Benefits

• Surrendering a lease does not soften the blow to your credit score and only reduces the cost of repossession, because the creditor does not need to hire a "repo" man to take the car away. You also get to surrender the car on your terms and avoid any potential harassment, such as the repo man trying to enter a locked garage. If the creditor reports the repossession as voluntary, future lenders might consider you responsible for recognizing when you cannot pay a debt.
  
  

Disadvantages

• If you cannot pay off the loan, you might as well keep the car for as long as you can. In a forced or voluntary repossession, you must pay the difference between the selling price of the vehicle and the value of the loan. Also, you never know what might happen if you have extra time to pay off the car. For instance, you might find a windfall and pay off the defaulted payments.
  
  

Considerations

• Any repossession only stays on your credit report for seven years, so the sooner you start the clock on the federal credit reporting time limit, the sooner you can rebuild your credit and possibly qualify for an auto loan again. Also, you want to reduce repossession costs, because a deficiency judgment goes on your credit report if the creditor sues you. If the lender forgives any debt, you must report the canceled debt on your tax return. If you cannot pay the debt, the IRS puts a lien on your property, which hurts your credit rating.
  
  

Tip

• Before you surrender the lease, talk to the creditor about hardship policies that may make it easier for you to make payments, such as a reduced interest rate or lengthening the life of the loan to lower the monthly payment. Alternatively, you could try to swap a lease with another party.