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

blueiedgod

Not to put salt on wounds, but I think people get burried because they buy vehicles that depreciate fast and probably don't even think twice when they are presented with a finance contract as 10, 15, 20, or 22% APR.

Here is my story, it is very opposite of most here. In January 2003, I bought a left over 2002 Honda Civic Si. It had a sticker of $19,500, invoice of $17,500, and the dealer sold it for $14,500. I paid taxes out of pocket and financed the rest at 1.9%. I have been enjoying it since, but since I have recently relocated to a colder climate with a much more pronounced witner (Buffalo, NY) I decide that I would like an AWD rather front drive. I started my quest to find a vehicle that I would enjoy. I ended my search with another Honda, CR-V manual. After some negotiations, I got a 2005 CR-V EX with stick for $500 over invoice, but here is the icing on the cake, they gave me $12,500 for the Si (15,000 miles). Needless to say that by now I only owed a little over $8000 on it. But the point is, Honda served me well for 2.5 years, and only cost me $2000 in depreciation.

Lesson is, if you are going to be trading in cars before the term is up, get a Honda or Toyota.

lhess

mitsubishi eclipse which is supposed to be a very fast depreciating car. Bought for 19K, drove it 4 years, traded it for 12K. It has a little to do with the brand but it has more to do with:

Not being upside down on a car in the first place
Negotiating a good deal on the new one
Having good credit and getting a good rate
Making your payments on time
Taking care of the car so it's worth something at next trade time.

And, THE MOST IMPORTANT THING, in my opinion, is understanding the numbers on the contract. If you do not understand, you should get up, walk out, and take a friend that can help out. Monthly payment is not the bottom line!!

jlawrence01

The problem with the Eclipse was that a LOT of people bought the car on the 0/0/0 promotion back in the 2001-03 timeframe and were thousands upside down on the vehicle. OUCH!

audia8q

I think most people are upside down because they buy more car than they can afford.....if the buyer can't put a big chunk down and finance less than 36-42 months chances are they can't really afford the car.....of course it's not so easy impress the neighbors when your driving a car within ones means.

rroyce10

........... In your case, you did nicely ........

But the Vast market go's in with little or no money down, then they usually drag an extra $3,000 of negative equity from the car they bought 30 months ago, or they stagger into a 42/48/60 month lease and want out in 28 months .. and it makes no difference what the badge is on the hood ....

Leasing has gained alot of popularity - again .. and it will be interesting to see how that market plays-out in the next 25/35 months .... people kinda forget about the mile restrictions, the condition and the pay-off includes the residual at the end, etc, etc .... time is the great healer, everyone forgot about it in 1989 through 1992 and then again in 95 through 99, so lets see how good their memory is from 04 through 08 ...l..o..l....

Terry

lhess

i owned that car for about 15 months and tried to trade it off or sell it the last 13 months i owned it. to be as nice as I can about it - I HATED IT!! Anyway, as you might expect, I was upside down on the dreaded beast for a long time. I finally paid and paid and got it to the point that a dealer gave me a little more than my payoff AND a decent deal on the new car. I would have traded for a mule to get payoff on that car. Needless to say, it was gone.

My point is that I could have traded it the moment I realized I hated it, but I would have been in really bad shape on the new one. I bit the bullet and drove the nasty thing until I could do a better trade. Most people don't want to delay their own satisfaction for that long.

as for the big lease revival - I leased a 1991 car and will never do that again!!

akangl

I'm GLAD we leased the Titan, it depreciates faster than rotten chinese. Plus having 3 vehicles keeping the miles off is no biggie.

Nissan dealer did try to get me to trade it yesterday, offered me $27k ACV, but didn't have anything I wanted on the lot. I'll keep driving it for a while longer, at least until next spring when I can have the lease paid ahead a year. I don't want to roll ANY neg into the next one.

rroyce10

....... Do one of two things .....

1.) Either get hooked up with the Zone manager from corporate Nissan and get that ball rolling ....

..or ..

