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

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  • driftracerdriftracer Posts: 2,692
    and your post will be deleted - I suggest removing those import words, lest you be chastised by the hosts. I've had posts removed for using the same words.

     

    My youngest son has a 1990 Nissan 240SX that has repeatedly embarrassed Mustangs and Camaros, and is going into the shop tomorrow to get its new engine and transmission - the engine is a non-turbo dual cam, bored .030 over, that has dyno'd at 288 hp at the crank....that'll translate to 220-230 at the wheels, in a 2300 lb car....do the math.

     

    My oldest has an Eagle Talon AWD with over 300 hp at the wheels - and is AWD, like I said - can't do that with a Mustang, although if they made an AWD Mustang, I'd buy it.

     

    I just bought a supercharged Saturn Ion Redline for my daily driver and weekend playtoy. Should be fun.
  • Hi everyone. I have recently deleted a number of off-topic posts. Please remember that this discussion is about consumers being upside down on their vehicles. Thanks.

     

    Car_man

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  • When I got my first "real" job offer out of college, I went out and bought my first brand-new car. (2004 Ford Explorer 4x4, purchased December 2003).

     

    I financed for 72 months because I didn't want a high payment, and more importantly because of the zero-percent interest (no extra cost for stretching the loan). I saw this offer as having the benefits of a lease (new car for affordable payment) without the drawbacks (no finance charges or mileage limits and I can sell whenever I want). However, reviewing this forum I see that many disapprove of this option because of depreciation.

     

    I didn't figure this would be a problem because my trade-in was paid for and I got a great deal. I financed $19500. Now I owe $16450 with 60 months remaining. Terry over in "Real World Trade-in Values" appraised the Ford at just under $15000 trade-in, or about $17250 retail.

     

    My question is, do you guys think I will build any equity at this rate? My payments are $275 a month. I've kept it nice, am not putting excessive miles on it, and might not trade for another year or two.
  • Kirstie_HKirstie_H Posts: 11,077
    The short answer is that no, you will not have any "equity" in this vehicle til about the last year of your loan, if then. If you can re-finance to pay it off more quickly, or if there's no pre-payment penalty and you can pay extra each month, that's about the only way you'll get ahead of the depreciation on your vehicle.

     

    kirstie_h

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  • kyfdxkyfdx Posts: 122,608
    it has a 0% loan on it, just save any extra money you have, rather than paying extra on the loan.. And try not to equate money borrowed on a car loan with the car itself...

       Whether you "build" equity or not, the car will depreciate the same amount... Depreciation plus interest is what your car expense really is, despite positive or negative equity.. If you had put $5000 down on the car, it would still be worth the same amount, and the expense would be exactly the same.. even though you would have $5K more equity in it.

     

    But, if you need positive equity to buy another car, then Kirstie is correct.. It will be sometime in the last 18 months of the loan, before you are even..

     

    regards,

    kyfdx

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  • stickguystickguy Posts: 32,595
    Since you are paying no interest, I can't see any reason to want to pay it off faster. In your case, negative equity is mostly a state of mind problem.

     

    Look at it this way. You could take $5,000 from wherever it is invested (earning whatever it is earning), and pay down your loan to put you ahead. Or, keep that money in the bank, earning interest, and supplying an emergency fund. Or put it toward a house, buy stocks, or whatever. If you put it toward the loan, you are making your effective ROR on the money 0%.

     

    If you are worried about trading in when you have neg equity (like now), put the money toward the payoff then. Or keep the Explorer, and the issue is moot.

    2019 Acura TLX A-spec 4 cyl. (mine), and 2013 Acura RDX AWD (wife's)

  • cnew21cnew21 Posts: 13
    I have a bit of a dilemma. I currently have a 1998 Mitsubishi Diamante ES. I purchased this car in 2001 at a 13% interest rate. My credit used to be terrible. It's really good now and we have just purchased our first home.

     

    We would like to buy a new car. Actually a minivan. My loan payoff on this car is $8,736 while the KBB value is about $4,500. I have 31 payments left. I have been a SAHM mom for two years and I tried to re-fiance this loan before to lower the interest rate but was turned down because I am not employed.

     

    So my question is...should we try again to refi this loan and lower the interest rate? Also by getting a lower interest rate will that make the payment lower? Also will the amount I actually owe on the loan be closer to what it's worth?

     

    OR...

     

    Should we just suck up the $4K negative equity and get the new minivan? I know our payment will be higher than what we pay now.

     

    Thanks!!
  • Kirstie_HKirstie_H Posts: 11,077
    In any case, negative equity is only a problem if you have to sell the car.

