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

blueiedgod · July 2004

....... Hmmm, I will have to look this one up, isn't 18 months the minimum for that charge.? .. but he'll get a lot of "experience" when he has to bunk with Bubba for 15/18 months .l.o.l....

Terry.

Education is free in jail. The government pays for it, well we do with taxes, as well as medical insurance. Since, he is going to school, it is not a bad proposition for him. He gets out of the Acura, and gets free education!!!! Aside for bunking with Bubba, this is the best deal for someone who did not plan ahead. No school loans, no car loans, free room and board, ever watch Oz? lol

berlingirl · July 2004

is what I am paying on. I have 38 payments left at 490 per month...UGH. I was foolish and traded my 97 Volvo 850 because I'd put 3k in repairs (new turbo at 60k) into it back almost two years ago. I ended up rolling 4k into this new vehicle. I don't think I am upside down too much as I did get a great deal on this car, dealer demo had 9k on it when I got it. This is my story...

I want to reduce my monthly payment by at least 250 a month. Truthfully I want to pay off cc's. I am considering leasing, but don't want to enter a lease upside down. Am I stupid to even consider leasing?? This is not a situation where I'm broke. I can make the payments, but there is not much left over at the end of the month. Husband wants me to keep the car as it rated high on the safety scale and we have kids. Brother says to pay the big bucks now and have a car for the next 8 years...I put maybe 10 to 12k a year on my car...so it's at almost 31k now and it's a 2001. I went into the dealer where I got it a few months ago and tried trade it in on something less expensive. My sales person couldn't have been less interested in getting me any type of deal. I would've had to come up with 2k to get out of my car and into a POS. I tried to sell it on my own, had NO calls at all. Only advertised it for a week two months ago.

Am I being totally unrealistic? Should I stay where I am...pay it off and be broke for the next 3 years or trade it in on a lease or buy a cheaper car???? Thanks...

blh7068 · July 2004

Based on what you said, you owe 18,620 over 3 yrs/2 mos on the Volvo. Ok- You would have to come up with 2k get out of the volvo and into a POS?

Was that putting money down on the POS or was it offsetting negative equity on the Volvo? How much would you have been financing on the new deal for how long? Need more details, but my gut says keep the Volvo.

Also, it wouldnt hurt to check with Terry(rroyce10) over in the "real world trade in values" board. He's real good- Be specific about the Volvo and tell him what part of the country you are in.(or you will be sent to your room!)

Good luck.

berlingirl · July 2004

Correct, that is the amount currently owed on this volvo. They offered to give me 16k for the car trade-in and refund what I owe on the extended 100k warranty which was about 1400. Of course that was two months ago now. The difference was 2k. The vechicles I was offered at the time were 2001 no frills 40+k mile civic, 2001 Nissan Sentra 34K again basic model and 2001 Ford Mustang with 31k(this had been in a wreck with 5 digit damage I found out as I contacted the former owner). All those would've cost approx 12-13k over a 40 month loan. My monthly payments would've been in the 280 to 315 per month range. I would save 165 to 200 a month depending on what I'd traded for at that time. I would not have had to put a cent down. Negative was rolled into the new loan. Note, all these vechicles were USED and had the USED car smell...I was totally discouraged again as my sales person thought I was nuts for wanting to give up the Volvo. He was the one I'd bought it from in the first place and I thought his dealership would give the most generous trade-in. They carry Volvo, Hondas and Nissans.

There is not a doubt in my mind that if I had gone to the dealership with NO trade-in I could've gotten a much better deal, however I cannot afford two car loans which is what I'd have as I didn't have any luck selling the volvo myself. Friends have said (and I don't know if this is true) that people who buy second hand cars in the high teens/low 20's do it only from dealers. I only tried advertising for a week, and because I wasn't getting support from my husband gave up. Poor excuse, but the truth.

