Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Mar 29, 2022

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The Lowdown

  • Your leased car can be returned via voluntary repossession or someone taking over your lease
  • You will still have to pay some fees, most likely
  • There are options to adjust payments like refinancing

Curious about how to return a financed car without penalty? There are options for those who want to return their vehicle or manage the loan.

If you don’t know what to do, consider refinancing or letting someone else take over your lease, although fees may apply. You could also cancel your auto insurance, sell your car, and use the cash to pay off the rest of your loan.

There are options for those who want to return a financed car without penalty, so enter your ZIP code into our free quote tool to find more affordable insurance.

Can you return a financed car back to the dealer?

Depending on your auto dealer and the terms of your agreement, you might be able to return a financed vehicle. However, you should be aware that there may be a time limit for how long you have to take your car back for a return. If you are outside that period, you will likely be penalized for trying to return your vehicle.

Some of the reasons you may want to return your car include:

  • You realized you couldn’t make the payments
  • The vehicle has a defect or other issue
  • You found a better offer somewhere else

There are likely dozens of reasons you might want to return your vehicle. If you feel it’s been a bad match, contact your dealer as quickly as possible to return your car and possibly get a new car. It would be wise to look at the terms and conditions of your agreement to see what it says before you go.

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What is voluntary repossession?

If you realize that you can no longer afford the payments on your vehicle and you’re worried about your car being repossessed, you can always start a voluntary repossession. During this process, your car financier will:

  • Repossess the car
  • Sell it to another driver
  • You’ll pay the difference between what the car sold for what you have on the loan

With this method, you get to offload the car for less than the full car payment, but you may still end up owing the bank a fair amount of money. If your vehicle is voluntarily repossessed, it means that you made the willful decision to give up your vehicle. You will also knowingly pay the difference when the car is sold to someone else.

This might be a good situation for those wondering how to let a car go back without ruining credit. The lender won’t be losing any money as long as you pay the balance between the car sell price and your loan.

What are alternatives to returning your car?

If you’re skeptical about returning the vehicle you’ve been paying off but need to do something, there are options. Depending on your lender, you may be able to adjust payments, give the car and lease to someone else, or refinance your loan.

These options are something you can do, but some will cost you more in the long run. So before doing anything, it’s wise to consider the situation and how you can benefit from each option.

Do you need full coverage insurance on a leased car? If you have this insurance and your insurer doesn’t require it, you could save money on your insurance by reducing coverage.

Can someone else take over my lease?

Having someone else take over your lease is a situation that can benefit both parties. For example, you’ll get out of a car lease that has become unaffordable while the other person receives a relatively new car that has been partially paid off. However, you should be aware of some of the additional charges or terms associated with giving your lease.

Some examples of what you could face when you transfer a lease include:

  • A lease transfer fee of around $300
  • Taxes on the vehicle
  • You’ll take over monthly payments as-is

Depending on how lenient your leasing company is, you may have to pay more to transfer the lease than you were paying each month. That being said, the one cost is better than having your account drained each month by a car payment that you’re unable to afford.

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When can I refinance my lease?

If you’re looking to get lower rates or a lower interest rate, refinancing your car might be an option. You should still be aware of the limits placed on refinancing. There are good and bad times to refinance your vehicle, depending on your loan and the company you took it out with.

Some examples of the best time to refinance your car include:

  • First 60 to 90 days: Most insurers won’t consider a refinancing application until the title has been transferred to the lender, which sometimes takes two to three months.
  • Six or more months after start: If you wait some time before you try to refinance, it’ll reflect positively on your credit score and allow it to recover from any drops.
  • Two or more years are remaining: To get the full benefit of refinancing, it’s recommended that you start the refinancing process when you have at least two years left.

In these cases, you’ll get the most benefit from a refinanced loan. While refinancing isn’t strictly limited to these circumstances, these guidelines will give you an idea of when you can start thinking about refinancing your vehicle to try and save on your monthly payments.

Is it possible to sell a financed car?

Are you wondering how to sell a financed car without paying it off? The most straightforward answer is that you can, but there are conditions that you should be aware of. For example, when you’re stuck with a car and recurring payments, you might want to offload the vehicle for the rest of the loan amount or more.

The first thing you should do is find the current going price for your car. According to J.D. Power, you can find your car’s value using various online tools, where you can see how much a private seller can reasonably get for the vehicle. It’ll also be wise to know how the value matches your cars’ loans.

What are possible penalties for returning a financed vehicle?

It would be nice if you could own up to your inability to pay and return the car without any hassle. However, that’s not how the system of financing a car works. Due to the ever-decreasing value of vehicles, lenders, and other circumstances, you may be faced with penalties when you attempt to return a financed car.

Some of the penalties you can expect when replacing your car include extra fees and a negative mark on your credit score. In addition, as previously mentioned, the insurer may try to sell off the car, and then you’ll have to pay the remaining balance on loan after that, without any vehicle.

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Returning a Financed Car: The Bottom Line

If you’re having issues with your financed car, you should know that you have options on how to proceed. Many people have had problems with car payments and haven’t lost their vehicles. Once you consider your options, you’ll know whether it is best to return the car or work out a deal with your lender.

Now that you know how to return a financed car without penalty enter your ZIP code into our free quote tool to see what you could pay today to cover that vehicle.