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  • asafonovasafonov MinneapolisPosts: 409
    You may want to ask Terry (rroyce) on the Real-World Trade-in Values thread in this forum about the actual trade-in and retail sale value of your Diamante. These are nice (near) luxury cars; it just seems that if selling privately is an option, you may be able to get a bit more than 4,500 for it if it is in good condition and has reasonable miles. Another reason not to trade it in to a dealer is, as a 1998, it is unlikely to stay on the retail lot and will be sent to an auction, meaning that the dealer will offer below auction price for it - possibly, below 4,500.

     

    As far as the minivan, I personally decided to buy one used after I found out what how much (little) I am likely to get for my 2-year old Accord, our first and likely last new car for a while (I need a minivan, too).
  • cnew21cnew21 Posts: 13
    Thanks for the reply. I did post on the Trade-in Values thread after I posted here. I need to check for any replies.

     

    Figuring all this stuff out is so complicated and confusing...
  • lemkolemko Philadelphia, PAPosts: 15,306
    ...for a 24-month loan, a 36-month loan, a 48-month loan, a 60-month loan, and a 72 month loan?

     

    In other words, roughly how many months into each of the above scenarios would a buyer need to be to break even?
  • danf1danf1 Posts: 935
    Too many variables here to say.

    What was the LTV?

    What kind of car?

    What mileage do you drive?

    How well is the car maintained? And the list could go on.
  • audia8qaudia8q Posts: 3,138
    like danf1 mentioned, there are alot of variables....but I have found if your an avg driver (not alot of miles and keep the car in good shape) that 20% MSRP down and 36 month loan should keep you in a decent position.
  • kyfdxkyfdx Posts: 122,608
    That is a good rule of thumb..

     

    Another one?

     

    Assuming no negative equity rolled into the loan, and no more than 60 month term, almost anyone will be right side up, once they have made at least 2/3 of their payments...

     

    So, 32 payments into a 48 month loan, or 40 payments into a 60 month loan..

     

    Of course, if people could keep a car that long, they most likely would never even wonder about negative equity, anyway..

     

    regards,

    kyfdx

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    Edmunds Moderator

  • qbrozenqbrozen Posts: 25,794
    well, danf1 mentioned the type of car, and that is a HUGE factor. Its MUCH easier to be right-side-up in a Honda than in a Lincoln.

    '18 BMW 330xi; '67 Coronet R/T; '14 Town&Country Limited; '18 BMW X2. 47-car history and counting!

  • ghuletghulet Posts: 2,628
    ...well, I certainly wouldn't want to roll ~$4k negative equity into any new domestic minivan, you'll be in a 'double whammy' negative equity situation for perhaps several years in that case. Maybe you could take the chance on a Sienna or Odyssey, but naturally, you're going to pay more for the van up front (and have bigger payments). I'd probably try to look for a slightly used domestic, if the payment amount is an issue, or a new Honda/Toyota if it isn't. Any chance of just keeping the Mitsu (and fixing the problems) til you're flush?
  • janzjanz Posts: 129
    if you get hit and your car totalled. The insurance company pays per the value of the vehicle, NOT the pay off of the loan. I know because this happened to me years ago. I had no car, an outstanding loan balance, and no cash.

     

    From the posted amounts, Bender does not seem to be too off base with value and loan balance, but as I understand it Explorers depreciate fairly rapidly.

     

    The other drawback to extended loans is that you are making payments long after the vehicle is off warranty when you will likely be beginning to have repairs.

     

    I agree with kyfdx, if Bender can build his/her own separate equity (account) by being disciplined enough to put a small amount (even $50) away monthly. You just plan for $325 a month payment and sock the $50 away.
  • explorerx4explorerx4 Central CTPosts: 13,605
    in the past explorers have done well as trade ins.

    i have an '02 eb. i took the zero for 5 years. at the time the rebate was 2k, so it wasn't a tough decision. at some point the rebate went to 4500, although it isn't there now. that is what's hurting me. i've been wanting an '05 to add some more toys, but since i don't want to put down any cash, i'll have to wait, no matter what i might buy. i still enjoy my '02, so life isn't exactly miserable in the mean time.
    2017 Ford Fusion SE 2017 Ford F-150 Limited
  • blueiedgodblueiedgod Posts: 2,798
    if you get hit and your car totalled. The insurance company pays per the value of the vehicle, NOT the pay off of the loan. I know because this happened to me years ago. I had no car, an outstanding loan balance, and no cash.

     

    I hope people realize that if they are buying a fast depreciating car with no money down, they ought to buy GAP INSURANCE.
  • janzjanz Posts: 129
    but, I doubt most do.

