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

asafonov

...plus whatever it will cost to fix the scratch lets say another $1500.

Based on my limited experience with body shops, this appears to be a rather high estimate - door replacement/repaint order. If this is just a (deep) scratch, you may be pleasantly surprised to get a $400-600 estimate from a reputable independept body shop (I found mine in checkbook.org) And, if you have Abra in your area - don't go there! Excellent work quality at ridiculous prices here.

cealgirl

I have a 1999 Isuzu Amigo soft top, 2WD-4WD Automatic, the car is in good condition but I want to trade up to something new that will get me good gas mileage. My problem is I still owe over $9000. on it. Would it be wise to try and trade this car in on something or should I just wit and pay more on my prsent car. :confuse:

minarets1

whats the downside to leasing for smaller payments for some time until the lease is up then buying the car outright....is there a downside to this?

dont you get lower monthly payments for said lease period and then when lease is up, you get the option of buying the "used/leased" car for the current value?

sorry never leased....prolly some obvious answer or everyone would do this

kyfdx

You'll be taking 7 years to payoff your car... At the point where most loans are paid off, when you need extra money to pay for repairs on an older, out of warranty car, you'll still be making payments..

The same reason that 84 month loans are a bad idea...

anonymousposts

The lease then buy strategy could work if a few stars align.

1. The lease must be subsidized by the manufacturer and must be a good deal.

2. If you can afford to pay off the residual within 1-2 years of lease end.

sebring95

Agree with the above. I've been looking at Tundras which are on a heavy lease subsidy (last month anyway). You can buy a Tundra for $275 for 36 months with a $20,000 residual. 24 month buy-out payments would be around $900. That's an average payment of $525/month for 60 months. If you were to buy that truck today for 60 months, you'd be closer to $560 if you got a good rate. If you put the extra $250 in the bank for the lease term you can come out in decent shape.

The downside is you have little flexability during the lease period if your situation changes. It's expensive to get out of a lease early.

If you're only able to afford the cheaper lease payment, then I really don't recommend leasing. You're buying more vehicle than you can afford which is never good.

bobst

"You're buying more vehicle than you can afford which is never good."

Every so often this forum has some beautiful words of wisdon. Thanks, Sebring.

grandtotal

You're buying more vehicle than you can afford which is never good.

Although I have never leased (yet) I view it slightly differently. I see it as paying for as much vehicle as I use.

mac24

1999 Isuzu Amigo soft top.........I want to trade up to something new that will get me good gas mileage......still owe over $9000.

It probably trades between $2.5 and $3K. That puts you in the hole by at least $6K before you even take into account the instant depreciation on your new vehicle. You've got to save an awful lot on gas bills to make economic sense of that equation.

mirth

It probably trades between $2.5 and $3K. That puts you in the hole by at least $6K before you even take into account the instant depreciation on your new vehicle. You've got to save an awful lot on gas bills to make economic sense of that equation.

Or, to summarize the summary, keep driving the Amigo and pay it off before you buy something new. $6000 buys a whole lotta gas.

jaserb

My sister and her husband got talked into this "strategy" on her '05 Pathfinder. It was the only way they could get into the vehicle. She commutes ~80 miles a day, and hauls the kids to Disney 2-3 times a year, so she puts a TON of miles on her vehicles. I believe she has a 3 yr / 45k mile lease, and she's at 19k miles 8 months in. Right after they bought it I asked my BIL if he was going to try and stay under the mileage or just pay the mileage charges. Here's the surreal conversation that followed:

BIL: "Oh, we could NEVER stay under 15k miles a year."
Me: "So how much is the extra mileage charge?"
BIL: "The salesguy said we could just buy it at the end of the lease and we wouldn't have to pay the mileage charge."
Me: "Yeah, but you have to buy it at the residual."
BIL: "So?"
Me: "So, if your buyout is $18k, say, and your truck has 75k miles in 3 years, you have to buy it for $18k even if the market value for a Pathfinder with that many miles is only something like $14k."
BIL: "Oh, that doesn't bother me."
Me (trying not to sound flabbergasted): "...Boy, it sure is a nice looking truck..."

Some strategy.