2.) quit talking about .... you were in the car biz, you know how it works .. dealers can only do what the manufacturer will allow them to do in this particular situation (or lack of) .... why talk with the store manager at Target when you should speaking with the VP from Toshiba ... get it.?



Terry.

ghulet

'Didn't have anything you wanted on the lot'? I can't imagine why, you've had two LemoNissans, I hope you're not considering another!!

grandtotal

Doesn't matter so long as it has a fresh NEW lemon smell.

akangl

Wasn't looking at NEW, was looking at USED. Found one truck I liked, but after seeing its service history at Ford I passed on it. I won't be buying another Nissan.

gogiboy

"But the Vast market go's in with little or no money down, then they usually drag an extra $3,000 of negative equity from the car they bought 30 months ago,..."

There's a wonderful, succinct article at cars.com titled, "Head-Over-Heels Buyers May Land Upside Down on Loan." This should be required reading for those souls desperate for the sight and smell of new automobile, but are far from even on their last gotta-have piece of eye candy.

It can be found at: link title and appeared on 5/12/05. I don't know if they archive. Nothing really new to anyone who frequents this forum and others within Edmunds.com unless it's the percentage of upside-downers (and what a downer!), which continues to grow. The author of the article makes an effort to break down the trend demographically. There is obviously a parallel between this trend and other indebtedness (credit cards, interest-only mortgages, personal bankruptcies and the like), which begs the question, Where does all of this indebtedness lead ultimately? Won't the buying public who are in over their heads reach such a critical mass that only an ever-decreasing minority will be able to finance a new car or will we simply see new creative ways to ensure that buyers will get financed?

Gogiboy

stickguy

To me, being upside down in and of itself is not a problem, if you have the money to pay off the shortage.

What's really the difference if I take 10K out of the bank to put down on a loan, or put down 0 on a low interest rate loan and keep my cash in the bank? Say I owe 12K on my car, and I write a check tomorrow to pay off the whole balance. I now own the car free and clear, but I still have the same net worth.

Of course, if you have nothing to start with, you can't cover the difference, but in that case, you probably buying too much car.

kstack

Last May I purchased a new 04 Mazda MPV minivan. At the time I traded in an 02 626. My current payments destroy me ($570 a month) and I owe 25,400 on the vehicle. I just can't handle the payment, but still need a vehicle. I can afford a $300-$400 a month payment and Im willing to get an older car. Any advice on what could be done about this. Oh yeah, the van now has 7500 miles on it, but is in excellent shape. Advice???

ksccts

Head on over to Real World Trade-in Values thread and see how far in the hole you are. :confuse:

perna

You can handle a 300-400 payment, but not $570? Cancel your cable, eat out a bit less, and there you go.

One year into what appears to be a 5 year loan doesn't leave you with a lot of options. You're stuck making sacrifices until you can get that principle down a bit. The problem is that you can't just roll your neg equity into a really cheap used ride, no bank will give you that much. The numbers we're talking, you might be able to roll it into something new and awful like a Cavalier, but really what's the point. For the $100 monthly savings, you're punishing yourself over nothing.

I don't want to be condescending here; I've made this mistake too (I once bailed out of a new car I had for 9 months!). The way I was able to do it is i had bought a cheap car in the first place, so there wasn't a huge amount of neg equity to speak of.

The problem with 60 month loans (again, the voice of experience here), is that everyone's life situation changes in 5 years, unless you're retired. Hopefully it's for the better, but sometimes things happen. When I bought my current car on a 60-month term in 03/03, my wife and I were DINKs, living in a small, cheap house. Her car was cheap and nearly paid off. In 03/04, my son was born. In 07/04, we had to replace my wife's car with something bigger. In 12/04, we had to buy a new house because again, there just wasn't room (and there were too many unfixable hazards for a toddler).

So here we are, 05/05, with two new car loans, two mortgages (old house still hasn't sold), and me sitting here wishing I hadn't taken that 60 month loan on my car just over two years ago. The reason I did it at the time is it was mega-low-interest (0.9), so what was the big deal? Well.....

