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

blueiedgod

I have a car that is worth about $20K, I owe $12K, I did not put any money down.

Did you trade a paid for car in? If not please share with us what kind it is?

Sure, as KYDFX said, it is a Honda CR-V.

jimmyto

Hi. We need your help.

My friend is getting divorced Oct 2007. During her marriage she bought a Windstar 2003 Sports Edition. Her husband bought it for her for approx. $40 000 CDN. $600CDN/motnh x 72 months @ 1.90% interest rate. He bought it but she signed the papers under her name only, not his.

The mini van has been but problems as the transmission had to be changed twice under the warranty. Mileage is 110 000 kms and power warranty is only until 150 000kms.

Is there a way/solution to get rid of this mini van? The balance on it is another $25 000. The mini van is worth about $12 000-14 000 in the market.

Selling the van would mean paying the difference of approx. $12 000 and she would be left without a vehicle to drive her daughter. Would keeping it be a better move?

Please help. What is your advice?

Thanks!

Jaibey

grandtotal

I don't like to be the bearer of bad news, but the Windstar is probably worth much less than $12000, maybe as little as half that. I don't think your friend has any options at all, she should keep it until it is paid off.

By the way, are you sure she still owes that much because I calculate that she should owe $25000 after about 28 months, and assuming she bought the van new (otherwise why did her husband pay so much for it) she should be a lot further through paying for it by now.

sebring95

I agree, the payoff seems high. Assuming a $25,000 payoff, they would have had to buy this 2003 model in December of 2004. That doesn't seem right, but I suppose possible. Assuming they bought it at a more reasonable time (June 2003) the payoff is only around $15,000. Unless there's a piece of this puzzle we're missing (skipped payments, higher APR, etc.)

Kirstie_H

Remember, it is $CDN - which doesn't change the loan calculation, but is different than the $US value.

If your friend has good credit, she *may* be able to refinance the loan if she absolutely can't afford the current payments. Hard to say, but talking to her bank/credit union about that is a good idea.

And, as others have mentioned, are you SURE about the payoff amount? If she simply took $600 and multiplied it by the number of remaining payments, that's not likely to be accurate.

qbrozen

I'm a third who thinks the payoff is high. And buying it that late I don't believe would even be the case because usually special promotional APRs (like 1.9% for 72 months) wouldn't still be available on such an old leftover.

I'm thinking they rolled a HUGE amount of negative equity.(???)

dtownfb

This sounds like it needs to be discussed during the divorce proceedings.....

joel0622

This sounds like it needs to be discussed during the divorce proceedings.....

Thats what I thought at first to when she said here husband bought it. Then I re-read the post. Her husband did not buy squat. Its her signature all over the paper work not her husbands.

sebring95

I'm not familiar with Canadian family court, but here in the land of the free, home of the brave......it wouldn't matter who's name is on it. The man would pay for it. One reason I'm still happily married :P

dtownfb

True but if he "set her up" by rolling negative equity or by not fully disclosing all the terms of the deal, she may have some recourse.

Unfortunately, she is stuck with a minivan that is no longer in production and giving her problems. Trading it will only lose her money and makes no sense to re-finance a 1.9% loan not unless you can get a home equity loan. this way it could be included in the divorce proceedings if it is tied to the house (assuming joint ownership).

cdnpinhead

". . . .unless you can get a home equity loan. . . ."

Interest of any kind (even mortgage) isn't deductable in Canada, so home equity loans are no different from any other kind of loan.

grandtotal

this way it could be included in the divorce proceedings if it is tied to the house

I don't see why it could not be included in the divorce settlement anyway. If it were a minivan that the couple (or one of them) owned outright it would be included as an asset, so why not as a liability?

joel0622

If it were a minivan that the couple (or one of them) owned outright it would be included as an asset, so why not as a liability?

I don't know, we are getting into the legalities of a foreign country now.

