Auto loan advice- Upside down and having a hard time.

[PureRev]

First post, been lurking for a little while though.

Need some advice on my current auto loan, I've had the car/loan since December 31st 2012. Thought it would be a good idea to go to the dealership on the last day of the year because they would be more desperate to make a deal and willing to work with me more. This was my first car to buy on my own, had no idea what I was doing and I honestly let myself get bullied into a bad position. I had no other transportation at the time and was a little too desperate myself, big mistake. 

I was talked into a new 2013 Dodge Dart at around $24,000 total financed. I had a trade in of an old vehicle that no longer ran and would have cost me too much to fix plus like $300 (they gave me $2000 in trade in plus down credit). I've been making my monthly payments pretty well since I got the loan, at $490 per month. I make around $28000 per year at my first job (23 years old) so this is a bit of a stretch for me. Recently my paydays have changed dates which is causing me to pay late on my car. This has gotten me behind and I'm having a hard time catching up. I changed my due date right after getting the loan so I can't change it again. I did a 2 month payment deferment last December when I was moving so I can't do another until June. 

I'm going to be moving again in the next couple of months so I need to get this situation under control asap. My credit score has recently taken a major drop after years of trying to rebuild it (too many inquiries and 2 things went to collections that I'm going to try and protest as they never should have gone there). I'm currently about $800 behind on my car payment and due to medical bills that have come up, I'm struggling to keep the whole thing afloat. I need to either find a way to get the car refinanced, defer payments to the back end of the loan, or find a way to sell the car even though I'm pretty upside down on the loan at this point. Or any other options that you fine fellows might be able to suggest.

Current credit score according to creditkarma is 550. Loan is with Santander.

Any help would be greatly appreciated, will provide more info I need to.

[pizzadude]

Welcome to the forums !  Sorry to hear about your situation.    Can you share a bit more information?   Do you have any idea how much underwater you are on the car?  Also what were the terms of your loan, interest rate, months, ?

[Remember0]

Yeah, we're going to need more info. Please tell me that for 24k this is a loaded Dart (like a limited) and not a more basic trim like the SE?

Honestly, I'm going to take a shot in the dark and say there's no way we're going to be able to refi this thing. The car honestly does seem like a big stretch given income...But do answer pizzadude's questions. They might help us better understand. One question I'll add: how much other debt do you have (medical, credit cards, personal loans, etc...)

Any chance you can maybe borrow from a friend/family to get caught up? I mean I think there's a bigger issue than timing here. Even without a timing issue, the payments are too high imo.

If you're pushing 60 days late (800 must be like 2 payments?), keep in mind a repo company might be out looking for it. If you have one, I'd keep it in a garage. Even if not, stay in contact with the finance company if the loan is currently past due! Tell them when you'll be paying what, etc... It's when they lose contact that they get really worried and start repoing.

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EDIT: This has nothing to do with your current situation, but for future tips on how to better negotiate look here:

http://ficoforums.myfico.com/t5/Auto-Loans/Guide-to-Financing-Leasing-and-Refinancing-a-Car/td-p/289...

Going on the last day does give you a lot of leverage (helped a friend buy a '14 Accord LX for 21k OTD on 12/31/2013). But you have to do it online, can't walk into a dealership ever and expect a good deal (they assume only suckers walk in, even on the last day of the year).

[nycsimone]

I don't think there's any other way to say this but...you're screwed.

Let me explain.

You financed $24,000 about 16 months ago. At $490 per month means you've got a 72 month loan with about a 14% interest rate. Considering you're 2 months behind that means that you've paid down about $3,400 in principal meaning you owe about $20,600 on this car.

KBB trade-in value for a 2013 Dodge Dart Limited (2nd to highest model) with 10,000 miles is about $15,000. This means a dealer will realistically value this car at $14,000 (assuming it's a limited).

This means you're about $6,400 underwater with this loan.

Can you get out of this? Yes, but not with a 550 credit score.

You recent collections and late payments on your current auto loan mean it's going to be nearly impossible for you to get out of this vehicle. There's cars out there that have enough incentives and wiggle room to negotiate $6,000 off msrp...but realistically I don't think you're going to find a finance company that is willing to give you the close to $30,000 loan you need to get out of this.

Realistically, a $490 a month payment with your earnings is way too high. If you earn $28,000 per year that means you take home maybe $1,800 a month so your car eats up 25-30% of your take home pay. This is too high. You need to be around $320-350.

We've all made bad decisions, you just move on and learn your lesson. If you can get caught up then good for you...it's going to be another 3-4 years before your car will even be close to being worth what you owe on your loan. And if you can't get caught up...you'll eventually lose the car. I'm not sure which is worst to be honest.

[Remember0]

Two more suggestions I have (esp. if it looks like this car might be repo'ed):

1) You need to arrange for having transportation BEFORE a repo happens! Most likely this means you'll have to try to squirrel away 2 or 3k somehow to buy a beater. So don't put every penny you have into the Dart's loan and then have it be repo'ed 6 months from now to be penniless. If you have terrible credit AND no savings, the buy here pay here guys are going to beat you when you're down unfortunately.

2) I'd sit down with a budget and figure out if it's feasible to keep the car even without the past due as mentioned.

Finally, you mentioned collections. Are they medical collections? If they are and they have been paid in full google these four words: whychat hipaa program guide . Follow the steps EXACTLY (no cutting corners (or doing what you think is "better") on things like certified mail, certified mail w/ return receipt, order of who to mail, etc...).