All you can really do is sit back, assess your mistake(s), vow not to repeat it again, tighten your financial belt by eliminating unnecessary expenses, and just make the payments.

kyfdx

All you can really do is sit back, assess your mistake(s), vow not to repeat it again, tighten your financial belt by eliminating unnecessary expenses, and just make the payments.

mirth

...if I just switch down to a Corolla or something with a lower payment, I'll be set, right?

Kirstie_H

Either that, or the recent exchange with chevygirl, who made a mistake, set credit & financial goals, and is working toward those goals.

jaserb

You owe $25k on an '04 MPV? LX or ES? I paid less than $18k for a NEW '04 last summer, and I've seen plenty of them advertised for sale in the 14,500 - 15,500 range. You must have rolled a ton of negative equity in there. I'd be surprised if even a loaded '04 has a trade in much more than $16k or so.

Anyway, I'd have to agree with what the others have said. Assume you can roll $9k of negative equity (my conservative guess) into something like an '02 Taurus. Now you have a $17k loan on a car worth 8k - assuming, once again, the bank will let you get that far upside down. So now you have a smaller, older vehicle with no warranty, but your payment is now $3XX / mo. Sounds OK, until something breaks. Then that 5 yr / 50k Mazda warranty starts sounding pretty good. Or you find out that another kid is on the way, and now you NEED that third row seat. Or you decide that you just can't stand driving that @!#$% Ford one more day and you go bury yourself in something new. Or, best case scenario, you make 5 years worth of payments and at the end of it all you're in a paid for Taurus that's at the end of its reasonable life span and is all but worthless.

The point (as has been made quite eloquently) is that you can't buy yourself out of a financial jam. The transaction costs alone will kill you. The only thing worse than being upside down on a nice new vehicle is owing money on an old beater that's falling apart. My brother still owes $2k on a '98 Contour with 140k miles ticking away on the original trans, and its only still running at all because we dropped a junkyard engine in it a couple of years ago.

Good luck,
Jason

stickguy

can also get a side job of some kind to cover the difference.

Sometimes you just gotta do what ya gotta do.

Anyway, IMHO, most people (me included) spend way more each month on stuff they don't even realize they are spending it on, and could certainly live without if they had to.

NOTE: not trying to be personal, may not apply to all readers!!!

Anyway, back to Dr. Phil. - skip starbucks, and drink the free coffee at work ($3.00 * 20 = $60/month). And so on, with eating out (go to a cheaper place or eat n), give up smoking, switch to cheaper liquor, etc...

Of course, it is easier to evaluate a budget before you commit to a loan, but that's water under the bridge.

stickguy

Oh, my answer to the poster is, you either make the payments, or come up with a bunch of $$ to pay off the negative equity and start over, much cheaper.

blueiedgod

Last May I purchased a new 04 Mazda MPV minivan. At the time I traded in an 02 626. My current payments destroy me ($570 a month) and I owe 25,400 on the vehicle. I just can't handle the payment, but still need a vehicle. I can afford a $300-$400 a month payment and Im willing to get an older car. Any advice on what could be done about this. Oh yeah, the van now has 7500 miles on it, but is in excellent shape. Advice???

I agree that your best way out if this is to get a second job, maybe working at the supermarket or something on weekends. You get the 30% discount on groceries while making that $600 a month to pay off the van. You kill two birds with one stone. Your primary income goes toward you house, kids, wife, and secondary goes toward the mistake.

You bailed on a 2 year old 626, probably rolled the negative into the MPV, if you keep on doing that you will end up with a 10 year old Explorer and $40K loan on it. Hoepfully, you will not get to that point, but there are people who have. Learn from their mistakes, and don't repeat what you have done already.

jaserb

I'm taking a welding class just for fun, taught by the metal shop teacher at the high school. He was telling us about his schedule - tuesdays and wednesdays after school he teaches our extension class, then the other days he leaves right at 3 to go moonlight at a local welding shop until 10 PM. Then he said, "How many of you have kids?" A bunch of people raised their hands. "Let me give you some advice - don't ever co-sign for them on a car."

