The impact of a voluntary vehicle surrender

Dear COF,

Voluntarily surrendering your vehicle may be slightly better than having it repossessed. Unfortunately, both are very negative and will have a serious impact on your credit scores.

Surrendering your vehicle and repossession are fundamentally the same thing in financial terms. You are unable to make the loan payments, so the lender is taking the vehicle. It will be sold to recoup as much of the debt you owe as possible.

The difference between the two is day and night – literally. When you surrender the vehicle, you return it to the lender on much more positive emotional terms, usually during business hours. When a lender repossesses the vehicle, they may send someone in the middle of the night to take it while you sleep, which can be much more distressing for everyone involved.

The less tangible issue is that when you voluntarily return the vehicle, you are taking some responsibility for the debt you owe. Be sure you completely understand the terms when you make the voluntary surrender. If there is a balance remaining and you don’t pay it, it could be turned over to a collection agency, which will add a collection account to your credit history.

When you voluntarily surrender the vehicle, your credit report will indicate that fact in the status of the account by listing it as a voluntary surrender and any remaining balance will continue to be reported. If the bank has to come take the vehicle, they will report the account as a repossession, and that will be reflected on your credit report, as well.

Both are very negative, but a voluntary repossession may hurt your credit scores slightly less than a repossession.

Thanks for asking.