Should I Voluntarily Repo My Car?

Summary

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Episode Overview

Theme:
This episode of The Ramsey Show Highlights tackles a listener’s real-life struggle with a burdensome car loan and whether voluntarily surrendering (“repo-ing”) his vehicle is a wise financial move. Dave Ramsey and his co-hosts provide step-by-step guidance, debunking misconceptions about voluntary repossession, and offering actionable strategies to minimize financial damage and regain control.

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Key Discussion Points & Insights

1. Listener’s Financial Journey and Emotional Challenges (00:06–01:59)

• Listener’s Background:
  The caller shares a history of financial struggle and renewed motivation:

  • Disheartened by a financial mentor’s passing, which derailed previous budgeting efforts.
  • Recently inspired to restart “Baby Steps” toward financial stability but faces skepticism from his spouse due to past failed attempts.

• Quote:

  “Last month, it kind of kicked for me, and I just got really sick and tired. Being sick and tired.” — Listener, 00:06

2. The Costly Car Loan Situation (01:00–02:47)

• Car Purchase Breakdown:

  • Bought a Dodge Caravan from a “buy here, pay here” lot.
  • Vehicle’s sticker: $19,900; after interest, payments will total nearly $34,000.
  • Currently pays $175/week and has done so for 2.5 years.

• Van’s Condition:

  • Estimated current value (by caller): $2,000 due to mechanical issues.
  • Transmission is failing, van not in great shape since purchase.

• Ramsey’s Initial Response:

  • Skepticism about the van’s low stated value; suggests clarifying actual value.

• Quote:

  “You paid originally 20,000, and now you think it’s worth 2. Two years later? That’s a bit of drama. I don’t believe you.” — Dave Ramsey, 02:47

3. Evaluating Voluntary Repossession: Why It’s a Bad Idea (02:48–04:36)

• Loan Details:

  • Actual payoff amount: ~$14,000.
  • Van's market value (likely higher than caller’s estimate): Possibly $7,000–$8,000.

• Voluntary Repo Pitfalls:

  • Turning in the car surrenders control over its sale price.
  • Buy here, pay here lots will sell the car at “below wholesale,” leaving the borrower liable for the deficiency—plus repo fees.
  • Dramatically increases the remaining debt and damages credit.

• Quote:

  “If you turn this into them, they’re going to sell it for two, and they’re going to come after you for 12, plus repo fees… This is the scam they run. So they want you to do this.” — Dave Ramsey, 03:16

4. Recommended Strategy: Regain Control and Reduce the Loss (04:37–06:22)

• Sell the Van Yourself:

  • Get an accurate appraisal and try to sell privately to maximize sale price.
  • Use proceeds plus a small loan or credit card (if necessary) to pay off the remaining balance.

• Explore Debt Restructuring:

  • Negotiate with the lender to possibly buy back the car and refinance the difference directly, ideally at a lower interest rate.
  • Even if borrowing $4,000–$5,000 on a credit card sounds tough, it’s still preferable to a large deficiency after repo.

• On Facing the Decision:

  • Mistakes happen; don’t compound them with a decision that leads to even deeper trouble.
  • The process will be difficult, but fixing the mistake “the right way” reduces long-term damage.

• Memorable Analogy:

  “You can’t just… stick your foot in a bear trap and then go, ‘Oh, the best way to get out… is chew my foot off.’ No, you can’t do that. You got to open the thing, heal. You got to fix it.” — Dave Ramsey, 05:46

5. Broader Lesson: Repo Realities and Car Loan Myths (06:22–07:28)

• “Drop Off the Car” Myth:

  • Listeners are reminded that a car loan isn’t like a rental contract—you can’t simply drop it off at the dealer or lender and walk away.

• Auction Process:

  • Repossessed cars are auctioned at prices “below wholesale,” doubling the caller’s financial problems.
  • A repo scars your credit and the lender will sue for the unpaid balance.

• Quote:

  “You guys, I don’t like my car anymore, so I’m going to just drop it off at the dealer. You all can’t do that, okay? You’re killing yourself. It’s not a Hertz Rent-a-Car.” — Dave Ramsey, 07:27

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Notable Quotes & Memorable Moments

• “Why did that not inspire you instead of disheartening?” — Dave Ramsey, 00:38
• “A volunteer repo is not a good plan… You're gonna end up owing 6 or $8,000 more by doing this.” — Dave Ramsey, 04:18
• “My credit is at, like, a 574.” — Listener, 04:51
• “I’d rather you owe them five or six thousand dollars than… have it voluntarily repoed.” — Dave Ramsey, 05:12
• “Just… don’t compound it and make it worse. Now you go, you know, fix it the right way. The least damage to your foot after you stuck it in a bear trap.” — Dave Ramsey, 06:07

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Timestamps for Key Segments

• Emotional and Financial Background: 00:06–01:59
• Breakdown of the Car Loan Situation: 01:00–02:47
• Dangers of Voluntary Repo: 02:48–04:36
• Alternative, Savvier Solutions: 04:37–06:22
• General Advice on Car Repossession: 06:23–07:28

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Takeaways

• Voluntary repossession is financially damaging and largely benefits the lender, not the borrower.
• Selling the vehicle yourself—and negotiating terms for any required leftover balance—is far better than surrendering control to the dealer or lender.
• There’s always a better alternative to compounding a financial mistake; facing the issue head-on yields the least long-term damage.
• Don’t believe the myth that “walking away” from a car loan is simple—there are lasting financial and credit consequences.

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Transcript

[A]

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[B]

Last month, it kind of kicked for me, and I just got really sick and tired. Being sick and tired.

[A]

Cool.

