Breaking your auto loan agreement may be very difficult if you were not a fraud victim, your automobile isn’t defective, and you didn’t buy an option to call off the sale. However, you may still have a few options if you are thinking of how to get out of a car loan contract. Without a cooling-off period for your car purchase, some dealers allow exceptions. Therefore, you stand to lose nothing if you ask.
And if you’re only interested in terminating your contractual obligations illegally, there are a handful of ways to do it. Although sticking with legally accepted methods is the best way to end your auto loan agreement.
Trying something off the books comes with the risk of fraud charges and a possible jail term. Even if you cheat the law, you’re still likely to pay more than it would have costed you to cancel the contract legally.
Is There Anything Like a Cooling-off Duration?
Are you wondering how to get out of a car loan contract? And perhaps your first idea might have been to use the federal cooling-off statute. Sadly, this regulation, which empowers consumers to call off certain sales agreements within three days to protect you against high-pressure sales techniques, doesn’t cover vehicle purchases.
Negotiating with auto dealers is usually regarded as a high-pressure situation. Conversely, cars lose a significant amount of value the moment you drive them off the lot. So, granting a cooling-off period would compel dealerships to sell virtually new vehicles at highly reduced resale prices.
Auto Purchase Contracts and Cancellation Agreements
Understanding the contractual terms of an auto loan is really vital for car buyers. Before you sign on the dotted line, you’ll want to see whether the agreement provides for optional fee-based contract cancellation. In other places, state regulations require auto dealerships to give extra protection for used car buyers. These protections serve as incentives for purchasing used vehicles.
For example, the State of California requires dealers to let offer full disclosure of Contract Cancellation Options for used vehicles worth below $40,000. You’ll have to pay $250 more for these agreements for cars in the range of $10k and $30k. In that case, you can break your car loan contract if you have a change of heart within two days of sealing the deal.
Invoke this state law if you’re looking to learn how to get out of a car loan contract illegally. You can claim the dealership didn’t inform you about the fee-based cancellation option because you wanted to break out of the agreement earlier. However, you may not get far with this choice, especially if your credit profile is less than stellar.
Many other protections for auto purchases pertain to illegal sales tactics or defective vehicles. The law in Massachusetts, for example, requires used car dealers to offer full refunds for any automobile that fails a safety inspection test. However, you can only apply this law within seven days of purchasing the vehicle. Also, there are many state-based agencies mandated to mediate buyer-dealer disputes.
Invoking lemon laws can protect new car buyers from flaws that the dealership cannot fix. Although it doesn’t offer a way for auto buyers that simply have a change of mind, these regulations do protect you from defective vehicles. You can check with local authorities for your state’s lemon law provisions.
Florida Lemon Law Example
The lemon law in Florida, for example, needs you to have first informed the manufacturer or dealer about the defect within twenty-four months of signing the deal. After that, the dealership must direct you to an independent auto shop. If that facility fails to fix your vehicle within 30 days of taking delivery, you may claim a refund.
Having an unfixable defect will automatically void the loan for the car you are financing or leasing. So, an off-the-books option is to consistently rig the vehicle and eventually claim the dealership is unable to repair it. The downside is that you’re likely to pay a premium, not to mention risking fraud charges.
Illegal Sales Tactics
If you can prove that the dealer where you bought your automobile failed to honor its contractual responsibilities, then you can consider filing a complaint at the local attorney general’s office. Some grievances are obvious. In peculiar cases, an automotive legal expert can help you find cause for negating your auto loan agreement.
In Massachusetts, for example, there are regulations to curb illegal interest rates. It caps vehicle financing rates at 21%. Assuming that your loan had an APR of 23%, the dealership may be in breach of the Massachusetts usury laws. Consequently, you can sue them for compensation for excess payments.
Tips To Help You Get Out Of A Car Loan Contract Illegally
When financing a car, your creditor retains essential rights until you fulfill your loan obligations. Your contract stipulates these rights as granted by your state laws. For example, your creditor has the right to repossess your vehicle without prior warning or going to court if you’re late with car payments. The reason is that you’ll be in breach of your agreement.
Moreover, your creditor can also sell your automobile agreement to a third party. In that case, the law grants the new creditor similar rights to seize the vehicle as the original creditor.
But did you know that your debtholder’s rights may be limited? Some state enactments dictate how your financing company may repossess the car and resell it to lessen on clear your debt. If your creditor violates any of these rules, they stand to lose other rights over you. Also, they may have to compensate you for damages.
It means that you can still terminate your auto loan agreement illegally, provided it’s your lender committing that illegality. So, here are vital considerations if you want to learn how to get out of a car loan by cheating the process.
