What Is Voluntary Car Repossession?

Surrendering a car could be a slightly better option than involuntary repossession.

Sheryll Poe | 

May 20, 2022 | 3 min read

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Updated on June 24, 2024

When you get behind on your car loan and miss several payments, you have two repossession options: have the car repossessed involuntarily or surrender the car, which is called voluntary car repossession.

Voluntary car repossession is when you arrange with the lender to return the car on your own terms, rather than forcing the lender or collection agency to find and repossess the car.

So what are the advantages of voluntary repossession? What are the disadvantages? Will you still owe money, and what's the impact on your credit report?

Advantages and Disadvantages of Voluntary Repossession

Advantages

Though repossession isn't a situation you want to encounter, engaging in the process voluntarily has some advantages, helping you to mitigate the stress, inconvenience, and financial impacts of a sticky situation. Some important benefits include:

• You avoid the stress and embarrassment of an involuntary repossession
• You choose when and where to return the car
• Your specific lender may handle a voluntary repossession differently from an involuntary repossession. You could incur lower lender repossession costs, including fees for repossession agents, towing, and storage
• You won't be caught unknowingly without transportation

Disadvantages

Many of the disadvantages that come with voluntary repossession are the same financial challenges you may encounter with any repossession. A few key concerns are:

• You'll still owe the remaining balance on the loan, or, if the car sells at auction, you'll have to pay the deficiency balance
• If you don't pay the remaining balances, the lender could turn the account over to a collections agency or even take you to court
• It could have a negative impact on your credit score, even though the repossession was done voluntarily

Costs

In any repossession scenario, you'll owe the lender money. Unless the car sells for more than it's worth at auction, you'll likely owe the lender the deficiency balance, or the difference between what you still owed on the loan minus what the car sold for at auction, plus any repairs needed to get the car ready to sell.

With voluntary repossession, however, you might not be responsible for any of the costs incurred during the repossession process, including hiring a repo agent and paying for towing.

How Voluntary Repossession Impacts Your Credit

All repossessions will negatively affect your credit score and can remain on your credit report for up to seven years.

By arranging to return the car voluntarily, however, you can build some goodwill by communicating and working with the lender rather than hiding from the situation. Future lenders might view a voluntary repossession more favorably than an involuntary one.

Realistically, lenders look at your credit history as an indicator of whether you can repay your future debts in a timely manner, and not the circumstances that caused you to fall behind.

You could also call your lender to understand the impact of a voluntary surrender on missed payments, if any, and how a voluntary surrender could be reflected on your credit report. Just be aware that some credit bureaus require lenders to report that information, so it could be out of your lender's hands.

Deciding Between Voluntary and Involuntary Repossession

Voluntary car repossession is only a slightly better option than involuntary repossession. You may be a bit more prepared and have some control over when you surrender your car if it's voluntary.

Avoiding some of the extra fees that can come with involuntary repossession can be helpful, too.

In terms of your credit, voluntary repossession can be the better option if you communicate and cooperate with your lender early on. In most cases, lenders would rather work with you than spend the time and money on the repossession process.

Sheryll Poe

Sheryll Poe is a journalist and freelance writer based in Washington, D.C. where she writes about the latest news and trends in the automotive, finance, retail, and technology industries. With over two decades of experience, Sheryll has bylined hundreds of stories for websites, magazines, newspapers for trade associations and business clients. When not wielding words on behalf of clients, she enjoys cooking (and eating), watching bad reality television, and traveling the world.