Voluntary Vehicle Surrender: Consequences and Options in Quebec

What Is Voluntary Vehicle Surrender?

Voluntary vehicle surrender is the process of returning your vehicle to the lender when you can no longer make the required payments.

Unlike involuntary repossession, voluntary surrender is initiated or accepted by the borrower. It generally allows the borrower and lender to agree on when and where the vehicle will be returned.

Voluntary surrender vs. involuntary repossession: what is the difference?

Can you simply return a car you can no longer afford?

No. You cannot simply leave the vehicle at the dealership and hand over the keys.

Doing so does not automatically terminate the financing agreement. The lender must be informed, and the surrender must be documented. The consequences will depend on the agreement you signed and the steps taken by the lender.

Before returning your vehicle, verify:

• the type of financing;

• the outstanding loan balance;

• the vehicle’s current value;

• any fees that may be charged;

• the impact on your debt;

• the conditions stated in the surrender documents.

How does the voluntary surrender of a vehicle work?

The procedure may vary depending on the lender and the agreement. However, taking certain precautions can help you avoid unpleasant surprises.

Verify the type of agreement

Start by determining how the vehicle was financed. It may involve:

• an instalment sales contract;

• a secured car loan;

• financing obtained separately from a financial institution;

• a long-term vehicle lease.

This distinction is important. The applicable rules and the possibility of an outstanding balance are not the same in every situation.

Contact the lender

Inform the lender directly about your financial difficulties. The lender can explain the procedure and identify the documents you will need.

Do not simply abandon the vehicle at the dealership. Ask for written confirmation of the agreement and the consequences of surrendering the vehicle.

Review the proposed documents

Read every document carefully before signing. In particular, verify whether the document:

• confirms the surrender of the vehicle;

• includes any fees;

• identifies an outstanding balance;

• contains a waiver of certain rights;

• confirms the end of your obligations;

• explains what will happen to the vehicle.

If any provision is unclear, ask for an explanation before signing.

Return the vehicle and keep supporting evidence

Document the vehicle’s condition when you return it. Keep records of:

• the odometer reading;

• photographs of the interior and exterior;

• the keys and accessories returned;

• the date and location of the surrender;

• copies of all signed documents;

• written confirmation that the vehicle was received.

This evidence may be useful if you are later charged for fees or damages.

What are the consequences of voluntarily surrendering a vehicle?

• Loss of the vehicle: You will need to consider how this will affect your transportation and the cost of an alternative.

• Impact on your credit file: A voluntary surrender may lower your credit score and remain on your credit file for several years.

• Difficulty obtaining new financing: A lender may reject your application or require a higher interest rate, a larger down payment or stricter terms.

• Additional fees or debt: Depending on your agreement, you may still owe an outstanding balance, towing fees, storage costs or repair expenses.

• Consequences for a co-signer: Anyone who co-signed the loan may remain responsible for the debt and may also have their credit file affected.

What solutions should you consider before surrendering your vehicle?

Voluntary surrender is not always the only option. Taking action before missing several payments will generally give you more options.

Negotiate with the lender

Contact the lender as soon as you expect to miss a payment. Depending on your situation, the lender may agree to:

• defer a payment;

• reschedule your payments;

• establish a temporary payment arrangement;

• change your payment date.

These measures will not necessarily reduce your debt. However, they may give you time to stabilize your financial situation.

Sell the vehicle yourself

A private sale may allow you to obtain a better price than a sale arranged after the vehicle has been repossessed.

Before selling, ask the lender for the exact amount required to repay the financing. If the selling price is lower than the outstanding balance, you will need to determine how you will pay the difference.

Reduce your other debt payments

Your car loan may not be the main cause of the problem. Payments on credit cards, lines of credit and personal loans may be reducing your ability to afford the vehicle.

Restructuring your unsecured debt may free up part of your budget and allow you to keep your car.

Consolidate your debts

Debt consolidation allows you to combine several debts into a single loan. It may reduce interest costs and simplify your payments.

However, this solution requires sufficient repayment capacity. A good credit score is also generally required.

File a consumer proposal

A consumer proposal allows you to negotiate the repayment of your unsecured debts based on your financial capacity.

It does not automatically eliminate a secured car loan. However, it may reduce your other payments and free up part of your budget. You may then be able to keep your vehicle by continuing to make your car loan payments.

Consider personal bankruptcy

Personal bankruptcy may be considered when your overall debt has become impossible to repay and other solutions are not realistic.

Its consequences are significant. This option must be assessed based on your income, assets and financial capacity.

Have your options assessed before surrendering your vehicle

Are you struggling to make your car payments? Before surrendering your vehicle, the Licensed Insolvency Trustees at Mallette can review your budget, debts and financing agreement.

This will help you understand the consequences of each option and determine the solution best suited to your situation.