, you might be able to get out of your car loan agreement in other ways:

• Arrange a voluntary repossession. Through a voluntary repossession, you return the car on your own, as opposed to an involuntary repossession that's carried out by a collection agency or lender. You'll owe the balance that remains on your car loan, however, and your credit will still take a hit—although likely less severe than with an involuntary repossession.
• Sell the car. Some dealers offer buyback programs, which often are valid one to two years after you bought the car. But if you do sell your car back to the dealer, you probably will lose money on the deal. Other options: Sell the car to a different dealer or to an individual buyer.
• Trade in the car. You can trade in the car for a different, less expensive car. However, the trade-in value will be lower than what you paid for the car. With a trade-in, you'll need to pay the difference between the trade-in value and the price of your new car.

Will Returning a Car I Can't Afford Hurt My Credit?

Returning a car you can't afford can hurt your credit score, especially if the return involves:

• Voluntary repossession: A voluntary repossession will show up on your credit report and hurt your credit score, but not as much an involuntary repossession.
• Late payments: If your car loan payment is more than 30 days late, the late payment might appear on your credit report and result in credit score harm.
• Loan default: Typically, a lender will report your car loan as being in default if you've missed payments for at least 90 days. A car loan default stays on your credit report for seven years and damages your credit score the entire time.

Alternatives to Returning a Car

If returning an unaffordable car isn't an option, you might consider these other options:

• Ask your lender about loan modification. A loan modification might result in lower monthly payments or a lower interest rate. To qualify for loan modification, you typically must prove you're experiencing financial hardship.
• Look into refinancing your loan. Refinancing your auto loan normally results in a lower interest rate and can make your monthly payments more manageable.
• Explore financial assistance or hardship programs. These programs can alter your loan terms if you're having trouble making loan payments due to a hardship such as losing your job. For example, an auto loan hardship program may allow you to change the monthly due date, skip loan payments or adjust your payment amount.

The Bottom Line

Returning a car you can't afford is sometimes possible, but it might be difficult to do. For instance, your dealer might reject your request to return the car or you may need to have your car voluntarily repossessed. If your car is defective or the dealer misled you about the transaction, however, your state's laws may be on your side. Before returning a car you can't afford, investigate all of your options, since some alternatives might damage your credit.