How to Break a Car Loan Agreement

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Car loan agreements are contracts between a financial institution or car dealership and someone purchasing a vehicle. A car loan agreement outlines any stipulations for the person to buy the car, along with detailed information about how many monthly payments he must make to the bank or dealership and the amounts of each of those payments. If you determine that the monthly payments are more than you can handle or that you no longer need the car, you can break a car loan agreement with some creative thinking.


Step 1

Check the date and clauses of your car loan agreement. If you signed the agreement within the past few days, the agreement may not yet be officially signed by the loan officer. In addition, your car loan agreement likely indicates the number of days from the date of the contract that the buyer has to use a clause in the car loan agreement to cancel the contract; typically, you have five days. Canceling your agreement before it gets started is the easiest way to break a car loan agreement, as there is less paperwork and fewer penalties.


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Step 2

Contact your car dealership immediately upon deciding to break a car loan agreement. You are responsible for paying interest on each day that you have possession of your car. The longer you hold on to the vehicle, the more money you owe and the less the car is worth.

Step 3

Ask the dealership to take the car back in a voluntary repossession. If the dealership takes the car back, it can sell the car again. If the car sells for less than what you owe on the car, the dealership may hold you responsible for paying the difference. When a dealership asks for the car back, call your finance company immediately and tell a bank representative that the dealership wants the car back and that the loan is canceled; ask the bank representative to end any daily interest accruals as of that date.


Step 4

Pay your financial institution or dealership any interest payments, fees, monthly payments and penalties for breaking the car loan agreement. When you break a car loan agreement without a reason outlined in your contract, you are subject to potential penalties by your bank and by the dealership. Pay these fees.


Step 5

Sell your car for the amount you owe on your loan to break a car loan agreement, if you are unable to get your dealership to take your car back. If you can find a buyer to take the car off your hands for the amount you owe on your loan, you can then pay the lender what you owe, close out your loan agreement and have the car off your hands.


Car loans from different dealerships and financial institutions have varying stipulations. Read your car loan carefully. You may find a clause in your agreement that allows you to easily get out of your contract.


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