But I do know this. I have seen numerous times over the years customers show me divorce decrees that state the other party is responsible for the repayment of a loan and those loans are usually in default. Normally when the court divides property you get whats in your name, your spouse gets whats in his/her name and any joint debts are split up or required to be PIF or re-financed into one party's name.

I have had many a divorcee have there credit destroyed because the ex is supposed to be paying a debt that is not in there name and they don't.

I am sure that varies from state to state or in this case country to country. But the bottom line is if your names on it the lender could care less what the decree says. You signed a contract saying you would pay the loan as agreed.

grandtotal

You're right. I was looking at it from a logical point of view and thinking in terms of a 'fair' resolution. Unfortunately the law is not always sensible.

jimmyto

Thank you for all your postings so far

I just spoke with my friend. It appears she had a lease on a Ford Explorer Special Edition. When she had her baby her husband suggested they get a Windstar. It appears they had to pay a penalty for ending the lease sooner and that penalty fee was added to the new contract for the Windstar.

They have now been separated for almost 2 years and she will be filing for divorce in October 2007. Their house had to be sold to pay out an outstanding balance on a 2nd mortgage they took to pay bills. Not much money was left out fater selling the house. My friend has been living at her parents for the past 2 years with her small child. And she is stuck paying a $600/month car payment to Ford with a $25 000 balance on the loan. Not to mention the $400 it costs her on gas to drive it to work every month.

Do you think when an agreement coudl be made with a judge then to have him pay 1/2 of the loan? Would this be possible even if he's not driving the vehicle?

What is your best advice? I suggested her to just keep driving the vehicle and pay the debt in full...I still think she was deceived and she OVERPAYED for that vehicle.

On a side note, interest payed on mortgages in Canada is not tax deductible. Only interest payed on student loans.

From the land located above the land of the free, land of the brave....

Waiting for your reply. THANK YOU!!!

Jimmyto

dtownfb

I would suggest she continue to pay the loan. Have her definitely bring this matter up during the divorce proceedings.

Good luck.

cccompson

Best advice? This one's for her lawyer.

fezo

Looks like this is one for her lawyer.

Have a neighbor who was in the same predicament with an old Lumina van of all things. She ended up with enough late fees to equal a few more full payments but finally the van was all hers. Unfortunately it still is. I don't really understand how the thing still runs at all. You can't even open the doors from the outside so the driver's window is always open enough to get in - even in the rain and snow.

blueiedgod

During her marriage she bought a Windstar 2003 Sports Edition. Her husband bought it for her for approx. $40 000 CDN. $600CDN/month x 72 months 1.90% interest rate.

$600x72=$43,200
It is 2007 now, so 4 years of payments: $600x48=$28,800

Rough payoff is: $43,200 - $28,800 = $14,400, incidentally, $600x24(remaining payments) = $14,400.

Where does the $25,000 come from? That is $11,000 in difference!

Also, why did they need a minivan for just one child, when Explorer is big enough? Ok, husband made a bad dicision, but what was she, chopped liver? She could have been the voice of reason...

From your other post (sold house to pay off debt) it does not sound like either the husband or the wife are good with money.

Her only way out is to pay this thing off and dive it for another 10 years, no matter how bad it is. Learn her lesson and next time not to rush in (marriage or purchases).

qbrozen

actual amount financed was more like $41k. (1.9%/72 mos = $601)

The quoted payoff means only 2.5 years of payments have been made. I guess it could have been a really old leftover ... but I am surprised they could get that interest rate on something so old. who knows?

jimmyto

Thank you for all your messages - I'll pass her the information once she is back from Australia. You have been very helpful.

musclebound

I have a 2003 Jeep Cherokee Overland 63000 miles. I bought used and still owe $21000 and it's worth between 12000-14000. I still have less then 4yrs left on a 72month loan. The truck gets crappy gas mileage and my extended warranty ran out a few months ago. I want to get a 2007 Altima 3.5SL. I'm not sure if a bank will finance me and how much my payment will be. I know the smart thing to do is just keep paying the truck off. I know if I trade it in my payment are going to be alot. But I'm that type of person. I only have 2 bills. The truck and a 2500 loan. My credit score is about 696. I paid off a 4500 credit card last month in which it didn't show up on my credit report yet. Any suggestions on strategy in making this happen. Good place to finance low apr. It will have to be atlest 72months. Or is leasing a good option without money down? I have heard mixed reviews on leasing.