Thanks, I will take your advice and visit Terry over in the real world...see what he says!

exb0 · July 2004

If you can find 2K to cover the negative equity, you can lease a new 2004 Honda Odyssey EX for 3 years for about $300 per month with about $1K down. But then you would not have any equity at the end of 3 years. If you keep and pay the Volvo off, it will still be worth something at the end of your loan. On the other hand, (490  300) * 36 = 6840 in savings with a lower monthly payment. Crunch your numbers and see what makes most financial sense to you, dont forget to include savings on CC interest in your calculations. To me it seems like you will be a little better of if you keep the Volvo, especially if you dont manage your money well and waste your monthly savings instead of paying your CC off.

perna · July 2004

$20k upside down on a 2000 Altima, did you call the police? haha

What stuns me about rolling negative equity is how much the bank allows. I was under the impression that they won't finance more than 3-5% over MSRP (to allow for TTL I'm guessing). On something like an Altima you're already going to be paying close to MSRP.

I admit, I rolled a couple Gs neg equity into my Maxima, but considering the interest rate through NMAC was a whopping 0.9% I didn't exactly lose my marbles. No, it wasn't he most financially prudent thing to do, but when you see a deal on the car you've always wanted, all reason goes out the window. Even with that neg equity plus 60 month loan, I'm still only about $3k upside down in the Max. The car holds its value a lot better than I'd thought, it probably helps I'm not miling it up (12.8k in 17 months).

berlingirl, keep the Volvo. It's going to end up costing you MORE money in the end because you'll want to trade out of your used POS ASAP, thereby losing all the equity you built up in the Volvo AND you'll take a hit on your used junkmobile. If you must absolutely lower your payment, refinance the thing, pay off cc debt with the savings, and then overpay your Volvo payments. This is almost exactly what we did with my wife's Escape, although we never *quite* made it there....lol. Had a newborn and needed out of the Escape, not enough room. Ended up cashing out the positive equity out of the Escape, paid off our credit card debt, and leased an Explorer.

bobst · July 2004

I agree. She should keep the Volvo and get a longer term loan from her friendly bank. Then pay off the credit cards. Then never carry a credit card balance ever again.

ghulet · July 2004

...that Volvo is already going on four years old and she has 38 payments left. I can't imagine extending the loan is going to do anything other than reduce the payment by MAYBE $100 a month, with the end result being having an eight year-old Volvo with a payment book. No, thanks.

Berlingirl, you're not really upside down, but you're going to find it difficult, if not impossible, to reduce your payment by $250 (to $240 or less) unless you just get a less expensive car, but I guess you know that already. We all want nice cars with cheap payments, it's just not that simple. You now have a nice, safe Volvo, and really $490 isn't so bad a payment in this day and age. That said, you could probably get a nice new Civic or Corolla with a 60 month note for $250-300 a month. Just make sure, whatever you do, that if you DO actually reduce your payment that you in fact put that money toward your CCs. I've seen lots of people roll negative equity into a new car with 'less' payment, only to continue their old spending and payment habits, thereby landing themselves in worse shape than where they started. Good luck, whatever you do!

lemko · July 2004

...then use the money once spent on the CCs to pay off the Volvo as quickly as possible. That $490 a month Volvo doesn't seem so bad compared to what you'd otherwise be driving. I see buying a car you don't like to save money as still wasting money.

jmlewter · September 2004

1. CURRENTLY OWN WITH NEGATIVE EQUITY, ABOUT 10K, CAN THIS BE ROLLED INTO A LEASE?

2. WHAT IS TYPICALLY MINIMUM FICO REQ FOR LEASING, IM 650,702 AND 712.

landru2 · September 2004

that was $20,000 upside down on a 2000 Windstar! She was advised to keep driving it until 2025 at which time she may be right-side up.

stickguy · September 2004

good thing that's Canadian. I couldn't even imagine how someone could get 20K US upside down in an '00 Windstar, but I suppose a good F&I guy ("credit experts! We get anyone bought! BK/ No Problem") might pull it off if a lender is dumb enough to go along.

driftracer · September 2004

if you paid more than cheap for it, rolled in negative equity, plus those things drop like a rock, I could see it under fairly normal circumstances.

mirth · September 2004

Even in Canadian dollars that's pretty bad.

landru2 · September 2004

that she owed an outrageous amount (although it was high). It was that after racking up over 200,000 km's and reducing virtually every body panel into dented sculpture, her van was close to worthless. This has to be one of the worst situations - the van will be dead in the junkyard before she is even close to paying it off.

akangl · September 2004

How people can dent the heck out of thier vehicle and just leave it that way. I have a fit if a bird poops on my Titan.

