How to Get Rid of Car Payments For Good

What options are available?

Car - For Sale By Owner
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Whether it’s time for an upgrade or your monthly payments are a burden, an auto loan (or lease) can cause problems until you get rid of those payments. You can’t use those funds for other needs or financial goals, and a payment on your credit reports can prevent you from qualifying for a new loan. So what are your options for eliminating an unwanted monthly car payment?

We’ll cover several approaches below, including selling the vehicle, refinancing and trade-ins, repossession, and asking somebody else to take over the payments.

Ideally, you can just pay off the loan and keep the vehicle, but that’s easier said than done. Still, if you have extra money in your budget, a strategy like a Debt Avalanche can help you find freedom from debt.

Selling the Vehicle

You might be able to sell your car (even if you still owe money on it) and pay off the loan with the sales proceeds. That approach is the most effective way to limit your risk and get rid of the required payments. 

In most cases, transferring the loan isn’t an option, and your buyer will simply pay you a lump sum for the vehicle. You can certainly ask your bank about transferring the loan to somebody else if you want, but it’s cleaner for everybody to just sell the car outright.

Leased vehicles: If you have a leased vehicle, you might try to sell it and pay off the lease. Your vehicle has value, and you can use that equity to generate cash. You might not get enough to pay off the lease completely, but you might make a substantial dent in the loan balance.

It might also be possible to officially transfer responsibility for the lease to somebody else. Several websites offer this service—but do plenty of research to ensure that you work with a reputable service. The promises don’t always lead to the results you want.

If you work with a lease transfer service, verify that your responsibility for the vehicle is 100% eliminated.

Refinancing the Loan

Depending on your needs, refinancing your auto loan might provide the relief you need. Especially if your credit has improved since you bought the vehicle, a new loan might feature a lower rate and lower monthly payments.

When you refinance, it might be tempting to go for the lowest payment possible. To do that, you’d choose the longest loan term (five years or more, for example), adding those years on top of the time you’ve already spent paying down the loan. But watch out: While a low payment seems appealing, stretching out the loan will cost you more over the long term. Starting a brand new loan means you reset the payment schedule. As a result, you start over in the early years of a loan, when interest costs are at their highest, and you barely make a dent in the loan balance.

Trade for Another Vehicle

If you want a different vehicle, you can probably trade in your existing vehicle, and add any unpaid loan balance to your new loan’s balance. But that’s rarely a good idea, especially if you’re getting a newer, more expensive car. Just like stretching out a loan (which results in higher interest costs), you’re just getting an oversized loan for your new car.

Trading in for a less expensive vehicle is an excellent strategy for saving money.


If none of the options above work (and you need to get out of the loan), it may be best to hand the keys over to your lender. If you voluntarily surrender the vehicle, you won’t pay the full costs of repossession—but you’re still liable for any unpaid balance, and your credit​ scores will suffer. Still, you can free up cash flow each month and begin the process of moving on. Speak with a credit counselor for individualized advice before you stop making payments or surrender your vehicle.

Have Somebody Take Over Payments?

With any loan, whether you own a house or you’re making payments on a truck, it seems like a great idea: Find somebody who’s willing and able to make the required payments, and walk away from the deal. The buyer benefits from low up-front costs and a predictable payment. The lender gets to keep collecting payments as if nothing happened. Most importantly, you get the freedom to move on, so it seems like everybody wins.

Unfortunately, it’s more complicated than that.

You are still responsible for payments until you completely satisfy the debt (and any agreements) with your lender. If you applied for a loan, your credit is on the line, and you’re responsible for paying off the debt. That risk does not transfer to somebody who takes ownership or possession of your car and starts making payments.

If the payments stop arriving (for whatever reason—your borrower might die, change his mind, lose his job, or wreck the car), the lender or lease company will take action against you. Lenders don’t legally have the right to go after your “buyer” because they don’t have a signed agreement with that individual. Potential action could include sending your account to collections, filing lawsuits, garnishing your wages, and more.

Ultimately, your buyer does not have any skin in the game—you do. As a result, it’s best to sell, trade in, or surrender your vehicle instead of letting somebody take over payments.