Thanks in advance for your help.

thenebean

its gonna be a bloodbath if you trade this thing in. and if you finance the altima for 72 months or more, along with the negative equity of the jeep - you are just setting yourself up for a financial nightmare...

i know you don't want to hear it, but stick with the jeep.

-thene

musclebound

I know I should stay with it. But I'm looking in the future of mechanicle problems with the jeep. It's already been in the shop a couple of times when it was under warranty. I'm thinking of it as starting over with a new family car. Car with no problems and a warranty. I'm thinking it's too much a negative balance to finance. I thought it was 110% financed through most banks and credit unions. I plan on sticking with this next vehicle until it's paid off. That's another reason why I want it new.

joel0622

I thought it was 110% financed through most banks and credit unions.

That is the case with most outside Banks and Credit Unions. Most dealers have lenders that will do 130%-140%, I have in the past got way more then that done.

The only thing that can keep you from being utterly destroyed is a large cash down payment.

The upside to leasing if you wanted to consider it is that if you did a two year lease and could afford the payment in two years all your neg would be gone and you could start fresh from there. If you get into another 72 month loan you will be carrying around $1000's worth of your jeep in the trunk of your new car for the length of the loan.

musclebound

I realized leasing is not the way to go for a 36 or 48 month lease. I calculated the payments on edmunds leave vs buy calculator. I know about the 1000's that will still be with me.

thenebean

when i worked for nissan, we couldnt finance more than 110% of MSRP - so unless you could put a bunch of money down, nissan wouldn't finance you either...

i would wander over to the real world trade in value forum and see if you can get some advice on trade in value of your car, as well as private party. it might be worth it (depending on circumstances) to sell it outright so you can recoup a little bit more of your money...

-thene

joel0622

when i worked for nissan, we couldnt finance more than 110% of MSRP - so unless you could put a bunch of money down, nissan wouldn't finance you either...


Dang, I got a gal done a couple days ago who owed $17980.00 on a Pontiac that was worth $6500. She was putting down $3K on a used Sebring that booked for $13600 trade, $16500 retail. We got $25500 carried on the car. 188% of the wholesale.

gasman1

I know the smart thing to do is just keep paying the truck off. You said it and others have agreed with you and offered good advise that you don't want to hear. Do the smart thing and live with the pain! Those imaginary repairs may or may not occur. If they do, they will cause some pain. Those HIGH payments and interest should you trade to soon (again) are certain and will be painful.
Please take this blunt message to heart as a shot for your new car fever and get over it. You have some serious recovery to do now. Live with the debt that you've already incurred and your life can be better in the future. Dig your debt deeper and your life will be much worse in the future. You can look forward to a new car in 4 years or look at 7 years of outrageous payments. Payments that can and will restrict you from enjoying life. It's you choice! Make it a smart one!

thenebean

:sick: :sick: :sick:

ouch - that hurts! 188% of wholesale?!

c'mon people! if someone who loves cars as much as i do (and wish i could have a new one ever year) can keep a car for the full 5 year loan, AND be disciplined enough to save payments for an additional 2-3 years after its paid off before getting a USED G35 sedan in 2-3 years, then people who could care less about cars should be able to do it too!

keep the jeep - it will remind you down the road to be wise in your decision as to what car to purchase, and to do research before making that purchase...you learn from your mistakes...if your mistake just disappears into a new car, you'll never learn from it...

-thene

Kirstie_H

Or, if you are already willing to make higher monthly payments, why not just do so on your Jeep until you get it paid off? If there's no penalty, you can get that debt down more quickly til you at least break even, and then trade.

