Owe more than it's worth... I'm upside down and I can't get up!

fillesmomfillesmom Member Posts: 4
I am very new to car buying and I need help! A few years ago I just had to have a Volvo 850T wagon. I LOVE this car but the payments ($456) are killing me! (Not to mention the cost of any repairs - $163 for a headlamp!) I am finally ready to give up my beloved dream car. Unfortunately I find that my payoff is $9244 and the trade in is only $5700. What in the world should I do? Can I roll this over? I was thinking of leasing something with a much lower payment. (That way I could avoid repair costs.)


  • lancerfixerlancerfixer Member Posts: 1,284
    I'm assuming you bought this used. How long was the term for...are you more than halfway done with the payments? If you go over to the "Real World Trade-In Values" thread on the Smart Shopper forum and post a very detailed description of your car, Terry over there could probably give you an idea of a good asking price if you want to sell it yourself. I advise against rolling over negative equity into a new car; eventually, you're going to be paying this money you owe one way or the other.
    You're not alone in this; I've been in a position of negative equity in the past, and made the mistake of rolling it over into another car. It's awful, but it's survivable (I sucked it up and made all the payments, and lived to tell the tale; the car is paid off and I've still got it.) Good luck.
  • fillesmomfillesmom Member Posts: 4
    Yes , the car is more than half paid for. I foolishly financed it for 60 months. Just HAD TO HAVE IT! Believe me I learned my lesson and won't make that mistake again. Now I am just trying do damage control.I have gotten a good idea about what it would sell for. I am thinking that I should get rid of it now because of the huge repair costs that are popping up pretty often. I is it bad to roll it over and just pay the amount on the new loan? Or maybe I should try to get the value and amount owed even with a lump payment and then sell or trade?
  • isellhondasisellhondas Member Posts: 20,342
    Personally, I think you should probably just keep it. Volvos have a nasty way of getting expensive as they age and it sounds like you are finding this out.

    Still, trying to roll 5000.00 of negative equity is going to be VERY hard to do. You will then be double buried.

    I would just try to tough it out.
  • driftracerdriftracer Member Posts: 2,448
    rolling $5K into another car takes a huge rebate - like those on Chevy products - therein lies the dig. You're going to be an owner for whatever would be next for a LONG time - if I were buying a car to keep 5-6 years, it'd be a Honda Accord. Problem is, there's no rebates to help you.

    On the cars with rebates, I wouldn't bet a dollar on being able to keep one for 5-6 years without significant major component replacements/repairs.
  • bolivarbolivar Member Posts: 2,316
    No, you are not 'trying to do damage control'.

    You are wanting someone here to reinforce what you want - to buy another car, which will inflict more damage, by burying you further in this next car.

    Keep the car. With $5,000 negative equity plus the cost of another car, I don't see how you could reduce your payment amount.
  • q45manq45man Member Posts: 416
    You are alot more than $5,000 in the hole because the next 20 months will require at least 10 cents per mile driven in maintenance and repairs. Plus your payments and all the other associated costs [gas/insurance/tag/tax]
    The State of Texas uses 8 cents per mile for their fleet and Volvo might run 12-15 cents.
  • fillesmomfillesmom Member Posts: 4
    I'm not trying to get anyone to "reinforce what I want"! I LOVE the Volvo and don't want to give it up. I am just seeing if there is a way to help the families monthly budget! What a nasty response from bolivar!
  • driftracerdriftracer Member Posts: 2,448
    that his response describes 90% of people trading a car with a loan - being in the car business, I see it every day.
  • anonymouspostsanonymousposts Member Posts: 3,802
    Leasing isn't as great of an alternative as it used to be. Rebates and 0.0% financing have driven residual values down to the point where leasing is often just as expensive as purchasing the car. This is the case unless you are looking to lease a Honda, VW, etc which have retained high residual values.

    Do what you feel will be best for your personal financial situation but remember that whatever vehicle you choose you will be stuck with for years to come. Therefore, make sure it is something that you can live with and will have reasonable repair/maintenance costs.
  • explorerx4explorerx4 Member Posts: 18,896
    20 payments of 456 equals 9120 (less than a payoff of 9244 which would not include 20 months interest.)
    9244-5700 = 3544 upside down (a lot less than 5000).
    might be fuzzy math, but it looks like you would have to pay $350 a month for a $250 a month vehicle for 36 months.
    2023 Ford Explorer ST, 91 Mustang GT vert
  • PAmanPAman Member Posts: 207
    First, keep in mind that the negative equity situation you are in is based upon a dealer's opinion. If you have only shopped one dealer, you may be surprised to find how wide of a range of estimates you will get for your car. If it is in great condition and is a popular color (red and white are near the top of the list) some dealers will pay more for it than others. Your $5K negative equity may suddenly become $3K or less at the right dealer.

