A reader reached out to us recently with a question that is the stuff of nightmares:
I bought my car last Wednesday brand new. I find out today my wife was getting furloughed and we won’t be able to afford the note, what options do I have?
When your financial resources change for the worse, buyer’s remorse is just about a given. Heaven knows you would not have made the same decision if only you had known what was about to happen. If you signed the contract though, you’re legally on the hook.
But that may not mean our reader is out of luck. If, by chance, he bought the car at Carmax, he almost certainly can return it. “There is no ‘cooling off’ period when you buy a new car,” explains Philip Reed, senior consumer advice editor for Edmunds.com. “This means that, unless you purchased the car from Carmax, which has a stated return policy, you are legally required to make all the payments in your contract.”
However, dealerships can unwind a deal, and it’s not unheard of. “It is completely up to their discretion,” Reed said. Still, a car that has been driven, if only for a few days, is no longer a “new” car, and has probably lost value. And if our reader had a trade-in, it may also be gone.
Unfortunately, a furlough just after you’ve taken on a new debt falls into the category of life throwing you a curveball. It’s a lousy break, but it happens. It’s not unlike having a piece of gravel hit your windshield, and wishing you’d left home a little earlier or later. You couldn’t have known, but you’re stuck having to deal with it. The best you can do is to assess your financial situation as well as you can when you prepare to make a big purchase. So, as you’re checking your credit score and your financing options, also take a look at how much wiggle room there is in your budget, especially if you have reason to believe your income might drop. If there are clues your job may not be secure, of course, you may want to hold off (or look for a cheaper option) on a big purchase.
An emergency fund can help, but if you don’t already have one, that information is not useful now. If the dealership will unwind the deal, that is the easiest solution. If not, then you have to decide whether to try to sell the new car (and almost certainly end up owing money but saving on insurance and car payments) or figure out how to make it work. Even so-called “voluntary repossession” can damage your credit, so that is not a good option either. (Checking your credit scores can help you keep tabs on how certain financial events affect your standing — you can check your scores for free many ways, including through Credit.com.)
Even though financial resources are limited now, it may be useful to try to make an educated guess at how long this is likely to last. If it is a time-limited cash crunch, and the dealership won’t unwind the deal, your best bet may be to make those painfully high payments for a few months until the employment situation changes.
More on Auto Loans:
- Are There Car Loans for People With Bad Credit?
- What to Do If You Can’t Make Your Car Payments
- Top 5 Worst Car Buying Mistakes