Getting out of a car payment typically involves selling the car to pay off the loan, but your options depend on whether you have positive or negative equity. If you owe more than the car is worth (being "upside-down"), the strategies become more complex and may require additional funds.
The most straightforward solution is to sell the car privately. This often yields the highest sale price, increasing your chances of covering the loan balance. You'll need to get a payoff quote from your lender, which is the exact amount to settle the loan. Once you have a buyer, you use their payment to settle the debt with the lender, and any leftover money is yours. If the sale price doesn't cover the loan, you are responsible for paying the difference, known as the deficiency balance.
If selling privately isn't feasible, you can explore a voluntary repossession. This means you return the car to the lender. However, this severely damages your credit score, and the lender will still sell the car at auction—often for a low price—and likely sue you for the remaining deficiency balance. It's generally considered a last resort.
Another option is refinancing if the monthly payment is the issue. This won't eliminate the payment but could lower it to a more manageable level if you qualify for a better interest rate. For those with a legitimate financial hardship, contacting the lender to request a loan modification or forbearance agreement might provide temporary relief.
| Option | Best For | Impact on Credit | Key Consideration |
|---|
| Private Sale | Those with positive or small negative equity. | Minimal negative impact if loan is paid in full. | Requires effort to market the car; must cover any deficiency. |
| Trade-In | Convenience; often part of buying a cheaper car. | Neutral if new loan is approved. | Dealership offer is usually lower than private sale value. |
| Voluntary Repossession | Extreme financial distress with no other options. | Severely negative, remains for ~7 years. | You remain legally liable for the loan balance after auction sale. |
| Refinancing | High-interest rates; need lower monthly payment. | Minor, temporary dip from credit inquiry. | Requires good credit to qualify for better terms. |
| Loan Modification | Temporary hardship (job loss, medical issue). | Varies; can be neutral if terms are met. | Not guaranteed; lender approval is required. |
Ultimately, the best path requires a clear understanding of your car's current market value versus your loan payoff amount. Websites like Kelley Blue Book (KBB) or Edmunds can provide valuation estimates to help you start.