-Jason

audia8q

To give perspective, we will see 10-15 buyers like jason's sister/bro in law for every 1 edmunds type buyer....amazing huh?

rroyce10

... **"Oh, that doesn't bother me."** . ...l.o.l...

I've only heard that about 3,749 times .... til' it's 2 months before the lease is up and then they realize they are 15,000 miles over their limit and they forgot to fix that $1,800 "ding" in the trunk lid .....

Leasing is good for those that go into it with "eye's wide open" .. unfortunately, most let that smaller payment blind them .. then they end up at one of the Edmunds sites crying foul and how they got ripped off ... waaay too common.



Terry.

akangl

You end up like me, all was well and good until things changed, now I've got a truck that I'm 15 months into a 48 month/48k lease and have 38k miles on the truck.

I'm so buried in it that I would need 3 earthmovers, a dozen dump trucks, and a few backhoes to get out, even then there is no I'm still probably stuck. Luckily it will be paid off (thanks to the way things are now) in about 4 months.

Good thing I love my truck!

black_tulip

I have a friend who even negotiated a 10K mile /yr lease instead of the usual 15K to lower his payments even further. Because, he is going to be over mileage anyway and he will buy it off, so why pay more??

kyfdx

I'll tell you why.. Because getting the 15K mileage lease is the cheapest way to buy those miles...

On a $30K car... going from 10K to 15K per year on a three year lease only adds around $835 to the total cost of your lease... That is $835 for 15K extra miles.. That is under $0.06/mi..

Compared to the typical $0.15-$0.20 per mile that banks typically charge for extra miles at lease end... I'd say your friend made a bad choice... That isn't rare.. I made the same bad choice myself once...

regards,
kyfdx

stickguy

I think the reason was he planned to buy it out at the end of the lease, so the mileage overage wouldn't matter since he would not be paying it anyway.

So, it made sense to get the lowest annual allotment, since the payment was smaller, except for one thing:

The payment was smaller because the residual was higher. The old pay me now, or pay me later. So, in this case, you need to compare what you save in payments vs. the extra buy-out amount.

Now, if you were lucky enough to be able to negotiate the buy out, might not matter, but don't count on that. And you would really be in a hole if you decided to turn it in anyway.

black_tulip

Of course it is a bad idea because the residual will be proportionately higher and so will be the depth of the hole he will be in at the end of the lease. I was just joking, but of course, my friend is quite serious!

PS I can't believe you guys thought I was seriously advocating this strategy!!

jaserb

Yeah, I told him if paying $4k over market value didn't bother him he was welcome to buy any of my cars anytime!

-Jason

dtownfb

Myriamh: I think you already got some good advice but i'll thor my two cents in.

Finish paying off the lease. Since you are close to work, you will probably only do 2-3k miles until the end of the lease so your overage won't be too much. Get the scratch fixed and walk away from the lease in the summer.

Keep the Corolla and ride it into the ground. Corolla's are great cars and with gas prices still hovering around $2.30, they get great gas mileage. NOw you can save some money with no car payments. If you do need another car please buy new or used. Don't lease again esp. not for 5 years. Follow the rule i learned form many on this board: "never lease longer than the bumper to bumper warranty".

Good luck.

divorcedmomof2

Please help. I have a 2004 Toyota 4-runner through a lease. It is still in my ex husbands name. I've tried to get out from under it because the payments are too much since I lost my last 2 jobs. It is way to much for me to handle. These are probably stupid questions.. but here goes. Can I trade it in for a used vehicle. My credit isn't that great from paying the lease and my house payment late. I just need something that I can afford to pay ON TIME.. I've talked to a couple dealers and they weren't interested.. basically. I've also wondered if I can trade it in and lease something else... just anything to make the monthly payments affordable. Any advice would be much appreciated.. Thanks:)

sebring95

Another good example of why leasing is bad unless you have ample cash on hand.

