A Poor Solution: Handing the Car Back
If a tow truck takes your car, that's considered a repossession. If you arrange to drop off the vehicle with the lender, that's considered a voluntary surrender.
If you opt to voluntarily surrender your car, you'll be spared the costs the bank incurs for sending out the tow truck and storing your car until it is sent to auction. But lenders see repossession and voluntary surrender as essentially the same thing: a failure to live up to your side of the loan agreement. Although they will show up differently on your credit report, both will shred your credit.
No Solution at All: Hiding the Car
This is not going to work. Here's a story to prove the point:
I sold cars for more than a dozen years in Southern California, and one customer was a woman who didn't even make her first month's payment. She also didn't respond to the lender's attempts to reach her.
She was deemed a "first payment default" by the bank, which marked her vehicle for repossession. She likely thought getting the car away from her home address would make her invisible to the bank, so she decided to skip town. Within a month, a repo company spotted her Mitsubishi Montero in a supermarket parking lot in Atlanta and repossessed it.
How did that happen? Technology. Repo trucks have cameras that read license plates and photograph nearly every one that passes their way. Those plates are cross-referenced with lists of cars that have been marked for repossession, and when the driver of a roving repo truck gets a match, the vehicle becomes a target.
Moral of the story: Even driving across the country will not help you outrun the repo man.
The Best Advice
The best way to deal with the can't-pay dilemma isn't a strategy for ducking the repo truck or even knowing how to rearrange the terms of your loan. It's the actions you take before you buy your car that may be the most valuable way to head off trouble.
"The first tip we would have for consumers is to try to avoid the situation entirely — if they can," Brown said. "Plan ahead to minimize the impact a hardship might have on making loan payments. For example, having an emergency fund with at least three to six months' worth of expenses is a good idea."
Here are a couple more proactive measures: Buy the right car for your needs, recognizing that it might not be the car of your dreams. Factoring in the extra costs of car ownership ahead of time. Stay well within your budget instead of pushing it to the max.
If you do all that, but still find yourself in a sticky financial situation with your car, we hope these tips — and a little luck — will save the day.