    Second, the BEST way to get rid of a car (legally) is to sell it yourself. If you don't want to have strangers coming to your house, consider running it on ebay. I'm amazed at the range of cars that are selling on there for much more than they seem to bring in my local market. Also keep in mind that if you are exposing your vehicle to millions of people on ebay, rather than hundreds or thousands in your local paper or Auto Trader.

    If you go the online route, do your homework first. Investigate what cars like yours are bringing on ebay. Make sure your car is in great condition and spotlessly clean; I'm continually amazed at how a good looking car will bring more money than a similar car with a new engine or transmission that only looks fair.

    Take some excellent photos of your car in an attractive setting, such as an upscale resteraunt, large or historic building or an easily recognized landmark. Make sure the photos show your car inside and out, including the engine area. Do NOT use a Polaroid or any camera that takes poor photos. Shoot the car on a clear, sunny day and do NOT put the car in the shade when you take the photos. MOST importantly of all: shoot the car CLOSE. Fill up the viewfinder with the car; if the car looks like a speck in the photo, positive things like its' condition won't show up well.

    Write your narrative carefully, completely and accurately. For example, if you are in New Jersey and your car has heated seats but you overlook mentioning that in the narrative, it could cost you a sale. If it has all-wheel drive or traction control, that could also be a huge plus to a potential buyer in snow country. If you don't know what some options or features are called, use your owner's manual, a sales brochure or look at the wording used in other ads.

    Finally, be REASONABLE about your price. If a retail book says your car retails for $10,000, I've seen buyers think their car is worth that and not a penny less. But, if your car is high-mileage, not equipped properly or in sub-par condition, or in an area where that model isn't popular, then getting that price is more of a fairy tale than it is likely to be reality. As I mentioned earlier, investigate to see what cars like yours are actually selling for. All of the dealers in this forum will tell you that the retail books, no matter which one you use, are at best guidelines, and sometimes more like wishful thinking.

    Good luck!

  • jillitajillita Member Posts: 1
    Okay, so I'm in a similar bind with our car ('02 Subaru Outback) - we bought it a bit over a year ago (new), rolled over our previous upside down loan so now we're even further in the hole. The payments are obscene - 560/mo - and as my husband is about to quit his job we are in a quandry over what to do. The things that are hitching our giddyup - the other car we have is a 98 Chevy s-10 that is totally paid off but only seats two and it seems like we need a 4-seater of some sort. Also, we love to take the car into the mountains - we live in Colorado - and for backpacking/skiing/etc. it's very practical and reliable.

    We have a couple options that I'd like advice on:

    a) trade-in to a dealer, take the hit on the neg. equity, and lease something for lower monthly payments (or buy a reliable (honda civic?) used car until my husband gets a new job)

    b) paydown the existing loan with savings money and then re-fi (or not - just suck it up and pay down the remainder on a month to month basis)?

    c) sell it ourselves - although this seems unlikely as the car is in the upper teens/low 20s value-wise and I for some reason have the impression that people don't like to buy high-dollar vehicles from individuals.

    d) suck it up and do nothing and keep paying it off month to month.

    Any thoughts or suggestions would be helpful.

  • driftracerdriftracer Member Posts: 2,448
    you're in a position only cash can cure.

    There are only two real choices - drum up the cash and pay against the payoff (have it ready) after you sell it privately; or keep it and make the payments.

    There's really no other way around it.

    Not to be personal, but quitting the job may not be a great idea when you know you've got the bills to pay. Don't want to over-simplify.
  • dtownfbdtownfb Member Posts: 2,918
    I'll toss in my two cents as I think it can help a couple of people here. I purchased a Nissan Quest S this afternoon. I traded in a 2001 Malibu LS with 35,500 miles with 31 payments to go and a 1996 Explorer V8 with 146,500 miles and a huge dent in the tailgate (estimated damage of $1800). The Explorere was free and clear. The Kelly Blue book value was $6,625 for the Malibu and the Explorer was basically worth nothing to dealer. They offered me $8100 for the Malibu and $1500 for the Explorer plus discounted the minivan by $1900. (Yes, this dealership is looking to clear his lot by tomorrow.) I'm buying a friend of mine's car.

    We got lucky. I was able to roll that negative equity into a car that we really wanted and we had a delaership that was willing to worl with us because they wanted to move the cars off of their lots.