How long is the lease term, what are the payments, what is the residual value, how many miles are allowed? All of that is found in the lease contract. Also, how many miles are on the 4runner, what model, 4x4?, etc. That will give us an idea of what it's worth and what it will take to get out early. Typically, you have to pay off the lease, one way or another so trading is usually tough in the first couple years. I wouldn't recommend making this mistake again, so lets figure out a way to get rid of the current vehicle before jumping ahead too far with your next vehicle.

mirth

By "trading it in", I assume you mean ending the lease. Unfortunately this is usually not possible until the lease is completely paid up. Sometimes a brand might let you give up a lease if you turn around and lease a new car (thinking GM mostly), but it doesn't sound like Toyota's interested. Sorry to be the bearer of bad news.

Another possibility: If the lease is truly in you ex-husband's name, then stop paying it (depends on how much you hate your ex). Legally he would be responsible for the payments and would take the credit hit when they repo'd the car. Make him take the truck back and then you could get something cheaper.

qbrozen

By "trading it in", I assume you mean ending the lease. Unfortunately this is usually not possible until the lease is completely paid up.

Actually, just like a car loan, a leased car can be bought in full from the lender. Unfortunately, this means paying what the residual would be at the end of the lease, PLUS all of the remaining payments. It is typically an "upside-down" situation, but it is entirely possible and is done all the time.

mirth

...but if she could do that she wouldn't be posting here. I naturally assumed she meant that she just wanted to stop paying, period.

bobst

I don't see why she needs to "make him take the truck back". I think all she needs to do is stop paying the lease and let her husband deal with it.

Then she can go buy a decent used car.

qbrozen

geesh. We don't even know the guy and here you are telling her to hurt his credit.

It could very well be the car was originally leased for her use while they were together, but was put in his name (just like my wife's vehicle) for a better rate, or whatever reason. If this is the case, and she continues to try to make good on the payments, then she is doing the right, honorable, and decent thing.

You should, however, let your Ex-hubby know what is going on, if you haven't already. It is certainly in his best interest to make sure you DON'T default on the payments. He's either gotta take it back, help you out with some extra money each month, or help you (actually, help himself) get out of the lease.

stickguy

Thankfully I don't have first hand knowledge, but wouldn't ownership/responsibility for the car (and lease) be spelled out as part of the divorce decree? I know that my relatives that recently went through this had to deal with some level of DMV stuff to make sure that the right cars were in the right name.

I guess a lease is harder to deal with, since you can't just sign the title over. Don't know if a lease company would change the name on the lease though...

In any case, as already noted, you can trade in a leased car on something else, but you will owe the difference (if any) between the buy-out price and it's trade in value. Plus, you then have to pay assorted fees/taxes, and the loan on whatever you pick up.

There are some ways to get someone to assume your lease, but it isn't the easiest thing in the world, and my not make much sense with a Highlander.

Your best bet is probably to either give it back to the Ex, or find a revenue source to finish paying out the lease

In any case, good luck.

bretfraz

If the 4-Runner is in ex-hubby's name, how can she trade it in? She doesn't have the legal right to sell something that doesn't belong to her.

If the lease is in both of their names, probably the smart thing to do is call the leasing company and ask how one person on a lease can sell or trade a vehicle without the other person. A "power of attorney" might be involved here, who knows, but better to ask first than to slug it out at some car dealership.

The leasing company doesn't care who is driving the 4-Runner as long as someone is making payments and keeping it insured. If payments stop, the leasing company will contact the lessee (her ex) and demand payment.

BTW, it IS possible to trade out of a lease and into something new. I've done it and it worked just like a regular loan. Call your leasing company and get the current payoff. Ask a customer service agent what their policy is regarding trading in vehicles still under a leasing contract. This isn't rocket science, folks. Make a couple of toll free phone calls and 90% of your questions will be answered in a few minutes.

z_cam

Hi,

I have read many of the posts in this forum and you all give very good advice. I was wondering if you can help me to make a decision.

I am upside down as well. I currently drive a 2001 Nissan Pathfinder which I bought in 2003 with 32K miles on it. In order to get the payments where I could afford them, I took out a 72 month loan (I KNOW, I KNOW, bad decision). Therefore I have a payoff of about $10,000 and when I took the truck to CarMax they valued it at $6500 on their estimate.