-Jason

danf1

You had me right up until the skip liquor part. The rest of it is great advice, but you will need a drink to put up with the P.O.S. that you'll have to settle for to drop a payment that much.

stickguy

OK, but stick with the cheap stuff, or start crashing weddings.

cadillacmike

Um...

Mazda warranty is FOUR years / 50,000 miles. My wife hit the 50,000 miles after less than 3 & 1/2 years :surprise:

Man are we glad to have traded in our 1997 Contour for the 2001 Miata back in 2001. :P

And oh yes, these two little gems need to be at the top on of the thread- I couldn't agree more...

You can handle a 300-400 payment, but not $570? Cancel your cable, eat out a bit less, and there you go.

All you can really do is sit back, assess your mistake(s), vow not to repeat it again, tighten your financial belt by eliminating unnecessary expenses, and just make the payments.

mirth

...even if you did that, many people would just ignore it and wander around through other internet forums until someone told them something they wanted to hear ("yeah, a friend's cousin's uncle's friend was able to dump his Navigator for a Focus and saved a bundle!"). No one wants to hear "Suck it up and live with it".

lemko

...I would realize an immediate $82 savings. Comcast Cablevision of Philadelphia is ridiculous. When first I got the identical cable service I have today back in 1993, it was only $33 a month!

If you have any credit card debt, pay that off as fast as possible. People throw away an astronomical amount of money in interest and fees to the credit card companies every month. Start with those cards that charge the highest rate and work your way down to those with the lowest.

Don't trade for another vehicle - remember, you can't borrow your way out of debt. I find those home equity loan commercials ridiculous.

sweet_guy

I have a dilemma. I am moving out of the country soon. I need to sell my '99 Grand Am SE before I move. I still owe some money on it and don't want to have to worry about a car payment after I move - since I'll be unemployed temporarily. So taking the car with me is NOT an option!

I owe somewhere around $6,000 CAD on the car currently. The car may or may not be worth that much in a private sale - it has 100,000 miles on it and is in pretty good condition still, but who knows? - the buyer will ultimately have to be the one who decides what they think it's worth.

Obviously if I don't get the full $6,000 from somebody, the bank won't let me transfer the title. Now I have about $2,000 CAD in an investment that I could pull out to help break even, if I need to. But that's all I have.

But let's say the worst case scenario happened and somebody wouldn't even bite for the car for $4,000 (private sale). What are my options? Can I just let the bank take back the car + offer them the $2,000 (as a nice gesture to help them break even on the car) and tell them that they have to accept that? Or what would you do?

I am leaving the country permanently and so I think I have a bit of leverage here. I would think that it would be in the bank's best interest to work with me while I'm still here in the country. Afterall, I'm trying to be very responsible and take care of this debt, but this situation is kinda complicated.

Any suggestions are greatly appreciated. Thanks.

mirth

I'm trying to be very responsible and take care of this debt, but this situation is kinda complicated.

What's complicated about it? You made a promise to pay the bank X amount of dollars but you don't want to pay it now and think you can get away with it because you're leaving the country. I don't think you'll find anyone here advocating this "strategy".

Your car is probably worth about $3,000 (CAD) max - it's a very high mileage economy car and the market is flooded with them. With the $2000 you already have, you're still short $1000. Work a plan with the bank to pay off the remaining $1000 so that they'll sign the title over to you. Or borrow from a relative.

Even if you try and sell the car, you can't because the bank still owns it.

I guess you could default on the loan and let the bank repossess the car. I don't know what country you're going to but maybe your bad credit history wouldn't follow you - until you came back to North America.

mac24

Thank you mirth, my view precisely. There's no other honest way to proceed than to fulfill the terms of the agreement he made, even if it's a little painful.

