Getting Out of a Car Payment: Your Real Options
What you can actually do about a car payment you can't afford
Getting out of a car payment means either stopping the payments legally or transferring the debt to someone else—and those are genuinely different paths with different costs. You cannot simply walk away from a loan without consequences: the lender will repossess the car, report the missed payments to credit bureaus, and often sue you for the difference between what they sell the car for and what you still owe. The routes that exist are: refinancing to lower your payment, selling the car and paying off the loan, transferring the loan to another person, surrendering the car voluntarily, or negotiating a loan modification with your lender.
Which one works depends on whether you have equity in the car (you owe less than it's worth), whether you can afford a lower payment, and how much damage you're willing to accept to your credit. None of these are painless, but some preserve your credit while others don't.
Key Takeaways
- Refinancing lowers your monthly payment by extending the loan term or getting a better interest rate, but you stay responsible for the full debt.
- Selling the car and using the proceeds to pay off the loan works only if the car is worth more than you owe, and you must pay the difference out of pocket if it isn't.
- Transferring the loan to another person requires the lender's permission and the other person's approval—most lenders do not allow this without a full new application.
- Voluntary surrender stops the payments but damages your credit for seven years and may leave you owing the difference between the sale price and your loan balance.
- Loan modification (asking the lender to change the terms) is rare but worth asking about if you have a temporary hardship rather than a permanent income change.
Refinancing: keeping the car but changing the payment
Refinancing means taking out a new loan to pay off the old one. The new lender pays your original lender in full, and you now owe the new lender instead. Your monthly payment drops if the new loan has a lower interest rate, a longer term, or both.
This works best if your credit score has improved since you took out the original loan, or if interest rates have fallen. You will need to be current on your payments (not behind) to refinance, and the new lender will run a credit check and verify your income. The catch: extending the loan term means you pay interest for longer, so a lower monthly payment often costs you more in total interest over the life of the loan.
Start by contacting your current lender to ask what your payoff amount is. Then get quotes from banks, credit unions, and online lenders. Credit unions often offer lower rates than banks if you are a member. Compare the total interest you will pay under each option, not just the monthly payment.
Selling the car and paying off the loan
If you sell the car privately or trade it in, the sale proceeds go to your lender first to pay off the loan. You get whatever is left. This works cleanly only if the car is worth more than you owe—called having positive equity.
Check your car's value using Kelley Blue Book, NADA Guides, or Edmunds. Call your lender and ask for the exact payoff amount (not your current balance—the payoff includes interest accrued to a specific date). If the value is higher than the payoff, you can sell the car, the lender gets paid, and you keep the difference. If the value is lower, you owe the difference out of pocket, which defeats the purpose of selling.
If you trade the car in at a dealership, tell them you are upside-down (owe more than it's worth) and ask them to roll the negative equity into a new loan. This is common but means you are starting a new debt cycle. If you sell privately, you will need to coordinate with your lender so the title transfers cleanly—some lenders require the payoff be sent directly from the buyer.
Transferring the loan to someone else
In theory, you could find someone else to take over your loan. In practice, most lenders do not allow this without treating it as a new loan application. The person taking over would need to pass a credit check and income verification, and the lender would likely charge an application fee.
Some lenders have assumption clauses that allow a family member or spouse to take over the loan with the lender's permission, but this is rare and usually only available if you are current on payments. Even then, the new borrower becomes fully responsible for the debt, and the lender still has a claim on the car.
Before pursuing this, call your lender and ask directly whether loan assumption is possible and what the process is. If they say no, you cannot force them to allow it. If they say yes, the other person should understand they are taking on the full debt and the lender can repossess the car if they miss a payment.
Voluntary surrender: stopping payments but accepting credit damage
Voluntary surrender means you return the car to the lender and stop making payments. The lender sells the car at auction and applies the proceeds to your loan balance. If the sale price is less than what you owe, you are responsible for the difference—called a deficiency—and the lender can sue you to collect it.
This damages your credit severely. The missed payments and the surrender itself appear on your credit report for seven years, and your credit score typically drops 100 to 200 points immediately. You will have difficulty borrowing money, renting an apartment, or getting a job that requires a credit check during that time.