I average 20-22,000, miles a year on my cars, many of them highway miles. I also drive an SUV because I carry a lot of video and photographic equipment because of my work. I generally buy used cars, I try to buy them 2-3 years old with low miles (usually 20-32,000 miles on them).

Because of my yearly mileage average, I usually reach or approach that magic 100,000 mile point in about 3 years. At this point I either have to trade (and get a paltry amount on the trade) for something with lower miles, try to sell it myself, or decide if I am going to keep it and run it in the ground.

What is your advice on the most cost effective way to buy vehicles from now on (without having to keep rolling over negative equity)? Do I need to try to even out the amount owed with the amount I would get on a trade by paying a block payment on the loan now? Is leasing a viable option? Any feedback is appreciated!

Thanks!!

cccompson

Rolling negative equity into a new car is bad enough but into a used car?

I don't believe that leasing is not a realistic option given your annual mileage.

Now quite sure how you are using the phrase "magic 100,000 point." Do you mean that it's time to sell because you can still get something for it? Or do you mean that it's time that things will start going wrong?

Financially, it seems to me that the best thing to do here is to drive it into the ground as it's likely to give you fairly good service for a good long while (at least until it's paid for!).

However, if you're set on replacing it, yes, pull out a wad to cover the difference (whether on trade or private sale). If Carmax will give you $6500, you should be able to sell it yourself for at least $7500-$8000.

sebring95

I'll continue on what I believe the above poster was alluding to....forget the "magic 100,000 mile" part. That may be some type of mental block for some folks when buying, but realistically the vehicle doesn't suddenly become worthless if it has over 120k miles. Particularly if the vehicle is cared for. You should be able to easily get 150k miles of reliable service out of any vehicle these days. When I was commuting 35k miles a year, I ran the vehices for long time. I drove several to 200k miles without major issues and they still had value when I sold them. Even SUV's wit high miles are desirable. If your Pathfinder is currently worth $6500 (that is a wholesale number Carmax is giving you) You could easily put another 100k miles on it and not lose half of that amount. Maitenance/repairs will have to be taken into consideration, but it won't be a big deal. Make extra payments, drive it until it's paid off (or value equals loan balance) and you'll be better off in the long run.

kyfdx

I think your plan is good... Buy used cars with 20K-30K miles, and drive them for three years until they are around 100K, then trade them off for another similar car..

The plan is good, but the execution is poor.. As you admitted, the 72 month loan was a mistake... You need to match your loan to the value of the car at the time of sale... You are only upside down in your current car, because you were paying it off slower than the actual depreciation.. If your monthly payment was all you could afford, then the car you bought was too expensive for your budget.

To keep this from happening in the future, stick to a 48 month loan... If you can't afford the payments on a 48-month loan, then you need to look for a less expensive vehicle..

In essence, if you can match the depreciation rate to the loan payoff rate, you will be leasing the vehicle.. But, your only hope to make this work is to keep doing what you are doing now.... Buying slightly used cars and miling them up... With the mileage you are driving, leasing a new or used car would not be financially feasible..

So... buy a car that you can afford a 48 month payment on... and, the next time you get ready to trade, you won't be upside down...

regards,
kyfdx
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cccompson

Oops, error in my post #503. Meant to say - I don't believe that leasing is a realistic option given your annual mileage.

Posts 504 and 505 both offer excellent advice.

bretfraz

During a previous career I used to drive 30-40K anually. Initially I bought, put on the megamiles, then took it on the chin at trade in time, only to do it all again.

I educated myself about leasing and learned that it worked better for me than buying. There is one major caveat, though:

You have to be of the mentality that as long as you do what you're doing, you will always have a car payment.

Most folks have the philosophy of paying off a car and driving it payment-free for a period of time. So they're naturally going to suggest buying used and driving it into the ground. Will that work for you or do you need a different solution?

I accepted the fact that I was going to have a car payment. It was already fact that I drove 30,000+ miles every year. So my goal was to minimize my financial exposure while driving a reliable car that met my needs. When the mileage racked up to the point that the car needed expensive repairs, I wanted to get rid of it and start over.