The bank agrees to lend the money, the borrower agrees to pay it back, it's hardly a moral maze!

dglozman

To many who have a car with high % interest payments I have a suggestion based on my personal experiance which might be debatable. 6 month ago I had about $9K loan to pay for my Honda CR-V for 6.25 %. I was planning to pay off this balance in a year. I got an offer from credit card a 0% for year for transferring balances, so I transferred my whole balance to this credit card. I divided the $9K for 12 month and I am sending that payment every month. I know it requires to open ANOTHER credit card, but if you are committed to pay off your car loan in a year and financially responsible this could be a good suggestion. At least it works for me. My money is in the bank earning interest and I don't have to pay interest at all for the car. Plus I was able to bring my insurance cost down, since it requires setting higher collision limits if your car is financed or leased. I already got the title from Honda and since my car is considered "paid in full" I'm paying less for my car insurance compare to what I paid when it was financed.

mirth

...since you're actually paying it off. Having a credit card is not a problem, being responsible is. Now, if you were a person who already had $30K in credit card debt then I might not think this was a good plan.

dglozman

If you have 30K in credit cards, it still be worth to get another card with 0 interest and transfer balances from high interest credit cards... But this conversation is not for car forums.
The post earlier about owning Eclipse and paying only interest for 1 year and still have the whole balance to pay is amazing. That should be a low to prohibit to do such things by manufacturers. I remember those radio ads from Mitsubishi "you owe nothing for the whole year - 0 payments for the year...!!!" And after a year you have a car that worth about half what it was in the beginning and you owe the full price + interest. I'm not surprised why people are upside down...

mirth

Mistubishi also took a bath on those offers because so many people defaulted on their loans. Won't be seeing that foolishness again any time soon...

04rsx04

currently i have a 04 chevy avalanche i am leasing for $640.00 a month due to being upside down before, i still owe $34,000, my question is what i can do to get lower payments? do a leaes buyout and finance the rest of the amount? or go get a cheaper car? i really need help the payments on the avalanche are killing me and the gas is outregeous, i would really like to get another car to get something that will save on gas just dont know how the lease really works as far as what i would pay..

sebring95

Your buy-out right now would generally be the the payments remaining plus the agreed buy-out at the end of the lease (residual). Probably far more than what your avalanche is worth. You can call GM (guessing that's who you're leasing it from) and they'll tell you your buy-out. Then lookup the value and figure out how close you can get to that figure by trading or selling. The difference is how much cash you'll need or will have to rollover into another loan. If it's a large amount, it might be hard to roll over into a cheaper/economy type vehicle. Consider exactly how much more gas you're going to spend on the avalanche before buying a cheaper vehicle. Sometimes you can't make back the savings in gas alone and who knows where your next payment will be if you have to rollover a huge amount.

Another option is to find someone to assume your lease, but that may be difficult because of your payment, terms, and the fact these trucks just aren't real popular right now. You might have to pony up a chunk of cash to get someone to assume the lease, plus GM charges about $600 to transfer a lease. www.leasetrader.com and www.swapalease.com are spots you can check. Good luck!

steine13

My guess is that this is an ailment only cash can cure. Gas is still relatively inexpensive compared to the other costs of operating a vehicle.
Go forth and (lease) no more...
:-(
-Mathias

mirth

04rsx04 - you're in this situation because you leased a new car while you were still upside-down on your old car. If you do it again now, even to get a "cheaper" car, you'll just make it worse. I see three solutions, two of which you probably won't like, and one of which you may not qualify for:

1. Drive the Avalanche until the end of the lease and never let yourself get upside down again.
2. Pay off the $34,000 with cash (you owe it, there's no getting out of it) and never let yourself get upside down again.
3. Pay off the $34,000 using a home equity loan (assuming you have a home with some equity) and never let yourself get upside down again.

There's no magic bullet. You owe $34,000 and there's no way to reduce that except paying it off. Considering the amount, $640/month looks cheap to me. Sorry.

directorb

Ok, 2 years ago I purschased a 2003 Kia Spectra, but because my credit was low, I got into basically a 6 year loan with a 17.9 intrest rate. Well now I am realizing that this was a very bad deal. I have paid 10 grand toward this loan and 6500 of it has gone toward intrest and right now my car is worth one-third of what I have left to pay on it. I have been trying all year to get out of this and into a better car and a better deal, but no one will even consider me because of basically what kind of car I have(Kia) and how much upside down I will be as a result of it.
I am one step to basically destroying my credit and taking my car back to the dealer and telling them what they can do with it, but I am concerned that Kia will try to sue me for what I will owe on the remaining balance and I would rather just get a used car and at least not worry about paying over 400 a month on a car that is worth about 150 a month and also worring about repairs.
So if there is anyone out there that can helkp me with my suituation. I want a better car but I feel like I am trapped in this car and I am worried that I will never be able to get the car I want.