[StartingOver10]

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@PureChrane wrote:

First post, been lurking for a little while though.

Need some advice on my current auto loan, I've had the car/loan since December 31st 2012. Thought it would be a good idea to go to the dealership on the last day of the year because they would be more desperate to make a deal and willing to work with me more. This was my first car to buy on my own, had no idea what I was doing and I honestly let myself get bullied into a bad position. I had no other transportation at the time and was a little too desperate myself, big mistake. 

I was talked into a new 2013 Dodge Dart at around $24,000 total financed. I had a trade in of an old vehicle that no longer ran and would have cost me too much to fix plus like $300 (they gave me $2000 in trade in plus down credit). I've been making my monthly payments pretty well since I got the loan, at $490 per month. I make around $28000 per year at my first job (23 years old) so this is a bit of a stretch for me. Recently my paydays have changed dates which is causing me to pay late on my car. This has gotten me behind and I'm having a hard time catching up. I changed my due date right after getting the loan so I can't change it again. I did a 2 month payment deferment last December when I was moving so I can't do another until June. 

I'm going to be moving again in the next couple of months so I need to get this situation under control asap. My credit score has recently taken a major drop after years of trying to rebuild it (too many inquiries and 2 things went to collections that I'm going to try and protest as they never should have gone there). I'm currently about $800 behind on my car payment and due to medical bills that have come up, I'm struggling to keep the whole thing afloat. I need to either find a way to get the car refinanced, defer payments to the back end of the loan, or find a way to sell the car even though I'm pretty upside down on the loan at this point. Or any other options that you fine fellows might be able to suggest.

Current credit score according to creditkarma is 550. Loan is with Santander.

Any help would be greatly appreciated, will provide more info I need to.

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I have a different take on your situation.

Yes, you made a bad decision by getting a car that is too much for your income.  The thing to do now is to make a decision that will mitigate your situation. You have a couple of options:

1) Get more income in to make the payment. As pointed out before you will need to get a lump sum into the lender right now so you can get on track. You can get the lump sum through friends, family or selling stuff around the house.  Then you will need a plan for extra income - either a part time job or some skill that you have to generate additional income each month to make the payment and repay your friends/family. 

Let me say here that if you look at your current budget - you might be able to find enough income that is frittered away on non-essentials like coffee, lunch out, dinner and drinks out etc. Look to your budget first. Go to DaveRamsey.com for budgeting help.

 Reduce expenses everywhere you can to find the money.

2). If you can't find the money in your current budget, can you get a roommate or two to help reduce your overall rent by collecting rent from the roommate(s)?

3) If you have to dump the vehicle, it will create long term much more difficult issues for you. Such long term issues include charge off and worse than that: a judgment for the deficiency. The judgment in most jurisdictions lasts 20 years (sometimes 10 years with 10 year renewal). Do not enter into this option lightly or without a plan. You would still need to get the second job or second income to pay off the judgment amount. If you end up going this route, then address the issue right away because the judgment accrues interest the entire time. It can turn $6000 into $15k to 20k over the years. Judgment interest is statutory.  If you go this route, then you will need to drive a beater until you get your finances straighened out.

Note:  the due date is not the cause of the issue. Lack of savings is the cause. If you are paid 2 x's per month for example, you need to have at least a months income (to start at your age) set aside in savings to make your payments that are due during the month no matter when you are paid. When you get your pay check you can replenish your savings account if you have used any part of it. The ultimate goal of course is to have enough cushion to withstand the ups and downs of additional unexpected expenses. Investment accounts are different. Retirement accounts are different. There are all kinds of financial steps to take. The DaveRamsey site will help you plan in this aspect.

Good luck. Don't take the easy way out. It has long term consequences that put you way behind the 8-ball.  If you work your way out of this short term issue you can refinance with a much lower rate but you will have to prove that you can make these payments first. You can do this. It just takes a little bit of planning.

[Remember0]

In a lot of states though, the OP wouldn't be garnishable (just don't keep a lot of $ in a bank account). And I've heard of SCUSA not getting judgments often. Even if they do, but OP lives in just the right state, they won't be able to garnish.

But in general I do agree. If OP can work his way out without a repo, that's the best way.

[StartingOver10]

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@Remember0 wrote:

In a lot of states though, the OP wouldn't be garnishable (just don't keep a lot of $ in a bank account). And I've heard of SCUSA not getting judgments often. Even if they do, but OP lives in just the right state, they won't be able to garnish.

But in general I do agree. If OP can work his way out without a repo, that's the best way.

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I understand your POV Remember0.

"Garnishable" is only one aspect of a judgment. Even if the OP isn't garnishable, that doesn't mean that the judgment goes away. It just sits out there are quietly accrues interest for many, many years. Then the OP decides at some point in the future he wants to buy a home. He goes to get a mortgage and finds out that $6k judgment that he forgot all about is now $18k or some other very large figure. BTW, I see this all the time as a Realtor. Keeps a lot of people from buying. I am saying handle the issue before it blows up to a huge unmanageable amount.

OP, we all have made mistakes. Many of us are here as a result of our mistakes. This is one of those times when it is better to face the difficulty head on and early rather than wait until it gets to be a ugly thing. BTDT.

[Remember0]

Oh that I completely agree with. Judgments do lurk in the background unfortunately!

[blondy250]

The biggest mistake the OP made is financing a 24K car with a 28K income. Many financial gurus say to go to a maximum of 30% of your gross income. This whole  subforum IMO is a disaster of people making the same mistake, its like watching a train wreck.