Then again I did kick a dent in the door of the Focus during a tizzy fit, good thing the car is silver and its not noticeable. Other than that I've always been good about NOT denting my vehicles, I hate driving a nice vehicle with dents in it.

benjaminh · September 2004

There's a VW dealership near where I live that ran an ad a few weeks ago that read: "UPSIDE DOWN IN YOUR LOAN? GET OUT NOW!" This was below a small picture of an upside down car. The fine print said that they would roll your negative equity into a new loan on a new VW. If you followed that advice, you'd not just be upside down, but spinning around.

I guess I'm lucky. I still owe $9k on my 2002 Accord, but it's probably worth 2k more than that.

CarMan@Edmunds · September 2004

Hi jmlewter. You should be able to roll some of the negative equity that you have on your current vehicle into a new loan or lease, however you will be much better off financially if you hang onto your current vehicle until you are less upside down on it. Adding the negative equity from this deal to your next one will only cause you to be even more upside down on your next car or truck. Furthermore, most banks will only finance up to a vehicle's full MSRP, or a little over it like 105%. This probably will not cover the $10,000 that you are upside down on your current vehicle. You would have to pay the amount that could not be rolled into your next loan or lease out of your own pocket when you traded in your current vehicle.

While the exact credit score that is required to qualify for a bank's lowest lease money factor varies from bank to bank, your scores definitely look high enough to qualify for most captive finance companies lowest rates.

Car_man
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stickguy · September 2004

Just a random comment on getting out from upside down. If you have the money to put down to stay right side up, fine, but if you take a larger loan (say with .9% financing), what's the difference if the money is in the car, or in the bank? Put another way, if I'm 3K upside down, why should I take that much out of the bank to pay down the loan to even?

The interest issue (which usually gets brought up about now) is certainly valid in some cases, but actually applies to any loan, not just negative equity, so it is kind of a wash. In effect, you are investing the money in a car loan (on your car) instead of having it in the bank, stocks, pork belly futures, etc.

Now, if you are flat broke and upside down, you have bigger problems

driftracer · September 2004

if they weren't flat broke and living paycheck to paycheck, it's very likely they wouldn't be upside down!

They would have had equity in their trade, they would have put some cash down, or paid cash, or would've been able to pay against the principle in addition to their monthly payment.

Most of the folks I've seen that are buried in their cars can't scrape up $300, much less $3000, to dig themselves out of the weeds.

Been there, done that, never going back....

stickguy · September 2004

there must still plenty of people that go with the cheap finance rates that don't put much down, not because they can't, but because they don't want to.

Maybe I'm abnormal, but if I was that poor, I'd still be driving my old 626 or something cheap, and surely not looking at expensive new cars.

ksccts · September 2004

Of course you are abnormal. It's the american way to buy more car than you can afford. Bankruptcies are at an all time high!

perna · September 2004

It's not just that, but me for example I usually finance cars at 36 months. That way I'm upside down, but not for long.

However with my Maxima, I was so certain I'd like the car and it was a "generation closeout" sort of thing (the 04s were a week away), I went for 0.9% for 60 months. I'd rather have the extra $200/month in my pocket for other uses, that's three years of my life that are more enjoyable. Of course I have a baby now so that $200 and a whole lot more are blown into the wind, but I'm sure someday he'll pay it back by mowing the lawn.

kyfdx · September 2004

"I'm sure someday he'll pay it back by mowing the lawn."

