Dear Driving for Dollars,
I own a car that is now worthless because engine and transmission problems require $5,000 in repairs, and the car is worth only $2,000. I still owe $7,000 on the car loan. Should I have it voluntarily repossessed?
— Bobbie Jean
Dear Bobbie Jean,
Repossession works basically the same whether it is voluntary or involuntary, though a lender may be more willing to work with you if you are voluntarily giving up your car. If your car is repossessed, it will be sold at auction and probably not for much considering the mechanical problems you describe.
You most likely will be held responsible for the difference between the amount received from the sale and what you owe, though the lender may forgive a portion of the car loan.
Regardless, the repossession will remain on your credit history for seven years. While it’s a hard pill to swallow, it’s probably best to get the car repaired. Otherwise, you’ll likely be paying the lender thousands with no car to show for it and be faced with a tarnished credit report for years to come.
Ask the adviser