Can You Cancel a Car Loan?

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - December 12, 2019

Cancelling a car loan is far more difficult than getting one in the first place, but it may not be impossible. Typically, there’s no buyer’s remorse clause in auto financing, so it’s important that you read the fine print before you sign on the dotted line. But even though you may not be able to “cancel” your new loan, it doesn’t mean you’re left without options.

Is There a Cancellation Clause in Your Contract?

In rare cases, there are lenders that offer borrowers a small window which can be used to return a vehicle with no questions asked. This time frame is short, often only a few days, and may come with costly penalties. The only way to know if this is an option for you is to read your loan contract carefully, and contact your lender as soon as you’re unsure about your purchase.

In most cases, though, this isn’t an option. So, how do you get out of a car loan that you don’t want? You have choices when it comes to canning it.

3 Options for Getting Out of a Vehicle Loan

If it’s been more than a few days and you don’t have a cancellation clause in your loan contract, then you typically have three options for getting rid of the vehicle to get out of your auto loan. All three come with risks, so take your time to carefully consider the situation and find out why you truly want to get out of the car loan.

In each of these options, you’re still responsible for making sure your loan gets paid in full. Generally, your options are:

  1. Voluntary repossession – A voluntary repossession involves giving the car back to the dealership, and breaking your contract. Voluntary or not, it’s still considered a repossession, and shows up on your credit reports and negatively impacts your credit score as such. You’re responsible for paying any remaining balance from your loan contract – called a deficit balance – after the dealer sells the vehicle.
  2. Private sale – You’re entitled to sell the car yourself, which can help because you’re able to set the price. If you get enough for the vehicle, you can use that cash to pay off your loan and keep anything that’s left over. However, since cars depreciate as soon as you drive them off the lot, it’s usually very difficult to immediately sell one for what you owe – depending on the age, make, model, and condition of the vehicle.
  3. Trade it in – If you need another car but just don’t think you made the right choice the first time around, you always have the option of trading in your vehicle. When you trade it in, you have to get a payoff quote from your lender, and use the trade value of your car to pay the loan. If there’s enough money left over, you can use that as a down payment for your next vehicle. If you don’t have equity in your car, you’re responsible for paying the balance to the lender in cash. If you don’t have the money, you still may be able to trade in the vehicle and roll the negative equity into your next loan. However, doing this is going to increase the total cost of the new car, so proceed with caution.

If these options don’t work for you, you may have to wait a bit longer before getting out of a vehicle you feel isn’t a right fit. If the car isn’t the issue, however, you have another option to consider.

Refinancing a Car Loan

If it’s not the vehicle you’re looking to get out of but you feel the loan isn’t working for you, you may be able to refinance your car. Refinancing means replacing your current loan with a new one, which hopefully has a lower monthly payment and a better interest rate.

In order to be able to refinance, you must have good credit or at least an improved credit score since you took out the original loan, and at least one year must have passed. You can try to refinance with your current lender, but most people refinance with a new lender.

To get approved for refinancing, not only do you have to meet the credit requirements, your vehicle has to meet equity, age, and mileage requirements, and the loan amount has to fall within the new lender’s refinancing range.

Ready to Find a New Loan?

When you’re ready to try for a new auto loan and get out of the one you’re currently in, CarsDirect wants to help. We work with a large network of special finance dealerships all across the nation that have the lending specialists available to help people in many types of credit situations. We can help you research new and used cars to find the one that fits your situation, as well as help you get connected to a local dealer.

Ready to get started? Just fill out our fast and free auto loan request form today, and we’ll get to work matching you to a dealership near you!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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