Most leasing companies will let you buy miles above their normal amount. If you run the numbers I think you'll find leasing new as good, maybe better, than buying used and taking the hit at trade in time.

jlawrence01

Leasing or buying is a financing decision. If you lease a car and amortize the car over a 24-36 month schedule and drive it for that period of time, you will always come out alright. Of course, if you do that you are not going to get the $219/mo 36 month $2500 offer that you see out there all the time.

However, if you are putting 35k miles per year, and amortizing the vehicle over 60 months, you are going to have a RUDE AWAKENING at the end of the leasing period when you will need to come up with a ton of money.

Like in ANY financial decision, those who come armed with information and an understanding of the process generally do pretty well. Those who don't are like lambs heading to the slaughter.

chanaelw

We had a 2000 Chevy Venture that we got a very bad deal on in 2002...(some credit issues = high interest rate, no research before buying) anyhow we still owed $7K. The van had ove 100K miles and some other issues. We were probably looking at a few $K in repairs this summer.

So we traded it for $3K which left us upside down by $4K. We bought a 2006 Ford Freestyle using the X-plan. The car was about $100 under invoice ($2000 under MSRP). We put down $2500 which effectively put our negative equity at $1500. Basically we ended up paying MSRP for the new car. We spent the past few years building up our credit and were able to get 0% financing. So now we have a new car that I love (and plan to continue driving after it's paid for) for about $50 more per month than the beat up 6 year old van. (and yes we bought GAP insurance)

melody2

I am currently in a difficult situation with my car...and could really use some advice.

Three years ago I made a terrible mistake by financing a pre-owned Toyota Sienna. I'm currently 3 years into a 72 month finance for this minivan...and needless to say...i'm completely "upside down".

Here's how bad it really is:
My montly payments are $520.00, at 16% APR! My van currently has over 91,000 miles, with no warranty, and I have 3 YEARS TO GO! My payoff on the Sienna is $16,000.00, and the vehicle is only worth $7,000.00 (on a good day). Thus, I am upside down $9,000.00!

Here's my question:
I've had a few offers on a 39 month lease (Trailblazer or Commander...both with high incentives) with $1-2,000.00 down...at a monthly payment around $560-576.00 per month. Although I vowed to never pay a dollar over what I am paying now for the Sienna, should I pay the extra $40-$60 for a new car lease with a full warranty (over 39 months it comes to around 2,000.00 extra)? Since I have to pay $520.00 for the next 3 years on the Sienna, because I still owe Toyota $16,000.00, does it make sense to pay a bit more for a 39 month lease to have a car with a full warranty? Or...should I just stay in the Sienna and "ride it out"? At the end of the Sienna term, I'll have a van with well over 100K miles...worth almost nothing. But, at the end of the 39 month lease on a new car...I'll have to turn it in with nothing to show for it as well.

I look for any advice you can give me regarding this situation. If you think it would be wise to go into a new lease, where do I begin? And how do I approach this situation without paying too much out of pocket to eat-up the inequity?

THANKS!

kyfdx

So... the new lease on the Trailblazer? Does that price include paying off your current vehicle?

Also, if you already have 91K miles on your vehicle, how far are you driving each year? Will the miles on the new lease accomadate your driving needs?

Even if the answers to these last two questions are favorable, I'd guess that you'll be better off sticking with your current situation...

I'd suggest that you re-finance to get a lower interest rate, but I don't know any bank that would loan $16K on a 4 yr.old Sienna with 91K miles.. I'm just assuming that it is 4 yrs old, though.. Otherwise, how did you end up paying $30K for it? If it is an '03 model, it has to be worth way more than $7K..

regards,
kyfdx

mac24

Couple of points.......... first, it's a Toyota Sienna, not a Dodge Caravan. Unless it's a lemon you have a good chance of it being a reliable vehicle until well after you've paid it off.

Second, it doesn't matter what the incentives are, you won't be paying any less than the market value for your new vehicle (and you could be paying more). Therefore you take an immediate depreciation hit on the new vehicle, which has to be added to the amount you're upside down on your Sienna, plunging you even deeper into debt.

Third, when the Sienna is paid off and has well over 100k under its wheels it won't be worth top dollar, but I think it will be worth a lot more than you imagine. You might also consider driving it for a while after that, and put $500+ in your pocket each month.