akangl

Your BEST bet is to stick it out, you have 4 years left on the loan and its not worth ruining your credit over. Double the payments on the Kia and pay it off sooner, or at the very least pay a little extra each month. Its tough to get out of a neg equity situation without some big $$$ down. Maybe check into a credit union and see if they will refinance the Kia at a lower rate. Whatever you do, you DO NOT want a repo on your credit. They WILL sue you for the balance after they sell your car at auction for pennies on the dollar. Good luck and I know how you feel.

kyfdx

Don't confuse the money you owe with the car you own... Once you borrow the money, they don't really have anything to do with each other..

You aren't paying $400/month for the car.... You are paying $400/mo. to pay back the money you borrowed.. No matter what you do with the car, you will still owe that money... and, your dealer has nothing to do with it... You owe the money to a bank.

The situation is this: You want a better car, but you don't have the money for it.

Answer: You keep the car you have, and keep paying that loan.. Anything else you do will just make things worse..

I'd suggest you try to refinance the loan, but if you owe three times what the car is worth, it is doubtful another bank will do that..

I know this is bad news, and probably not what you want to hear... but, trading up to a more expensive car (if that were possible), will not help your financial situation.

regards,
kyfdx

isellhondas

Yes, stick it out. You really have no other choice. Make sure you continue to maintain that Kia and you should be OK.

bobst

Directorb, you are getting lots of good advice. Hope you are listening.

"I want a better car"

Since we drove a 1972 Datsun for 13 years, don't expect me to feel sorry for you driving a nice 2-year old Kia.

sebring95

If your credit is better today than it was when you bought the car, you might look for a credit card that has a low interest. You might even get a low interest intro rate on balance transfers. There might be a fee, but you could still come out ahead. You'll have to be careful because of minimum monthly payments and such, but a 10%-12% credit card will save you significant money. You'll still need to stick-it-out with the Kia (even though the car will technically be paid off) but you should pay it off much sooner.

Based on your numbers, I'm guessing you owe about $13,000-$14,000 on the Kia. If you could get a credit-card with 12% interest, and you keep paying $400/month, you'll have it paid off in 40 months (instead of 48) and you'll save over $2,000 in interest. It's no miracle cure, but it's certainly bettter!

scottinky

I am currently driving an 03 Nissan Pathfinder. I traded an 02 Mustang gT on it about 1.5 years ago. The GT wasn't practical for my video business. anyways, I was 6K flipped on the car.
my current pathfinder payment is $589 per month. I owe 23K on it. due to the higher cost of fuel
have been considering trading it for an 05 Mazda3 wagon. My local dealer is offering them at
S plan pricing for the end of the month. I have calculated, based on a fair trade in value, that
my payments will actually go down by roughly 90-110 per month, on payment alone. this doesn't count the savings on fuel. I have 3 years left on the truck. Is it smart to start over again, and
roll over that 6K one more time? Or do I just stick it out? Yes, the pathy payments are high, but the only item the truck does not have is a DVD or navigation system. Oh, I do have a 3mo. old getting ready to start daycare to the tune of $650 per month.

kyfdx

Just 3.5 years left on the Pathfinder vs. 5 or more years to get the Mazda, right?

If you just look at the payment, and keep trading, you can really cost yourself some money... Stick with the Pathy... they have pretty good resale... Two more years of payments, and you might be at the break even point...

Short-term pain for Long-term gain.... Sort of a forced savings plan...

regards,
kyfdx
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qbrozen

and based on your current payment, you'd be looking at $500 a month for an economy car??? I certainly wouldn't want to be paying that, personally.

scottinky

thanks. I figure in three years, I will have a reliable, japanese built vehicle with low miles that willbe paid for, and last for as long as I want it to.