My boy is ten.. and he wants to mow.. but, I'm too scared to let him... And, I hate mowing grass.. Fortunately, I have about 1/6 acre.

ghulet · September 2004

I've been seeing, over and over on most channels, an ad for 0% financing for 72 months on new '04 Pontiacs. I can only imagine those few people who will actually qualify for the 0% being upside-down for a LONG time, unless they pay a little (or a lot) extra every month. I don't know if one can combine other offers (i.e. discounts) along with the zero percent. Think about paying MSRP (~$20-24k) on the lame-duck Grand Am, for example, on a six year note.

KCRam · September 2004

A couple of posts that may not even qualify for off-topic were sprayed with electronic Raid...

Automotive here, please

kcram
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lemko · September 2004

...a lame duck like the Grand Am. Would go for a G6 or Bonneville. The low monthly payment as a result of the 72 month thing sounds good if you get in trouble, (lose job, become sick, die) but I would make a monthly payment equivalent to a 36 month loan when things are good.

stickguy · September 2004

good point lemko. That way you have a cushion if a particular month is tight financially. You can do this with a normal loan too, but you will end up paying much more in interest.

perna · September 2004

The other problem, other than being upside down, is that you do NOT NOT NOT want to pick an econobox to finance that long for. My wife's '98 Cavalier, despite being well cared for, garaged, and *mechanically* sound, was a rolling junkbox by about 3 years and 30k miles. Every interior piece was loose or had already come apart, the seats had lost their support, and anything stitched or glued was in just nasty condition.

For 72 months, you want something DURABLE with some semblance of resale like a Suburban, Park Avenue, or Bonneville. Stay way far away from the Grand Ams, Cavaliers, Aveos, etc.. you're going to want to get rid of those things way before 72 months but you'll be stuck in an inconceivably huge hole owing far more than the car is worth.

Personally, I'm just bummed Cadillac is exempt. Those CTSs sure are nice.

driftracer · September 2004

GM included, won't allow a loan for less than $15k to go 72 months. I guess they figure if you can't afford to pay out $16k over 6 years, you've got some qualifying problems...

kyfdx · September 2004

Is this even available on the G6? I thought it was only for '04 models?

I think the problem was your choice of econobox, not the fact that the Cavalier is small or economical.. It is just a crappy car.

There are plenty of "econoboxes" out there that will be in great shape for six years.. though, I doubt GM makes any of them.

regards,
kyfdx

audia8q · September 2004

every mfg captive finance source we have right now is buying very deep on new cars...This week I have seen some outlandish approvals. one guy got approved at 0% for 60 months who 4 months ago couldnt get approved at any rate on any car.

driftracer · September 2004

That F-350 is MINE!

louie_j · October 2004

I have a 2002 Nissan Sentra GXE (36,000 miles) that I bought new in March of 2002. About half way through the loan now. I still owe about $8000 on the loan. The trade-in is suppose to be somewhere around $6500.

I'm looking to trade it in for two reasons. First, this incarnation of the Sentra is not as "robust" as the last one I had and don't think it will last as long. Would like to trade it before things start "happening" to it. Second, I recently got married and I need a car tha my wife can drive. The Sentra is a 5-speed and the new car would be an automatic.

The payment isn't a problem ($311/month). I'm just looking to get a different car. Same payment would be fine. As far as negative equity goes, the difference ($1500 in this case) is just added to the price of the new car, right? Meaning, if I went and bought a car for like $12,500, the total purchase price would be $14,000, right?

I know I need to keep the "new" car for a long time to make this work. I plan on getting a '02 or newer Civic, so I know we'll have it for a while.

Advice?

stickguy · October 2004

teach your wife to drive a stick. Problem solved. Either she will be able to drive the Sentra, or you will end up divorced ;-)

Anyway, the current Sentras are still supposed to be pretty reliable. I wouldn't worry about it falling apart at 36K.