[B]

I've been like this before, and that kind of makes my wife question if I'm serious or not. But last time I had a financial advisor. He actually idolized you and just everything that you did. And he was very close to being a multimillionaire before he eventually passed away right after he was helping us with our budget. So I got real disheartened and stopped budgeting. I just stopped everything. And just.

[A]

Why did that not inspire you instead of disheartening?

[B]

I know, I know. And that's kind of what I'm feeling now. I'm feeling more inspired to do this. And, I mean, how ashamed he would have been just. It just scares me. So I'm starting my baby steps. I know I need to save my thousand, and I don't think I'll have an issue with that. My issue is I went to one of those stupid buy here, pay here car lots where they are the bank, so they finance you through themselves. And I ended up paying close to $34,000 for a Dodge Caravan. It was 19 9, but after interest, it was close to $34,000. Oh, boy. I have been paying $175 a week for this van for the past two and a half years. And, yeah, I've had nothing but issues with it. So next month, I'm getting a check from a job for $2,500, and I was going to use that to buy a family vehicle with no payments and give the van back on a voluntary repossession. No, I just listened to an episode today that said you would never do that.

[A]

Nope.

[B]

So I thought I would call.

[A]

Okay, so the 34,000 is not the balance? No, 34,000 is the total of payments, including all interest through the end of the loan. And so that's not your payoff balance. So what you need to get from them is what the actual payoff is. If you walked in there with a.

[B]

Check today, it would be right around 14,000.

[A]

Oh, good.

[C]

Oh, that's way better.

[A]

And what's the van worth?

[B]

It's probably worth about $2,000.

[A]

Who said.

[B]

The transmission is going out?

[A]

You said okay.

[B]

Yeah, I said okay.

[A]

So the transmission's struggling, but. And the vans. But. But you paid originally 20,000, and now you think it's worth 2. Two years later? That's a bit of drama. I don't believe You.

[B]

It wasn't in the best condition when I got it.

[A]

I know, but you didn't pay $20,000. You're not that dumb for a van that was worth eight, and you didn't. And so this van's not worth two now. It's probably worth seven or eight. Okay. You need to figure out what the van's really worth and get the drama out. Because if you turn this into them, they're going to sell it for two, and they're going to come after you for 12, plus repo fees. You lose control of the sale price of the van when you do a voluntary or a regular repo, and they're going to sell it at below wholesale because it's what they do at those lots. This is the scam they run. So they want you to do this. So now I'm going to find out what the van's really worth, and I'm going to get it sold, and I'm going to cover the difference with a loan at the credit union or wherever. Even on a credit card, if you borrow four or five thousand dollars and you get out of a $14,000 loan and a crappy van and you take 2500 bucks and go get your little car, I'm with you on your general direction that this thing's got to go. But. But a volunteer repo is not a good plan.

[B]

Okay?

[A]

You're gonna end up owing 6 or $8,000 more by doing this. That's why it's not a good plan. You understand? They're going to sell it for way cheaper than you would sell it for. So the hole that you're in is going to be a lot larger. And then they're going to come after you for that amount of money.

[B]

Yes.

[A]

You're going to get sued for that amount of money. If you don't pay it to them, and they will, this group will. They'll come after you. It's what they do. It's their modus operandi.

[C]

What's your. What's your hesitation?

[B]

I. I worry, like, even if I sold the van, I worry about not being able to get a loan to cover it. My credit is at, like, a 574.

[A]

Yeah, that may be difficult. And, you know, you might go back down and talk to them and say, is there a situation where you guys would buy this back and let me sign a note with you for the difference and just pay them? I'd rather you owe them five or six thousand dollars than. Oh, than have it voluntarily repoed. Right.

[B]

Okay.

[A]

So you talk to them. I talk to your credit union. I'd take out a credit card. Any of that. Because any of that's. You're all. At the end of the day, what we're doing is reducing your debt. So any of that's. We're just changing the structure of the debt and reducing it, and that's what you've got to do, man. And you can't just. You can't sign up for something that's horrible, stick your foot in a bear trap and then go, oh, the best way to get out of the bear trap is chew my foot off. No, you can't do that. You got to open the thing, heal. You got to fix it. You know, you got it. You're gonna have to go through some more pain to fix the bad decision that you made when you impulsively did this. And you knew better when you were doing it the whole time.

[B]

The whole time.

[A]

Yeah. So this is. This is the price you pay for that. And that's okay. We've all done stupid stuff, but just, you know, don't. Don't compound it and make it worse. Now you go, you know, fix it the right way. The least damage to your foot after you stuck it in a bear trap.

[C]

That's right.

[A]

And so. So, guys, when you have a car loan of any kind, doesn't matter whether it's pay now, pay here, buy here, whatever, tote the note people, or whether it's freaking Lexus Motor Credit and Ford Motor Credit and Chrysler credit and anybody like that, it doesn't matter. This is not a Hertz rent a car that you can just drop the thing off.

[C]

Right.

[A]

And say, I don't want it anymore. They're going to assess that. They're going to run it through a repo auction. And I've bought cars at repo auctions, and they sell below wholesale. And sometimes they run them through Manheim. They run them through the big auctions, the auto auctions, and they, you know, they say this is a repo. And, you know, and so you're expecting some dings. You're expecting some problems with it if you're the buyer. And I'm going to discount it below wholesale so that I'm getting a deal if I'm the buyer. And so it's going to bring the least possible price in that scenario. And then they're going to sue you for the difference. And you've got a repo on your credit.

[C]

Yeah. Meanwhile, you could have sold it and.

[A]

Doubled or tripled and cut the problem. Down. So, you guys, I don't like my car anymore, so I'm going to just drop it off at the dealer. You all can't do that, okay? You're killing yourself. It's not a Hertz. Rent a car. Create your free every dollar budget today. The simplest way to budget for your life.