My two cents.........ride it out.

melody2

Thanks kyfdx for your reply!
The lew lease on the Trailblazer would indeed pay off my current vehicle. The reason we have 91K miles on the Sienna is because it was the only vehicle my wife & I had for a little over 2 years. So, because we now have 2 vehicles (I'm leasing a Ford Fusion), I feel that the miles on a new lease would accomidate our needs.

The Sienna is a 2001...and we bought it PRE-OWNED...if you can believe that! Our APR is 16%, and the sticker was $23,000.00! So, when the term is done, we'd be paying close to $40,000.00! Needless to say, we were desperate and felt that we "really needed" the van to accomidate our growing family. Now, when we look back on the situation, we realize that we would have been just fine in our Ford Focus Wagon.

So, with that being said...since we're currently paying $520.00 per-month on this van...with 3 years to go...does it it wise to pay $40-50.00 per-month more on a 39 month lease ($2,000.00 over the 39 months) to have a car with a full warranty? The one good thing about the Trailblazer deal is that it has good incentives to eat-up some of the inequity, and they're only asking for the inception fees at the beginning. I would not be willing to pay alot out-of-pocket to make the deal.

I look forward to your response!

melody2

Thanks mac24...that makes alot of sense. True, the one good thing about this situation is that it IS a Sienna and NOT a Windstar.

I have alot to think about.

kyfdx

I have to agree with mac...

The incentives don't really eat up any of the negative equity... You get the incentives, whether you trade in your car, or not...

I'd keep paying on it... Even if you don't make it the whole three years, your $7K car will depreciate a whole lot less than the cost of a new lease... Even 12 or 18 more months of making those payments will put you in a much better financial position..

cccompson

Don't make a bad situation worse by getting into the Trailblazer lease. Try to re-fi the Sienna (which likely has many, many miles of good service left).

british_rover

Why not take that 40-50 extra dollars a month you would pay for the lease and break it up like this.

Pay 30 bucks a month extra on your Sienna and put 20 bucks away to pay for any unexpected repairs. Maybe do it the other way around depending how you want to do it.

The chances of anything drastic happening to the Toyota are fairly slim and this way you are eating up more of the principal each month and paying less interest.

div2

I'm no Toyota lover, but I'd be willing to bet that a 2001 Sierra with 91K will be more reliable than a new 2006 Trailblazer.
Just pay it off as quickly as you can and keep driving it.

irnmdn

I also drive an SUV because I carry a lot of video and photographic equipment because of my work. I generally buy used cars, I try to buy them 2-3 years old with low miles (usually 20-32,000 miles on them).
Because of my yearly mileage average, I usually reach or approach that magic 100,000 mile point in about 3 years. At this point I either have to trade (and get a paltry amount on the trade) for something with lower miles, try to sell it myself, or decide if I am going to keep it and run it in the ground.

First: you don't need an SUV to carry lot of equipment.
Second: If you drive a lot miles, you need to look at some thing than gives mpg in 30s not in the teens.
Third: By doing proper schedules maintenance, any reliable vehicle should go well past 150k.

Based on all of the above you should be looking at something like Honda Fit. Holds as much as Pathy, 35mph highway and should last 200kmi if properly taken care of, and lot more fun to drive.

bretfraz

or is $560-575/month for a LEASE on a Trailblazer or Jeep Commander more than a little pricey?

I mean, I'm looking at the ads in my Sunday paper and a Ford dealer is offering an Explorer XLT for $275 @ 24 mo with $2500 down. With sales tax that pymt shouldn't be more than $300.

kyfdx

Rolling in $9000 of negative equity...

sebring95

Think of it this way....In 39 months you'll have either:

(A) Nothing. You'll turn the leased vehicle in (and hopefully won't owe any excess wear/tear charges) and have spent $1500-$2500 more in payments.

(B) A van worth several thousands dollars at a minimum. Worst case you have a couple major repairs, but likely you won't spend anywhere near the $1500-$2500 you're GUARANTEED to speed on the new vehicle.

This is a no-brainer in my book. Unless you just WANT a new car.