If you can’t keep up with your loan payments, you can write a letter to your lender to voluntarily surrender your vehicle.
Although surrendering your ride still ends with the car back in your lender’s hands, your credit score won’t take such a bad hit and you’ll avoid the bad feelings a repossession creates. But signing a car loan agreement always comes with a risk of repossession, so knowing how to surrender a financed car is important.
Car loan expert and car insurance broker app Jerry is here to walk you through everything you need to know about how to surrender your car to a lender. We’ll also show you how to lower your car expenses using our trusted insurance comparison app.
What is a car loan surrender letter?
A car loan surrender letter notifies a lender that you can’t keep up with payments and will return the vehicle. By notifying the lender and initiating a voluntary surrender, you can prevent defaulting on the loan and repossession of your vehicle.
Because even a voluntary surrender can hurt your credit score, you should think of a car loan surrender letter as a last resort if you’re unable to keep up with payments. Consider all your other options, first:
- Arrange an alternative payment agreement with your lender that takes some pressure off your finances
- Refinance your car loan
- Trade in the car if your balance is less than the car’s value
How to write a car loan surrender letter
Because a car loan surrender letter will negatively impact your credit score, it’s a serious decision. But if it’s your only option, it’s a smart move to prevent forceful repossession.
Here’s how to surrender your car to the bank with a car loan surrender letter:
- Identify yourself and your vehicle. Be sure to include an account number so that your lender can match your letter to your records.
- Explain that you’re unable to make payments and intend to surrender the car.
- Provide contact information so that your lender can reach you.
- Request signature confirmation of delivery if you’re sending the letter by mail.
- Keep a copy of the letter for your records.
Once you’ve submitted a surrender letter, call your lender to arrange a safe time and location to drop off your vehicle. If you don’t want to send the letter by mail, you can also drop the letter off along with your vehicle.
A voluntary repossession won’t wipe away your debt—you’ll still be responsible for payments after you surrender your car. Your lender will try to sell the car on your behalf and you’ll be responsible for your outstanding balance minus the sale price. This lower balance is known as the deficiency balance.
Key TakeawayWriting a car loan surrender letter won’t erase your debt, but you’ll likely pay a reduced balance if your lender can sell the vehicle.
What’s the difference between voluntary surrender and repossession?
The main difference between voluntary surrender and repossession is that voluntary surrender allows you to avoid the chaos and humiliation of a forceful repossession.
When you surrender a financed car, you’ll still be responsible for a deficiency balance—and voluntary repossession will still affect your credit score. But writing a car loan surrender letter shows future lenders that you took responsibility for your debt rather than forcing the lender to take drastic action.
The bottom line: even though it’s not ideal, it’s easier to repair your credit after voluntary surrender than a repossession.
Key TakeawayVoluntary surrender will impact your credit score, but it shows future lenders that you’re responsible and won’t force them to repossess your car.
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Licensed Insurance Agent
R.E. Fulton is an expert insurance writer specializing in car ownership topics from car shopping and loan advice to insurance and repair guides. R.E.’s mission is to create unique and accessible content that helps readers to become more successful and independent car owners. R.E. has written and edited over 900 high-performing articles for Jerry, with an average of 1 million+ views. As a senior writer on Jerry’s editorial team, R.E. draws on over 10 years of experience as a professional writer and digital publishing specialist. Prior to joining Jerry’s editorial team in 2021, R.E. worked as a writing coach at Columbia University, the Rochester Institute of Technology (RIT), and the University of Rochester. They serve as a managing editor for peer-reviewed history publication Nursing Clio, where their work has appeared regularly since 2015.
Jessica Barrett is a senior insurance writer and editor with 10 years of experience in the automotive and travel industries. A specialist in car insurance, car loans, and car ownership, Jessica’s mission is to create comprehensive content that car owners can use to manage their costs and improve their lives. As a managing editor for a team of writers and insurance specialists, Jessica has edited over 2,000 articles for Jerry on topics ranging from local insurance shopping tips to refinancing car loans with bad credit. Before joining Jerry as a senior content editor in 2021, Jessica created visual content for clients such as Expedia, Vivid Seats, Budget Direct Car Insurance, Angie’s List, and HomeAdvisor. Her content was published in Business Insider, Forbes, Apartment Therapy, and the BBC.
