Buy or lease with negative equity?

askibum02

My wife had her second rear end collision in as many years yesterday. I want to buy her a car that has collision avoidance, because I don’t know how much more my insurance will bear. She has a ‘16 Dodge Charger R/T currently and I am looking at getting her a Passat R-Line, Accord Sport, Camary XSE, or a Subaru Outback. The biggest issue is that I have about $7000 negative equity in the car. I talk to a sales person I have bought two cars from previously and he suggested leasing as a way to erase the negative equity sooner than keeping a car until it is completely payed off in 5-6 years. Thoughts?

PF_Flyer

Check this Edmunds article:

Upside Down and Underwater on a Car Loan

The bottom line though is you can't make that $7,000 magically disappear. It's just how you sort of make it easier on yourself as you pay it down. You probably need to look at the lease terms on some of those specific vehicles and see how things would play out over time.

Michaell

PF_Flyer said:

Check this Edmunds article:

Upside Down and Underwater on a Car Loan

The bottom line though is you can't make that $7,000 magically disappear. It's just how you sort of make it easier on yourself as you pay it down. You probably need to look at the lease terms on some of those specific vehicles and see how things would play out over time.

The problem with a lease is that you're trying to bury $7000 in only 36 payments; if you go with a traditional loan, you can stretch that out to 60 or more months.

I know it's hard to fathom, but there will come a time where that $7K will be a lot less, if not gone altogether.

Perhaps another accident will get the car totaled; at that point, the GAP will kick in and absolve you of the negative equity. (at this point, I'd insert a tongue-in-cheek emoji, but there isn't one)

mb_enthusiast

Should you negotiate negative equity on a trade-in after negotiating the lease, or should you raise the issue up front?

kyfdx

mb_enthusiast said:

Should you negotiate negative equity on a trade-in after negotiating the lease, or should you raise the issue up front?

There generally isn't much negotiation on trade-ins.. The UCM will tell the sales manager a number, and that's it. If they low-balled you, they might be more flexible on the new one, but the number is usually the number. So, if you get what you think is a poor offer, then tell your salesperson that you aren't going to bother with the rest of the deal.

mb_enthusiast

kyfdx said:

mb_enthusiast said:

Should you negotiate negative equity on a trade-in after negotiating the lease, or should you raise the issue up front?

There generally isn't much negotiation on trade-ins.. The UCM will tell the sales manager a number, and that's it. If they low-balled you, they might be more flexible on the new one, but the number is usually the number. So, if you get what you think is a poor offer, then tell your salesperson that you aren't going to bother with the rest of the deal.

Ok. I've gotten written offers in a close range, $5k to 7k. I've been telling them about the negative equity trade from the outset.