     
  • Or get a loan with included gap insurance. Mine pays the higher of current value or (loan payoff-my current deductible). And if I get hit from behind (i.e., other person's fault) I don't even pay the deductible! No additional charge and still a better rate than the dealer F&I could provide.
  • driftracerdriftracer Posts: 2,692
    "And if I get hit from behind (i.e., other person's fault) I don't even pay the deductible!"

     

    What has that got to do with GAP insurance - if an accident isn't your fault, you wouldn't pay a deductible anyway...
  • wlbrown9wlbrown9 Posts: 867
    My stepdaughter traded in an old Saturn on a Rodeo summer of 2003. Got a good deal on the Rodeo with not much trade on the Saturn that needed work. I insisted that she get GAP coverage so she would at least be even if something happened and not way under and no wheels. It's INSURANCE just in case and IMHO it makes more sense the less you can afford the loss.
  • rroyce10rroyce10 Posts: 9,359
    ....... I'm with you, and it's Cheap insurance ..! .. depending on the amount, whats it going to cost - $150/$300..? thats 1 day at Disney World ..

     

                   But hey, it's like ABS and Side Curtains .. folks think they will never have to use them, so they don't want to pay for them ...

     

                                   Terry.
  • Hello to all!!!

     

    Okay, here is a sad one. I currently have 18 payments left on a '02 Jeep Grand Cherokee Laredo. Terms are 48mo/15k. I currently have 63k on it. My payoff is $21,250 and I have an average appraisal of on the vehicle of $13,500. I have access to GMS and am looking at anything General Motors to try to combat the negative equity. I am weighing the options of getting out now or paying $.15 per mile at the end. Should I lease again or stay put or should I try to finance???

     

    Any suggestions welcome...
  • kscctsksccts Posts: 140
    Best thing to do might be to finish out the lease and just buy the truck then. You can then resell or keep it.

     

    How on Earth did you get yourself in this predicament. 4 year lease at 15K/yr and only 30 months into it you are already at 63,000. OUCH!

     

    With a lease you have no equity, negative or positive. Thats what a lease is all about. You pay only for the portion of the car/truck you use. Your problem is the payment for excess miles at lease end. Cheapest way out may be to just buy it and sell it yourself at lease end. You are going to pay no matter what. Can't drive a car/truck 96,000 miles and have it worth anything substantial at that point!

     

    And remember, you can never borrow your way out of debt!
  • akanglakangl Posts: 3,651
    I'm one up on you, I have a 2004 Nissan Titan LE CC 4x4 that I'm 3 months into the lease. I have 4k miles on it. Its a 48 mo/48k lease and I owe right now about $16k more than its worth. NEVER again will I own a Nissan. Leasing isn't a big deal since we have 3 vehicles, but those Titans take a bath. The residual is $17k........OUCH!
  • steine13steine13 Posts: 2,706
    I suggest you keep paying on it until 4/5 weeks before the lease is up, and then find out what it's worth at that time, and weigh it against the purchase price.

     

    Buying it may be a lot worse than sucking it up and paying the $0.15 per mile. If it were MY Jeep, I wouldn't loan it to people for a lousy $150 bucks every thousand miles... I think that's pretty cheap for a $30+ SUV.

     

    Just hope it doesn't cough up a tranny or something... it IS a Grand Cherokee...

     

    -Mathias
  • I drove myself into this predicament!!! Actually I changed jobs and it required a longer round trip. I am getting a company car at the first of February. My wife is driving a 92 Nissan w/ 156k we own it, but who knows how long it will run. Is it really worth (a) driving it to the end

                       (b) letting sit as I pay $550.00 for next 18 mos???

                       (c) or trying to widdle down

    approximately $8000 in negative equity.

    I do have access to Ford friends and family and to a GMS from my father. What if I got it down to -$2000.00 or -1500.00 with rebates and discounts. Is it worth it then???
  • stickguystickguy Posts: 32,595
    Well, if you are getting a company car, that should keep down the miles. Why not dump the old one, and let the wife drive the Jeep?

     

    If you go 30K over the mileage limit, it will actually add less than $100/mo. to the cost of the lease. So, as Mathias pointed out, it is really a cheap way to put that many miles on a nice SUV.

     

    (30,000 * .15 = $4,500, 4,500/48 = $93/75/mo.).

     

    Look at it this way, if they told you when you got the lease that you could do 48/78,000 for an extra $94/mo., and you knew you needed the miles, would you have done it?

    2019 Acura TLX A-spec 4 cyl. (mine), and 2013 Acura RDX AWD (wife's)

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