So you think you bought a lemon. In fact, it happens more often than you might think. After all, every car maker is a giant corporation, and within every corporate structure you’ll find cost-cutters out to increase profit margins any way possible. That’s how America got deadly automotive scandals, and it’s the same reason you might still have a Takata airbag in your car.
The question is how to get rid of a lemon and start over in something like, say, a Camry. People mock Toyota’s famously vanilla sedan for its lack of curb appeal, but you never see Camry owners out there regretting the purchase of their car. You know what you’re getting, and the beauty is in Toyota’s consistent delivery.
Other car owners should be so lucky. Unfortunately, there are no take-backs or do-overs after you buy or lease a new vehicle. You can’t just drop it off at the dealership and get your money back. However, you can limit the damage to your ego and personal finances. Here is the only way to get out of a bad car purchase in one piece.
8. Confirm your suspicions
Before you do anything drastic, confirm that the vehicle you bought is indeed a lemon. (If you bought a Jeep or Fiat model circa 2015, you can skip this step. It’s a lemon.) You might talk to your mechanic and ask whether they know of common defects in the engine or model. Another tactic is to look at J.D. Power initial quality ratings. When you see others moaning about your car, proceed to the next step. We’d say look at J.D. Power dependability scores, but it takes three years for a rating. You’ll want to exit before then.
Next: See what it’s worth.
7. Check your car’s going rate
Once you know you want out, find out what you could get for it right away. Automobiles depreciate anywhere from 5% to 20% in a single year, so we’re talking thousands of dollars on the table. Use one of the auto search engines (e.g., Cars.com or Autotrader), and punch in the information on your car. Be as specific as possible — down to the mile — to get a match, and see at what price sellers are listing your vehicle. Keep in mind that the list price is not the sale price. It will usually be a little lower.
Next: How to handle your car loan
6. Prepare to ditch the loan
You might believe you are stuck with your car loan and can’t unload it until you pay it off completely. That’s not necessarily true. Though you have to do a bit of lifting on your own, you can sell your vehicle to a private buyer (i.e., third party) with money due on your loan. The buyer will need to agree to write two checks (one to the bank for the amount due and one to you for the purchase balance) and wait for the title from the bank. Autotrader laid out the steps to follow when handling this type of sale.
Next: Timing is everything when you sell your car.
5. Check the 3-year resale value
When we ranked the top ways to save money on a car purchase, timing considerations made the top five. The same concept applies to selling. Owners looking for an exit have to time their leap in order to get the most back. We suggest checking in on Kelley Blue Book predicted resale values for your vehicle at three years and five years. Studies by iSeeCars also might help you determine what your car is worth at two years or less. In general, luxury sedans depreciate fastest and large SUVs much slower.
Next: If you have to keep it, refinance the loan.
4. Refinance the loan
When selling in the near future looks like a rough deal, consider refinancing the loan. This solution would be the move to make if your credit improved significantly since you bought the car. If you get a bank to agree, you’ll have a lighter interest burden for the rest of the vehicle. Read the fine print if you plan to pay off the loan ahead of its term, as there might be a penalty involved. Bank of America has a loan refinance calculator worth using to see where you stand.
Next: You can get out of a lease, too.
3. Buy out or trade your lease
Though you should plan to ride out the two or three years you agreed to lease a car, there are ways out of that situation, too. The ugliest (and least recommended) tactic is paying the penalty for early lease termination. Lease-trading sites (e.g., Swapalease) allow those in possession of the car to get out the lease without paying high penalties. You might have to throw in some cash to get the new lessee to accept, but it’s still far better than paying the termination fee or eating the remainder of the lease.
Next: Cope with the short-term hit to your finances.
2. Accept the short-term loss
Even when you play your cards right, you are going to lose some money after buying a lemon. It might happen right away when you ditch your lease or sell after a few years, or it might happen later when you start paying for the regular repairs the most unreliable cars will need. However, it will happen, and we recommend getting out at the earliest date possible. You’ll lose money in the near term, but in the long run you will limit the damage.
Next: When you sell, avoid dealerships.
1. Sell to a private buyer
We discussed the complications of selling a car with a loan to private buyers, but you should make every possible effort to avoid trading in your vehicle. Auto dealers cannot make a living by paying market price for your car then selling it to a customer. (Savvy buyers would never pay the mark-up price.) Your best shot at a decent return is finding a private buyer and closing the deal. When it’s all said and done, it’s how to get out a bad car purchase in one piece.
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