As to your real question, if you trade it in, any negative equity has to be made up someplace. You either pony up the cash, or sometimes it can be buried into the payment on the new car. The problem with that (if you can pull it off) is that the negative equity snowballs, since whatever you buy will depreciate once you drive it off the lot.

2 suggestions: post the details on "real world trade in values" thread, and Terry can give you an accurate idea of what it is worth (remember, the books don't buy cars). You also might want to consider selling it yourself. It could end up being a better move financially.

kyfdx · October 2004

stickguy makes several good points.. (though teaching your new wife to drive a stick...yowza!)

1) Sell this car yourself... You might be able to get $8K out of it.. then you are free and clear to buy whatever makes sense..

2) Even if your car doesn't feel as solid as you would like, it is not likely to be much of a problem.

3) Don't trade unless you have the cash to make up the negative equity.. That just starts you down the long road to automobile servitude. Just because someone will lend you more money than a car is worth, doesn't mean you should do it.

regards,
kyfdx

stickguy · October 2004

don't hit refresh since it causes double posts to appear.

louie_j · October 2004

Sorry about the double post. lol

Unfortunately, the wife isn't very hand-eye coordinated. I doubt she could learn to drive a stick. She has enough trouble learning to drive as it is. I'm sure I'd be replacing a burned-up clutch shortly after teaching her to drive.

How do you sell a car that you own money on?? With the price of a used '02 Sentra being almost what I owe on mine, how do I get someone to buy it? One of my least favorite things is privately selling a car. Sometimes I think I rather just eat the $1500 and be done with it.

I've done some rough calculations and if I deduct my negative equity from my trade in value (meaning if trade in is really $6500, use $5000 as the actually amount of trade) a $13,000 car comes out to almost what I'm paying now a month (assuming I did my math right). I can live with that.

stickguy · October 2004

if the trade in value is $6,500, the actual value to your deal is -1,500. That is, it will cost you that much to have them take it.

Selling with a loan has been discussed a few times around here. I haven't done it myself, but it can be done. You either need to work out something with the buyer and lender to have them essentially pay it off for you and wait for the title, or pay it off yourself (through some kind of s/t borrowing or dipping into savings). If you are lucky, a bank holds the note, and you can do the transaction and get the title locally. Otherwise, there will need to be some kind of faith or patience on one side of the deal.

To me, getting the thing paid off and having the title in hand is just mucl less of a PITA. Selling a car privately where you can sign the title on the spot is a nice selling point.

lemko · October 2004

I would go for at least a Buick LeSabre. I wouldn't look at any of those econoboxes under any terms or conditions. If all I could afford new was some rattletrap Cavalier, I'd look at getting a more substantial used car.

As for the 2002 Sentra, I wouldn't worry about the car falling apart @ 3 years and 36K miles. Fifteen hundred in the hole isn't bad compared to what people who buy Kias and Hyundias end up at the end of the same period and miles. I'd just pay it off to the end of the term and be done with it.

janz · October 2004

I recently read an article in USA Today that said this was a really bad financial move. For the following reasons:

1) In 2 mos. an '04 model will already be one year old.
2) Low payments over 6 years will build your equity VERY slowly.
3) Most domestics models depreciate fairly quickly.
4) If you do happen keep the car long enough to be paid off, it will be 7 years old.

Again a personal decision, but the point was that this is another way to end upside down. It might be interesting to do the math if on making larger than minimum payments, but I doubt most people would consider that.

Just my .02

driftracer · October 2004

the people who can qualify for it don't need it - at all...

It's an advertising gimmick - it gets people in who can't qualify for 0% at 72 months, gets them interested in a vehicle, a test drive, an "I'm sorry, you don't qualify" speech, and a "here's the rate you qualify for" briefing - and they buy the car - GMAC didn't lose a DIME on that one!