That will give you a positive goal to work toward.

qbrozen

bah! paying loans off in full before trading? And you call yourself a car lover??! ;b

thenebean

ha ha! i know - i should be ashamed! what is wrong with me?!?!

believe me, i could buy a different car for every day of the week and still not be happy - so many different cars to drive! but i know its a stupid financial decision...and unfortunately, having a whole bunch of cars in my garage is not gonna do me any good if there's no house attached to the garage or any gas in the cars because i can't afford either!

i spend lots of time drooling over the new infiniti g35/g37/nissan GTR though...someday....

-thene

gasman1

That's the ticket! Pay it off in two years instead of four. At least if those payments get to be too painful, you can ease up on yourself. You don;t have that option with the new car plus the 4 year old Jeep, plus whatever else was rolled into the previous loan(s).

Kirstie_H

Exactly! I'm moving, my commute will change, and I'm getting the "new car bug." Looking at a variety of sources, I figure I'm around the break even point right now if not better. So, I've been rounding up my payment by at least $50/month, sometimes a lot more, to reduce the balance AND to eliminate some of the interest over the lifetime of the loan.

I totally understand the desire to get rid of a vehicle that is now out of warranty, you don't care for, and you don't want to continue to pay to maintain/repair. Accelerating the payoff is the best way to do that while still allowing flexibility should you be unable to increase payment at any time. Doing that will at least get you closer to break-even, as the Jeep's value seems to already have taken the biggest nosedive and should level out now.

blueiedgod

Generally, it is a good idea to keep what you have already. But, if you have that "new car bug" then you have to do it smart.

Looks like if you sell it your self, you may make it easier on the wallet. Trade-in: $14,798 Private Party: $16,909 Dealer retail: $18,635

Let's say you sell it for $16,000, you owe $21,000, you will just have to come up with $5000 to pay off the lean on it.

Like you said, you have no other bills, except the car and a $2500 loan. It should not take you more than 2-3 month of savings to come up with the $5000 to offset the depriciation. This assuming that you are the typical Jeep Grand Cherokee buyer (Someone who buys a $35,000-$40,000 vehicle usually makes about $70,000-$80,000/year, using "vehicle = half annual pay" formula). At $70,000 annual pay, your bi-weekly take home should be about $1,600 - $1,700 after taxes. By putting every other check into savings, you can save $5000 in 3 months. Once you have that $5000 in your hand, see if you still want to get rid of the Jeep, or just keep it.

If any of the above does not apply to you, then just sit tight, and don't dig your self deeper into debt.

Besides, Nissan Altima is not the most reliable car out there...

kamdog

Hi, I owe $26000 on a 1975 civic. I rolled 47 years worth of cars I couldnt afford into it, and now I dont know what to do!!

Geez, people. Live within your means, and if you cant, get some more means!!. I love BMWs. I wanted one in 1970, but all I could afford was a duster. So I bought a g-d Plymouth Duster. I wanted one in 1976 and had more money, but all I could afford was a Celica (not a bad car, btw) so what I bought was a Celica. Well, house, kid, college, etc., meant that the BMW was out of my reach. So I didnt get one. Live within your means. Now that I can afford a BMW, I am buying one, but the point is that you have to live within your means, and there are certainly many cars out there that fit your budget. There is a difference between NEED and WANT, and people have to learn that.

boomchek

musclebound

If you absolutely must get out of the Jeep the best thing wold be to come up with the cash to cover the negative equity.

So if you sell it privately, like someone said earlier, come up with $5k negative equity, and get into a Nissan.

Last thing you need is bury yourself into a long loan and be at the same spot in 5 years, with 2 years left of high payments due to negative equity.

cdnpinhead

Of course, no one wants to hear what you've just said.

But, it's stone true.

Spend less than you make.

What a concept.

joel0622

I would hate to see what would happen to our economy if people actually started living within there means.

I would guess that the long term effect would be great but the short term would probably be devastating.