    It is possible to get rid of some of the negative equity. Not all of it but now I still have one car payment. It's a higher payment then the Malibu but we can afford it. And it is much better then having two car payments totaling over $750. And again, it's a car we are very happy with and had as our number one choice.

    This worked for my situation but i did a lot of research before I entered into this deal.

    I would also add what some others have said in different forums, "Do not buy a car because it has the bes or largest rebates". If that is the reason you are buying a car, you will be extremely disappointed. That is why I bought the Malibu over the Accord back in 2001 and I regretted it.

    good Luck and I hope this helps you.

    P.S. - jillia - I agree with driftracer. Now may not be the best time for your husband to quit his job. Personally, I did this for my family. Two kids and we do travel quite a bit on the weekends (both families are 2 hours away). The Explorer was damaged and with 146k miles on it, a major repair was just around at the corner. The Malibu was too small and neither of us was very excited about the car.
  • eharri3eharri3 Member Posts: 640
    For an outback? That's what probably sucks the most about being so buried. YOu're stuck making the kind of payments on a fairly average vehicle that could have easily gotten you into much more car if you werent dragging all that negative equity around. I know people at work paying over 450 per month for 6-8 year old 150 thousand mile vehicles purchased used. That kind of payment could get you into any number of more upscale vehicles but instead your paying it on something 'middle of the road'.
  • landru2landru2 Member Posts: 638
    Had a guy come in today wanting to get into 2 used vehicles for the same $780/mo payment he currently is paying for his 6 month old Explorer. When I found out that his current payoff was $48,000 I had to get the rest of the story. It turns out that he was 4 months into a Kia Sportage 48 month lease when he rolled that negative equity into his Explorer lease.

    Some people just never learn.
  • driftracerdriftracer Member Posts: 2,448
  • eharri3eharri3 Member Posts: 640
    Perfect illustration of my point. 780 per month... that's easily a Lexus, high end BMW, Escalade, Vette... but for an EXPLORER?
  • dtownfbdtownfb Member Posts: 2,918
    That is a little excessive. I didn't know you could even roll that much equity into a car loan. What do you use as collateral? The car is not worth that much.
  • landru2landru2 Member Posts: 638
    MSRP for the type of Explorer this guy had was about $48,000. Add in the depreciation of a few months old Kia Sportage and voila, instant major upsidedownness.
  • rroyce10rroyce10 Member Posts: 9,332
    ....... As soon as you say the word "Kia" you have instant negative equity, even if you paid Cash .l.o.l..

  • q45manq45man Member Posts: 416
    On a 5 year loan you have to pay 30% down [including sales tax] to always be above water.
    Since most cars depreciate 47-55% [US versions as high as 63%] in the first 3 years.
  • steine13steine13 Member Posts: 2,801
    Apples and oranges. The down payment goes against the "street price"; the depreciation is calculated off MSRP.
    Haggle right, pay 10-15% down on a popular car (Sienna, Outback, Pilot) and you're right-side up from day one and likely to stay there.
    No 72-month loans, please.
    I put 8% down on a cheap Sienna a year ago and Mr. Finance didn't even TRY to sell me GAP insurance.
    Of course, the sales tax money is GONE immediately.

    All the tales of woe here just illustrate Steiner's Law of Credit: It's expensive to be poor. And it's even more expensive to make bad decisions.

  • eharri3eharri3 Member Posts: 640
    By paying Full MSRP plus a street price, meaning the depriciation hit was even harder because the car was worth less than what he paid for it right from the beginning?
  • grandtotalgrandtotal Member Posts: 1,207
    Not sure I follow your reasoning on gap insurance. To give you an example, I bought a car at the beginning of 2003 for cash (100% down, nothing a month for 48 months). Four months later it was written off, I'm really glad I had gap insurance. In your case you stand to lose your downpayment plus suffer early depreciation even though you got a great deal on the vehicle.
  • jratcliffejratcliffe Member Posts: 233
    Grand, gap insurance is worthless if you're right-side-up on the car (i.e. owe less than its worth). I interpreted steine's comment to mean that the F&I guy didn't try to sell gap to him because, given the size of his down payment, he was right side up immediately, and hence had no use for gap insurance.
  • grandtotalgrandtotal Member Posts: 1,207
    Gap insurance is not worthless if you are right side up on the car. In my case, if I had not had gap insurance I would have received around $16000 from my insurer. With gap insurance I received a little over $20000 and was able to replace my essentially new (4 months old) car with a brand new car.
  • landru2landru2 Member Posts: 638
    I believe you are refering to Waiver of Depreciation insurance rather than GAP insurance. I've learned on these boards that this excellent type of insurance does not seem to be available in the U.S.

