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@Anonymous wrote:
Long story short...my mom bought me a car in her name while in college & made me start paying the bill last year when I graduated. Now that I want a new car..I'm in a bad predicament because the car probably has $6000 (my guess) in negative equity. She still owes $10,000 on it but the exterior of the car is in bad condition so I'm thinking they won't give me much for it (2008 Dodge Avenger). I have already been approved for $18,000 (or more if needed) at 1.49% with dcu. But I didn't tell them about the upside down loan that will be added because my mom told me I didn't have to add it to mine at first. Should I start my first auto loan with this negative equity added to it or should I try to sell the car privately? I have 2 weeks until my loan application expires & I would like to get rid of my old car asap so I don't have to put anymore money into it. Also I have been looking into 2014 VW Jettas with no more than $1500 down.
First, congratulations for graduating college. It was extraordinarily nice of your mother to take out a loan for your car so you had transportation during college. And you didn't even have to start paying for it until you graduated. Very nice of your mom to carry that debt for all those years.
I notice that you aren't sure of the actual negative equity. One of the things you can do is go to CARMAX and get a quote for the amount that they will pay for your vehicle so you have an actual number to work with when figuring out the best way to go for your new vehicle purchase. CARMAX quotes to buy are good for 7 days IIRC.
Then discuss the actual amount that you are upside down with DCU to see what options are available to you. That way you can make a plan that will not only take the debt off your mom's credit but get you going in the proper direction.
@Anonymous wrote:
Long story short...my mom bought me a car in her name while in college & made me start paying the bill last year when I graduated. Now that I want a new car..I'm in a bad predicament because the car probably has $6000 (my guess) in negative equity. She still owes $10,000 on it but the exterior of the car is in bad condition so I'm thinking they won't give me much for it (2008 Dodge Avenger). I have already been approved for $18,000 (or more if needed) at 1.49% with dcu. But I didn't tell them about the upside down loan that will be added because my mom told me I didn't have to add it to mine at first. Should I start my first auto loan with this negative equity added to it or should I try to sell the car privately? I have 2 weeks until my loan application expires & I would like to get rid of my old car asap so I don't have to put anymore money into it. Also I have been looking into 2014 VW Jettas with no more than $1500 down.
Figuring negative equity:
According to kbb.com your car should be worth about $5500-$6700 depending on the condition. I don't vouch the accuracy of kbb, but a good way to estimate value. This reflects estimated 75K miles (I don't know how much miles are on your car), and selling private party. Selling to a dealer will usually be less than this. So my guess is that your negative equity is closer to $4000. You can find out your negative equity to the penny, by getting actual quotes from private buyers and/or dealerships/carmax. I suggest you do this just so you know exactly what you're working with.
Option 1:
I'm not sure what your options are if you choose not to add it to your new loan. Will you end up paying both payments? How much is the current loan payment?
Option 2:
If you do add it to the new loan it will look like this: $18,000 + $4,000 (est. neg equity) - $1500 (down pay) = $20,500. First concern is if dcu will even payoff the previous loan because it is in your mom's name (someone enlighten me if this is possible). Second concern is if it pushes your LTV too high, they don't approve. But if they do, I don't see it being too bad of a deal for you. If approved, $20,500 at 1.49%, ~$300 monthly for 72 months, and that's if they don't raise your APR for having a higher LTV.
Bottom line advice:
Without knowing your 'option 1', I don't see it being too bad of a deal taking the new loan with the negative equity. You have a great rate, so it wont affect too badly. Also, you can apply more to principle to work down the negative equity.. If your negative equity is really high, I suggest GAP insurance. Make sure you learn how to price shop the vehicle. Read the sticky guide if needed. I hope his helps.
I agree that was super nice and generous of your Mom. If only I had someone to do that for me
Start with finding out the value of the car. Repairs are alot less expensive for dealers to do so it might not go down as much as you think.