My 2016 Ford Edge with 110,000 miles needs a new engine, but I still owe $10K on it — I can’t afford the $5K-$6K repair and it’s not worth much. Should I consider voluntary repossession?

Repossession can do serious damage to your finances

There are a few important reasons why this Reddit user may not want to simply let the vehicle get repossessed.

The biggest issue is that this approach won't fix their financial situation — in fact, it will make it worse. Finance expert Dave Ramsey explained the problem to a caller on his show who was also considering letting her vehicle get repossessed.

As Ramsey explained, when a lender takes a repossessed vehicle, it will auction the vehicle off at a deep discount. Then, under the law, the lender can try to collect the remaining balance from the person who owned the vehicle before it was repossessed.

"The deficit, the money that doesn't get paid by the sale of the vehicle, they are going to come after you for it," Ramsey explained. "By letting it be repo-ed, voluntary or otherwise, you are losing control of the sale price, which means you lose control of the hole that you're in."

And if this wasn't bad enough, the lender would likely tack on additional fees for the repossession, adding even more money to your debt. Plus, the late payments and repossession would do damage to your credit score, which would make borrowing money a little tougher going forward.

This Reddit user likely doesn't want this kind of outcome, so they'll need to find another solution.

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Other potential options

Since letting the SUV get repossessed is far from a desirable solution, the Reddit user would be wise to explore other options.

One option is to try to finance the repairs. The Reddit user might consider taking out a personal loan, or working out a payment plan with a trusted mechanic. Another option could be to get some additional quotes to see if they can lower the repair costs.

But if borrowing more money is out of the question, they could see if they have any friends who might be knowledgeable enough to help with a DIY repair — although since an engine installation can get quite technical, they shouldn’t go this route unless they're 100% sure their friends have the necessary knowledge and skills.

If they truly don't want the SUV anymore, or if they don't think it's worth repairing, the Reddit user could try to sell it for as much as they can. If the proceeds from the sale end up being less than the amount they owe on their auto loan, they could consider getting a personal loan to pay the difference so they can walk away from the vehicle before doing any more damage.

Regardless of what they decide, the Reddit user should also consider creating an emergency fund once this situation has been settled. Life happens, and unexpected expenditures like car repairs can pop up on us at any moment.

Once the Reddit user figures out what to do with the Ford Edge and has settled their debts, creating an emergency fund with several months of living expenses could come in handy the next time an surprise expense pops up.