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Owning a vehicle is no longer considered a luxury, even though the cost of transportation can be excessive for a middle-class budget. Car and lease payments, insurance, gasoline, repairs and maintenance costs really add up. In fact, these costs can consume a large percentage of the driver’s take-home pay. As a result, many consumers are forced to consider “voluntary repossession” in order to lessen their monthly financial burden. If you are struggling to make your loan or lease payment, there are a few facts you should know before considering a voluntary repossession–it may be possible to stop repossession.

What is repossession?
There are two type of repossession: voluntary and involuntary. Keep in mind that any type of repossession, whether voluntary or involuntary, will affect your credit and the derogatory notation will remain on your credit bureau file for seven years.

During an involuntary repossession, your car is repossessed and you are responsible for covering the fees associated with its repossession.

A voluntary repossession, in which you voluntarily return the vehicle, can save you money on collection fees because the lender does not have to arrange for the car to be repossessed.

Either way, your obligations may not end after the vehicle is repossessed. Once a vehicle is repossessed, the lender will most likely sell it to the highest bidder and apply the proceeds of the sale to the balance owed on the car. If the sale price is not sufficient to pay the balance due and any legal fees incurred, there will be a "deficiency balance" remaining. You and any co-signer will be legally obligated to pay this deficiency balance. If you do not pay this balance, the creditor can possibly sue you to try and collect.

Preventing repossession
Preventing repossession is easier than disputing it afterward. If you are unable to make a timely payment, contact your creditor or lessor immediately. Many creditors or lessors have programs in place to help people experiencing temporary setbacks. If you are able to negotiate a revised schedule of payments with your creditor, do not forget to get the terms in writing to avoid any possible miscommunication.

Cosigners are equally responsible. If you have a co-borrower, and your vehicle goes back as repossession, not only will the repossession appear on the co-signer’s credit report, but they are also legally responsible for any deficiency balance.

Since the cost of having a vehicle repossessed is quite high, it makes sense to exhaust all options before allowing repossession to occur. Many creditors have hardship programs in place to help people experiencing temporary setbacks. For example, your lender may grant an extension, meaning that the past due amount can be paid at the end of your loan. Another option may be for the lender to rewrite your loan to reduce your monthly payments.

Some other alternatives to repossession might be to sell the vehicle, to find someone to “assume” your lease, or to take out a different type of loan (e.g., home equity loan) to satisfy the debt. For more information about your rights and responsibilities, visit