How to Get Out of a Car Loan

This is a guide on how to get out of a car loan contract. Refinancing, renegotiating, or even trading in your car can bring you back out of the red.
Written by Jacoba Bood
Reviewed by Jessica Barrett
If you can’t afford your car loan, try renegotiating the terms. If your payments will still be too high, you can sell your car to pay off your loan.
Most people can’t afford to buy a car outright, so they purchase a vehicle with the help of an
car loan
. The deal? You agree to pay the lender back over time, with interest.
Not being able to afford your car payments can be a financial stressor (not to mention, bad for your credit). If your car payments are putting you in the red, you might want to consider getting out of your loan or selling your vehicle to pay off your loan.
Not sure which route to take?
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, has compiled all the information that you need to know about refinancing a loan and how to get out of an auto loan.
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Get out of your loan by refinancing

When you
refinance a loan
, you essentially swap it out for a new loan.
Your new loan will pay off the old loan. Then you can negotiate a preferable loan contract.

Why consider refinancing your car loan?

Ideally, your new loan will have better terms than the old one. This is the outcome that will save you money in the long term. You could shoot for more favorable loan terms like lower interest rates (
) or a shorter loan period.
If you are having difficulty making your monthly payments, better loan terms might not be an option. You could also negotiate a loan with lower monthly payments—although you will probably end up paying more interest in the long term.
There are some downsides to refinancing a car loan. You might have to pay refinancing fees, and
refinancing a car can hurt your credit score
. You will probably see a slight drop in your credit score, but it is just temporary.
In most cases, the benefits of locking down better loan terms will outweigh the costs of refinancing. Likewise, if you are in a pinch and need to lower your monthly payments, refinancing a loan could save the day—even if you have to agree to less favorable terms.
Key takeaway If you are having trouble making your monthly payments, better loan terms may not be an option—however, you will likely be able to lower your monthly payments if you agree to a longer loan term with higher interest rates.

Renegotiating a bad car loan

If you are worried that you might have difficulty making your loan payments in the future, you can ask a lender if they would be willing to negotiate the loan contract.
Your lender will be more likely to agree to negotiation if you reach out to them before you fall behind on your payments.
If negotiating is an option, be sure to show up prepared. Use online loan calculator tools to budget out how much you can afford to pay on a monthly basis. Just keep in mind that you might have to agree to less favorable terms in the long term.

Selling a car with an existing loan

Selling a car with a loan can get you out of a loan contract—free and clear.
If you aren’t able to negotiate and or refinance your loan, selling your car is probably going to be a better option than having it repossessed. There might be other reasons that you might want to sell a car with a loan as well. For example, maybe you accept a job overseas and find that it is more practical to leave your car behind.
If you want to sell your car with a loan, there are a couple of ways that you can go about it.
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Selling to a dealership

Selling your car to the dealership is usually the most convenient option.
Dealerships might not offer the best price, but they are accustomed to navigating these scenarios (aka, you don’t have to worry about private buyers showing interest and not texting you back).
In most cases, the dealership will work with your lender to come to an agreement. They will pay off your loan when they buy your car. Once the loan is paid off, you walk away with the remaining balance left over from the sale.

Selling to a private buyer

You can also sell a car with an existing loan through a
private sale
It can be more risky and complicated than selling to a dealer, but you are likely to land a better price through a private seller.
You will essentially have to negotiate with the lender and the buyer at the same time to come to an agreement. Once you do, you will use the money from the sale of the car to pay off the existing loan. At this point, you will sign the vehicle title over to the new owner.
If possible, try to conduct this three-way transaction in the lender’s place of business. Having all parties present at once will help ensure that the sale is legally binding.

Trading in with a car loan

If you want to save yourself the time and hassle of selling a car with a loan, you might want to consider
trading in your car
for a more reasonably priced set of wheels.
Even if a dealership doesn’t buy your car with a loan, they will probably happily take it as a trade-in for another vehicle. The remaining value on your old car will usually go toward the down payment of your new one.
If you choose to put the value from a sale or trade toward a more affordable vehicle, saving money on your insurance can help you get back on track with your new loan.
Using an intelligent AI-based tool like
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A licensed broker that offers end-to-end support, Jerry gathers affordable quotes, helps you switch plans, and even cancels your old policy for you. It’s completely free to compare quotes, and the average Jerry user saves a whopping $879 a year.
Key takeaway If the dealership doesn’t buy your car with a loan, they will still likely agree to a trade-in.
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How to get out of an upside down car loan

If you are
upside down on your car loan
, that means you owe more on your loan than your vehicle is worth.
If you are having trouble paying off a loan that you are upside down on, you might still be able to refinance. However, if you want to lower your monthly payments, you will probably have to accept less favorable loan terms in the long run.
You can also choose to sell or trade in the vehicle to a dealership, but you will likely end up owing the dealership money—not the other way around. Private sales on cars with upside-down loans are even more complicated for this reason.
If you can still make your payments, it is usually best to continue paying off your loan. If you have improved your credit since taking out the loan, you might be able to refinance for more favorable loan terms that can help you save on interest in the long term.
Key takeaway If you are stuck in an upside-down car loan, the best course of action might be continuing to pay off the loan or refinancing.

Use Jerry to lower your monthly car expenses

If you’re having trouble keeping up with your monthly car expenses, refinancing or selling your car aren’t the only options you should explore—there are other ways to
save money on car expenses
Drivers that use
to swap car insurance policies save an average of $879 a year on car insurance.
It’s this simple: download the Jerry app or go to In less than 45 seconds, Jerry collects all of your information from your existing insurer.
Choose from competitive quotes from 55+ top insurance companies, and Jerry takes care of the rest—securing your new
car insurance
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Jerry’s car loan comparison tool

can also help you compare rates and find out how much you can save on your loan. As an AI-powered broker, Jerry gives you all of the savings and coverage with none of the hassle!
Comparison shopping is the most effective and efficient way to make sure you’re getting the best refinanced auto loan.
You can call around to compare loan terms—but who has the time (or patience) for that? To easily compare multiple rates from top lenders, use Jerry as your one-stop shop for auto loan refinancing.
"Jerry is the most useful app I’ve ever downloaded. In a matter of MINUTES, I was able to get multiple quotes, cancel my policy, start my new one, save $230 a month, AND it automatically generates new quotes every five months to make sure you’re paying the lowest possible price." - Satisfied Jerry Customer


Can you get rid of a car loan?

There's no magic fix for getting rid of a car loan, but there are ways you can work towards finishing it off. Making payments on your car loan is the most obvious way to get rid of it. You can also refinance your car loan to potentially speed up this process with better interest rates.
Of course, you can also sell your car. If you do this, the money you sell it for will be used to pay off the car loan. Keep in mind that if you're in an upside down car loan, you might not be able to pay off the loan fully after selling the car.

Do I have to finance a car?

If you can't afford to pay for a car in cash outright, yes, you have to finance a car. You will need a lender to pay for the car past your downpayment.
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