1. Repossessing the Automobile
Most states mandate your creditor to take back your car immediately you default on your loan. Check your contract to know what may constitute a default. Failing to make timely payments is a great example. And if your financing company accepts to adjust your payment schedule, your original contract terms may no longer apply. Ensure you have such changes in writing to avoid the hassle of proving an oral agreement.
As soon as you default on an auto loan, the regulations in most states allow the financing provider to seize your car:
- At any time,
- Without giving notice in advance, and
- To access your property for repossession.
Breach of Peace
While at that, your creditor should not breach your peace. In some states, debtholder will be liable for a “breach of the peace” if they:
- Apply physical force;
- Use threats of force; or even
- Taking the vehicle out of a locked garage without your approval.
In the event of a breach of the peace, while repossessing your automobile, your creditor may be asked to compensate you for bodily and property damage or pay a penalty. It makes an excellent legal defense when you want to learn how to get out of a car contract illegally.
Your financing company is likely to file for a deficiency judgment collection. That’s the difference between your contractual debt and the resale value of your vehicle.
2. Selling the Automobile
After repossessing your vehicle, your debtholder may choose to resell it via a private or public sale or keep it to cover your debt.
Some state regulations require your creditor to tell you what will happen to the automobile. Let’s say they plan to sell it at a public auction. The state grants that your creditor lets you know when and where they’ll hold the sale. It allows you to be present and bid for the car. You also may have a right to information on the date of the sale if they’re selling the vehicle privately.
Whichever way, the state entitles you to buy back or redeem the car by paying all of your debt. It often comprises your previous due payments and the rest of the debt. On top of that, you’ll pay for repossession expenses like sale preparations, attorney charges, as well as storage fees. Alternatively, you could attempt buying back the car through bidding at the repo sale.
Some state-based consumer protection laws give you an opportunity to reinstate your auto loan. Paying your due premiums and your creditor’s repossession costs is one way to reclaim your car legally. Obviously, you must commit to make timely payments and meet your obligations in the reinstated pact to avoid a repeat repossession.
The state requires your debtholder to resale your repossessed car in a manner that’s commercially reasonable. The creditor does not have to secure the highest possible value or even a fair price for the car. However, if the resale price is short of a fair vehicle market value, it may imply that the sale wasn’t commercially reasonable.
Failing to resell the automobile in a commercially acceptable manner should be good for you. You can make a claim against your financing company for damages. Besides, it forms the basis for a solid defense against a deficiency judgment.
3. Personal Property in Your Car
No matter how your creditor wants to dispose of the repo vehicle, the law prohibits them from withholding or selling any personal property inside the car. In some places, for instance, your creditor must let you know what personal items they found in your vehicle. Also, they must tell you how to retrieve the property.
Another statute may require your debtholder to use reasonable care so that no one else removes your property from the vehicle. If they’re unable to account for items left in your car, you may want to find help from a lawyer about your entitlement for compensation.
4. Electronic Disabling Accessories
Some auto-financing providers will not approve your loan request unless you let them install an electronic device. Your creditor may use this gadget to stop the vehicle from starting if you fail to make timely payments. Using that kind of accessory may have the same legal grounds as a breach of peace or repossession, depending on your state’s regulations and your agreement with the lender.
Your state’s opinion of these gadgets could impact your rights. Talk to a consumer protection agency in your state or an attorney. Ask any questions you may have regarding the use of these devices in your area.
Key Takeaways When Learning How To Get Out Of a Car Loan Illegally
The difference in your contractual debt plus some expenses and what your lender gets from reselling your car is called a deficiency. Other fees you may owe under the agreement include repo expenses and early termination charges. Usually, the law allows your creditor to seek legal redress. They may apply for a deficiency judgment suit to collect any outstanding payments on the loan.
You may have a legal defense against this deficiency judgment. For instance, the lender may have:
- Waited too long to sue you
- Committed a breach of peace while repossessing the car
- Failed to resell the vehicle in a commercially accepted manner
But you may not know about it unless you talk to an attorney. The legal expert will be in a position to tell you if you have grounds for contesting the deficiency judgment suit.
The Wrap Up
Canceling your auto loan agreement is far more trying than obtaining one in the first place. However, it’s not an impossible feat. Even though a buyer’s remorse clause often doesn’t exist in auto financing, there are legal and illegal mechanics and legalities of how to get out of a car loan. Although getting rid of an untenable vehicle purchase loan is vital for your finances, we encourage you to stick to legally accepted methods throughout the process.