The people who do take it while transferring their money from soemwhere else would have paid cash or done home equity anyway - easy way to drum up some business. Also, the 0% is in leiu of those huge rebates....

sdjb34 · December 2004

I traded in my 1999 Chrylser Town and Country for a 2004 Envoy XL but must admit I did not do as much research as I should have. The payment is about $100 more than my Mini van was and increase in the insurance is astronomical. Combine that with the poor gas mileage and I'm strapped. I'm at a loss and don't know if there's a way for me to get out of this vehicle. I just made my first payment in Sep 04. Anyone ever found themselves in this situation and have any suggestions on what I can do? Thanks.

corvette · December 2004

It comes down to how much you owe on the Envoy and how much the Envoy is worth. If you owe $5000 more than it's worth, you will have to come up with that much money to sell the car outright. A car dealer might roll some of that difference into a new car, but financing companies are very strict about what percentage of a new car's retail value they will finance. If you're looking to reduce recurring expenses, your best bet is to pay down what you owe on the Envoy until you owe less than it's worth, and trade it in on a more economical used car, whose operating costs you have investigated before purchase.

If the poor gas mileage compared to a minivan is making that much of a difference, I would guess you are putting a lot of miles on the car. Besides the gas expenses, this will further reduce the resale value.

ghulet · December 2004

...doesn't anyone do RESEARCH before they buy a vehicle (like checking EPA figures and calling their insurance company for rates)? Sorry, not trying to be mean or 'rub it in', but still!

cadillacmike · January 2005

I just can't believe the horror stories that I'm reading here. That many thousands of dollars upside down. And its usually from a financial / car choice previous mistake that from what I read they turn around and make again!

I was close once, I had traded in a Fiero with non functioning AC and a broken drivers side mirror on a TEMPO of all things. I quickly decided that the car was not going to make it through the 3 year loan. I went back to the ford dealer and he gave me a song & dance about negative equity, etc, so I went to a saturn dealer, same song, different dance (or was it same dance, different song). Then I got a Buick ad in the mail with a $500.00 rebate good thru the end of the year (it was Nov 1991). I bought a LeSabre, GREAT car, NO negative equity, net financed was about 20,000 4 yrs @ 3.9 APR. I kept the car for 8 yrs and 175,000 miles (it still ran and looked great)and got nearly 3,000 in trade allowance on my next car (1995 Fleetwood), which I now own clear. I only traded the LeSabre because I wanted a better tow car (I don't do trucks).

Other than that I never even fathomed having any "negative equity" on any car purchase. We've kept our cars for at least 3 years (easy for me, not so easy for my wife) and this probably helped. We drive a lot, that probably doesn't help, not having dug a hole in the first place was probably the best thing.

mac24 · January 2005

The problem is usually caused by being unable to differentiate between what you want, and what you need!

driftracer · January 2005

that people aren't perfect, astute business people, like many claim to be.

On an internet forum, I could claim to be Superman, or to have paid $6k under invoice for a 2005 Acura RL, but neither would be true.

I'll make a suggestion - instead of rubbing people's nose in their mistakes and bragging about how much better you've handled things, reserve judgement for things in your own circle.

driftracer · January 2005

it was designed like that. People jump into Edmunds all the time, touting their prowess as car buyer Gods, telling what I believe are partially concocted war stories about how they really pulled one over.

This makes the average Joe who comes here for information and advice feel like an idiot, and I'm sure that's not Edmund's concept of service to their readers.

One poster is publishing these "check me out, I did this and I did that" posts, while maintaining that a domestic vehicle with a formerly great, but currently flawed history, and depreciation/value that drops like an anvil on Jupiter is the only vehicle on the planet worthy of ownership.

Can we ease up on the bragadocious flair?

mac24 · January 2005

I don't think your post was aimed at me, but I take the point anyway.

However, I do think that a lot of this hole digging is done because of the feeling that, for whatever reason, I deserve a brand new Speedmobile (or whatever), rather than thinking that I need to keep this Junkmobile for another three years to get myself back to a level playing field.

Criticising someone for that attitude is very different than doing so because they are in difficulties because of circumstances beyond their financial control.

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

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