    GAP insurance is only relevant when you owe more to a lender than a vehicle is worth.

    I've seen this a lot working with leases:
    Selling price $24,000.
    Payoff at time of insurance write-off $20,000.
    Value of vehicle at time of write-off $17,000.

    GAP insurance will take care of the shortfall from $17,000 to $20,000.

    Waiver of Depreciation insurance will pay the $4,000 remainder to bring the customer back to what they originally paid.
  • grandtotalgrandtotal Member Posts: 1,207
    Thanks for the clarification Landru2. My aplogies to jratcliffe, it looks like we were talking about two different things, sorry.
  • jratcliffejratcliffe Member Posts: 233
    No worries - weird things go on up there in the frozen north, I know. ;) Landru, thanks for the clarification - I had never heard of Waiver of Depreciation, sounds like an interesting option...
  • ptrekkerptrekker Member Posts: 51
    Best option is to suck it up and keep paying for the Volvo. You have been paying it for years. In another 20 months, or in about spring of next year by my calculations, you will own a very nice car free and clear.

    The other option would be refinancing which might be possible, but would ensure that you would remain upside down longer. Maybe stretch it out for another year with a better interest rate, but by then you are financing an 8 year old car.

    Rolling 5k of negative equity into another car would be a bad, bad move. That means you would be paying 20k for a 15k car.
  • eharri3eharri3 Member Posts: 640
    IS before you calculate the finance charges on the inflated price of the new car.
  • ms_mayorms_mayor Member Posts: 113
    ptrekker says rolling the neg. equity is like paying 20K for a 15K car...

    Very true, and that 15K car will be worth even less once you drive it off the lot.
  • kyfdxkyfdx Moderator Posts: 227,388
    No one can make negative equity "go away". If you pay MSRP for a car that usually sells for $2K less than MSRP, and roll the amount into the loan, you'll soon find you are the same amount upside down.

    In regards to the Volvo, you either paid too much, put down nothing, or just got unlucky and bought a quickly depreciating car. Whatever reason, the cheapest way out of your dilemma is to just keep paying on your current loan. Anything else you do will just compound the problem.

    In regards to the Subaru: You aren't paying $560/mo. for the Subaru, you are probably paying $380/mo. plus another $180/mo. for the negative equity you rolled into the loan. Trading the car for another car will not fix that problem. To fix your problem, you have to pay off your debt. Keeping your current car is almost always cheaper than buying another one. Try to separate the payment from the car. They really don't have anything to do with each other. The large payment is a result of past mistakes. Learn from them, rather than compound them. For both of you, its better to just suck it up and make the payments.

    I've been there, and it can be fixed, but it takes discipline and its not fun.

    Good luck,

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  • tblazer503tblazer503 Member Posts: 620
    I gotta agree with the consensus... If you took out a 60 mo loan, guessing you made about 12 payments or so(said you had it just over a year), your total payments for 48 more months is about 26,880. The KBB private party value of an '02 Limited Outback 24k Excellent(no problems at all) is 20k. Which means taking out intrest, you are probably still at least 3-4k upside down. gas probably isn't killing ya on it, and I doubt insurance is... so it's difficult to justify trading it unless you can make a substantial difference on the payment while keeping your insurance/maintenance/gas bill at bay....
  • Kirstie_HKirstie_H Administrator Posts: 11,134
    A midwestern newspaper is looking to talk with recent car buyers who had negative equity in their trade-ins. (In other words, your old car was worth less than the remaining loan balance.) Please respond with your daytime contact info to [email protected] by 5pm Eastern Monday, Feb 9.
    Jeannine Fallon
    PR Director

    Need help navigating? kirstie_h@edmunds.com - or send a private message by clicking on my name.
    Share your vehicle reviews

  • wsm6674wsm6674 Member Posts: 7
    Sorry about your difficult situation. My advice seems to be a bit out of step with what others have been saying, but is probably what your Parents (or Grandparents, depending on your age) would have to say:

    Sell the Volvo for as much as you can get for it and buy a good-running, if not pretty or fast, used car you can keep for a few years. If you keep the used car cost down to $2,500 or so (which can be done) you'll need to come up with $6,000 to $8,000 in cash or loan. Pay off any loan as quickly as possible (at $500/month it would only be two years at most), then keep the used car another two or three years and save that $500 each month towards a better used car, or if you must, a new car that you will never be negative in.