Voluntary surrender is sometimes presented as "better" than repossession because you initiate it, but the credit damage is nearly identical. The only real advantage is that you avoid the repossession company showing up at your home or work. If you are considering this, contact your lender first and ask whether they will waive the deficiency if you surrender—some will, but most won't.
Loan modification: asking the lender to change the terms
Some lenders will modify a loan if you are facing a temporary hardship—a job loss, medical emergency, or income reduction that you expect to recover from. Modification might mean skipping a payment, extending the loan term, or temporarily lowering the interest rate.
This is not common with auto loans the way it is with mortgages, but it is worth asking about if your hardship is recent and temporary. Contact your lender's loss mitigation or hardship department (not the regular payment line) and explain your situation. Be honest about whether you expect your income to recover. If you are permanently unable to afford the payment, modification will not help.
Modification typically does not damage your credit if you are current on payments when you ask. If you are already behind, the lender is less likely to work with you, and any modification will still reflect the missed payments on your report.
What happens if you simply stop paying
If you stop making payments without doing any of the above, the lender will begin calling and sending notices. After 30 days, the missed payment appears on your credit report. After 90 to 120 days, the lender typically initiates repossession. A repossession company will locate and take the car, often without warning.
Once repossessed, the car is sold at auction, usually for less than its market value. The lender applies the sale price to your loan balance. If you owe $15,000 and the car sells for $8,000, you owe the remaining $7,000 plus repossession and auction fees. The lender can sue you in court to collect this deficiency, and if they win, they can garnish your wages or place a lien on your bank account.
The repossession and deficiency judgment stay on your credit report for seven years. This path costs you the car, damages your credit, and often leaves you with a debt you still have to pay.
Comparing your options side by side
| Option | Credit Impact | Keep the Car? | Still Owe Money? | Best For |
|---|---|---|---|---|
| Refinancing | None if current; hard inquiry appears briefly | Yes | Yes, full loan amount | Lower monthly payment; improved credit score |
| Sell the car | None | No | Only if upside-down; you pay the difference | Positive equity; want out completely |
| Transfer the loan | None for you if approved | No (other person keeps it) | Other person owes it | Rare; lender must allow it |
| Voluntary surrender | Severe; 7-year impact | No | Possibly; deficiency judgment likely | Cannot afford payment; expect deficiency judgment |
| Loan modification | None if current; reflects hardship if behind | Yes | Yes, modified terms | Temporary hardship; expect income recovery |
| Stop paying (no action) | Severe; 7-year impact | No; repossessed | Yes; deficiency judgment likely | Not recommended; worst outcome |
Frequently Asked Questions
Can I get out of a car loan if I'm underwater (owe more than the car is worth)?
Not without paying the difference or accepting credit damage. If you refinance, you still owe the full amount. If you sell, you pay the gap out of pocket. If you surrender or stop paying, you face a deficiency judgment and seven years of credit damage. The only exception is if a lender agrees to a loan modification or waives the deficiency, which is uncommon.
Will refinancing hurt my credit score?
Refinancing causes a small, temporary dip when the lender pulls your credit report. This hard inquiry typically lowers your score by 5 to 10 points and disappears within a few months. The benefit of a lower payment usually outweighs this brief impact, especially if your score has improved since you took out the original loan.
What if I can't afford any of these options?
Contact your lender's hardship department and ask about loan modification or payment deferment. If that fails, voluntary surrender is preferable to repossession because you control the timing, though both damage your credit. Consider whether a co-signer or family member could refinance the loan in their name, though this transfers the debt to them.
How long does it take to refinance a car loan?
Refinancing typically takes 5 to 10 business days from application to funding. You will need your loan documents, proof of income, and the vehicle identification number (VIN). Some online lenders move faster; credit unions may take longer. Your current lender must receive the payoff before your next payment is due to avoid a late payment.
If I surrender the car, will the lender forgive the deficiency?
Most lenders will not, but some will if the car is worth close to what you owe. Ask your lender directly before surrendering. Get any agreement to waive the deficiency in writing. If the lender refuses and sells the car for less than your balance, they can pursue a deficiency judgment against you in court.