Will Voluntary Repossession Affect Your Credit

A young couple admiring a new car
Dear Experian,

I bought a car about 2 years ago at a "buy-here-pay-here" lot. I have never missed a payment and have been a good customer. Since buying the car I have spent over $3,000 in repairs. I recently have been looking to get a new vehicle since the repairs are killing me financially. I was talking to a dealer about a trade in. Much to my surprise, he told me I should simply just give the car back to them. He said to check my credit report and see if they report the payments, and if I did not see it on there, which I didn't, then giving my car back would not hurt my credit. Is it simply this easy? I am going to go upside down on the car $5,000 so it sounds so much more to my advantage, but I worry the risk of having a repo on my credit report. Any advice?


Dear TDB,

I'm afraid it's never that simple. I understand that having to deal with multiple car repairs can be a drain financially and emotionally, but be wary of anyone recommending that you surrender your car or have it repossessed.

The original account won't appear in your credit report if the dealership you purchased the car from does not report payments to Experian (or any of the other credit reporting companies).

However, after you return the car the dealership could sell any remaining debt to a collection agency that reports to one or more of the credit reporting companies. The account would then become part of your credit history. A collection account is very damaging to your creditworthiness and credit scores.

Also be aware that, while the account may not appear on your report, you still owe the debt and your creditor can continue to try to collect the balance. And, there may be tax implications because the amount you didn't pay could be reported as income.

Thanks for asking.
The "Ask Experian" team

The purpose of this question submission tool is to provide general education on credit reporting. The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team may include it in a future post and may also share responses in its social media outreach. If you have a question, others likely have the same question, too. By sharing your questions and our answers, we can help others as well.

Personal credit report disputes cannot be submitted through Ask Experian. To dispute information in your personal credit report, simply follow the instructions provided with it. Your personal credit report includes appropriate contact information including a website address, toll-free telephone number and mailing address.

To submit a dispute online visit Experian's Dispute Center. If you have a current copy of your personal credit report, simply enter the report number where indicated, and follow the instructions provided. If you do not have a current personal report, Experian will provide a free copy when you submit the information requested. Additionally, you may obtain a free copy of your report once a week through December 31, 2022 at AnnualCreditReport.