    That's my advice
  • janzjanz Member Posts: 129
    that the $2,500 car lasts 5 years...
  • steine13steine13 Member Posts: 2,801
    It's an art. And it requires luck. I recommend against it if the back's against the wall financially... much better to go with the $6k 2001 Prizm, inspected of course, and then drive it a loooong time while saving money.
    The cheap car thing is really iffy... I've done well with the $1-2k variety, but I quickly learned to have TWO of them... and I did all my own work... and I've done almost as well with cheap new cars bought right.
  • lemkolemko Member Posts: 15,261
    ...like a Chevrolet Caprice, Crown Victoria, or Mopar M-Body. These cars are darn near bulletproof. Repairs and maintenance are cheap and easy. Parts are plentiful.
  • mamameowmamameow Member Posts: 5
    Hi need your feedback. I am in the same situation being upside down. I own an 03' Taurus and am 7G's upside down also. I will have the money to close the gap (assuming I can get 9-10 grand trade in like a few have offered) and was wondering what I should do. I am thinking of applying the 7 grand to my Taurus BEFORE I GO TO THE DEALER TO BUY NEW OR USED. I want out of this pile and i look at it this way.....it does not matter what day of the week it is....unless I pay down this vehicle, I will NEVER get out of it, and even if i paid the thing off i will still be screwed (my fault of course) Is this the right approach to take to get into a new vehicle? THANKS
  • driftracerdriftracer Member Posts: 2,448
    if you sold it privately. Check out your payoff, advertise using a nice ad, pay the difference, and press on.

    Make sure you're not going from the frying pan into the fire by trading/selling the Taurus only to bury yourself in another ride.

    Is the Taurus itself the problem? Getting into another NEW domestic is going to put you in the same place. You'd be better to pay it off early, drive it for a couple of years, and not drop a ton of cash if you don't have to.
  • mamameowmamameow Member Posts: 5
    I will consider this option. I am just itching so bad to get out of it but either way, I am buried and thats that :0)
  • driftracerdriftracer Member Posts: 2,448
    what are you looking to get into? I ask because it seems it had better be worth it before you throw big money into paying off the car just to jump into something else.
  • kyfdxkyfdx Moderator Posts: 227,388
    Something tells me that "bad itch" to get into something else, is how you got so far buried to start with... I find the best way to get out of debt is to keep what you have, and keep making the payments. Of course, the car biz would be hurting, if we were all like that.


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  • rangerranger Member Posts: 9
    New to this site so I hope I'm posting in the correct post. I own a great 2003 Econoline 350 passenger van. Bought new and got a great deal on it. Currently owe about 12,780 on it. The problem is its gas mileage. About 11-12 city & maybe 17 hiway. I knew it had poor mileage when I bought it but I was banking that gas prices wouldn't go above $1.60. WRONG! Anyways, I would like to trade it in on a 2004 Toyota Sienna van AWD. Price is about $31,000. Trade in value on my van is around $21,000. I know the Toyota dealer won't budge from the MSRP much. I'm also afraid he won't give me anywhere near the blue book on my van. (why would he want a full size gas guzzler sitting on his lot). I haven't been through the dealer yet to ask questions because I don't want to show my hand yet.Any thoughts on this? Mucho appreciate it!
  • driftracerdriftracer Member Posts: 2,448
    if it's an XLT with a 5.4, non extended, RETAIL value is around $21k, not trade-in. If it's an extended van, add about $900.

    Realistically, these vans are EVERYWHERE as fleet rigs and rental returns and usually see $16-17K wholesale. You're still in a good equity position, but you're nowhere near close to the $10 grand up you're thinking.

    Siennas are pulling close to MSRP, so you're realistically looking at a $14K difference figure.
  • rangerranger Member Posts: 9
    It's a chateau package, non-extended, 5.4. Should be interesting to see what kind of trade in the Toyota dealer will give me.
  • driftracerdriftracer Member Posts: 2,448
    you might seriously consider selling it yourself or offering it to Carmax or a Ford dealership. Chances are, the Toyota dealer will wholesale it and you probably would not do as well there.
  • q45manq45man Member Posts: 416
    What am I missing if you drive 15,000 miles per year at an average of 14 MPG you use 1071 gallons, if you trade for a more expensive van that gets better mileage , you have an extra amount in payments plus pay sales tax on the new amount but save 250-280 gallons at best per year......the extra sales tax alone would be $2,000, no to mention higher payments.
    It would take 1,333 gallons at $3 per gallon or 1,600 gallons at $2.50 to break even.

    4-5 years if not more.

    Now if you drive 30k per year it might make more sense.
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