I would guess (purely a guess based on nothing but my observation) that 30-40% of the cars we sell are to people who probably can't afford them. not saying they won't pay for them but it puts a strain on there budget month to month.

geffen

I'm looking to trade in my 05 Taurus however I know i'm about 2 to 3 thousand dollars upside down, is it wise to take advantage of the dealer rebates to soak up some of the negative equity? or should I just drive what I have until i've paid off my loan then make a trade?

boomchek

If you really must get rid of it because it's not working for you, you might be surprised that after an appraisla you're upside down more than you thought.

Many people use the rebates to soak up negative equity, but I'd first find out how much upside down you are by getting the car appraised.

kyfdx

You won't really be soaking up any negative equity... That is just an illusion..

Your loan on the new car will be higher than it would be if you didn't have the negative equity. You are just transferring it from your current loan to the new one.

Nothing wrong with that necessarily.. if you are trading the car because you need to. But, if you are trying to get out of the negative equity situation, you have to keep your car and pay the loan down.

regards,
kyfdx

steine13

(i) There is no such thing as a 2003 Cherokee. You have a Grand Cherokee, which is a very different, more sophisticated, more trouble-prone Jeep. You are right to worry about reliablility.

My neighbor had one that was so bad ChryCo gave him an extended warranty to 100k, it was in the shop so often. He finally got rid of it and bought a new '05 or '06. The idiot.

Of course, the new one has been absolutely flawless for 70k miles, go figure.

(ii) I can see being upside down on an economy car; most people need reliable transportation, and if money is tight, just finance the whole wack. That's not the best solution, but it's not unreasonable. But a 15 mpg 4wd SUV that you can't afford...? Oh well, water under the bridge.

(iii) I have an easy test for people who want to trade with negative equity for alleged monetary reasons: You have to trade the Jeep in on a Corolla LE. Good, proven, basic transportation with power windows & locks, AC & cruise and not a lot else. Absolutely zero sex appeal.

That's $14-15k + tax if you bargain right and will last until you're sick of it.

If that's not palatable, then you're not making a "value" decision, but rather a decision based on "I want it now", which is more fun, but not good for your pocket book.

You may use this superb decision-making tool free of charge...

-Mathias

jimbres

(iii) I have an easy test for people who want to trade with negative equity for alleged monetary reasons: You have to trade the Jeep in on a Corolla LE. Good, proven, basic transportation with power windows & locks, AC & cruise and not a lot else. Absolutely zero sex appeal.

That's $14-15k + tax if you bargain right and will last until you're sick of it.

If that's not palatable, then you're not making a "value" decision, but rather a decision based on "I want it now", which is more fun, but not good for your pocket book.

Brilliant! Wish I had thought of that.

musclebound

Sorry I didn't think I would have space in the title. It's a 2003 Jeep Grand Cherokee Overland. I can afford this vehicle. Corolla would be too small for my family. But I understand what you mean.

boomchek

Aaah, so it's not an affordability issue, it's a new car bug issue.

I can totally understand but it's definetly not worth burying yourself. The best thing is to just stick it out, or pay it off.

lemko

...how you got into the sitution of owing $21K on a 2003 Jeep Grand Cherokee Overland. Did you roll any negative equity from another vehicle into it? How much was the vehicle and how much did you put down? What was your trade? Do you think you could get another extended warranty to cover any unforeseen repairs?

blueiedgod

Hi, I owe $26000 on a 1975 civic. I rolled 47 years worth of cars I couldnt afford into it, and now I dont know what to do!!

I want a bimmer too... but I owe $40,000 on a 1983 Prelude that was appraised at $400 because of the big rusty holes in the body, and the missing muffler. I think I am going to go with BMW 850... the price on that should cover my negative equity on the Prelude... Plus, since I won't have to pay $300 for new muffler and $$ for body work, I will actrully be SAVING money. :P

I think I can handle $6000/month payment for the next 96 months.

joel0622

You joke about it but there are more people out of equity then there in. About 70% of the financed cars rolling right now are hooked.

We see/fight/cause it every day. It only takes about two trades in a 3 year cycle with no money down to get there.