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What should I do to get out of this situation?

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gk94254
New Member

What should I do to get out of this situation?

Well let me start with a little back story, in January of 2012 my mom was forced to buy me a new vehicle after my present vehicle(sweet 16 present) had sustained smoke and body damage by a family friend which insurance wouldn't cover and repairs would be over $8,000! We ended up purchasing a 2012 ram 1500 that stickered at around $37,000 however due to roll over from the prior vehicle(2011 ram 1500, owed $29,000 and were offered $14,000) the total loan came out to $50,500 and then we put $7,000 to be able to get approved so loan was $43,500 @ 7.5% for 75 months(about $730 a month). 

 

Now don't get me wrong, it's a nice vehicle for a 17(now 18) year old however I went from a top of the line model to a midgrade model which to make it comparable would cost close to $10,000. So now that I am 18 I am looking to trade it in on a fully loaded truck but here comes the big problems; the truck has 30,000 miles on it(I drive a LOT) and will only bring around $18,000 on trade in($19,000 of depreciation in 15 months), we still owe around $36,000 on it, and the biggest rebate I can find on trucks is around $12,000. My mom has a credit score of around 700 and I'm not sure what mine is(she added me to some credit cards to build credit just 2 months ago).

 

I have also considered leasing the truck instead of financing as I have heard this would be better with the roll over(however not my amount of driving). We will not be putting money down on this vehicle as we have done on all my other vehicles($5,000 on my first car, $5,000 on my second car, $6,000 on my 2011 ram, and $7,000 on my 2012 ram). Both my mom and I would be on the loan.

 

What would be the best choice for me? 

Message 1 of 26
25 REPLIES 25
Dustink
Valued Contributor

Re: What should I do to get out of this situation?


@gk94254 wrote:

@Anonymous let me start with a little back story, in January of 2012 my mom was forced to buy me a new vehicle after my present vehicle(sweet 16 present) had sustained smoke and body damage by a family friend which insurance wouldn't cover and repairs would be over $8,000! We ended up purchasing a 2012 ram 1500 that stickered at around $37,000 however due to roll over from the prior vehicle(2011 ram 1500, owed $29,000 and were offered $14,000) the total loan came out to $50,500 and then we put $7,000 to be able to get approved so loan was $43,500 @ 7.5% for 75 months(about $730 a month). 

 

Now don't get me wrong, it's a nice vehicle for a 17(now 18) year old however I went from a top of the line model to a midgrade model which to make it comparable would cost close to $10,000. So now that I am 18 I am looking to trade it in on a fully loaded truck but here comes the big problems; the truck has 30,000 miles on it(I drive a LOT) and will only bring around $18,000 on trade in($19,000 of depreciation in 15 months), we still owe around $36,000 on it, and the biggest rebate I can find on trucks is around $12,000. My mom has a credit score of around 700 and I'm not sure what mine is(she added me to some credit cards to build credit just 2 months ago).

 

I have also considered leasing the truck instead of financing as I have heard this would be better with the roll over(however not my amount of driving). We will not be putting money down on this vehicle as we have done on all my other vehicles($5,000 on my first car, $5,000 on my second car, $6,000 on my 2011 ram, and $7,000 on my 2012 ram). Both my mom and I would be on the loan.

 

What would be the best choice for me? 


 

Financing a vehicle when you are under 18 is not a good idea.  

Your only option at this point. Keep the vehicle and make the payments. Pay more than the minimum to cut down on the interest charges and get the vehicle paid off early.

 

edit by webhopper

 

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 2 of 26
creditnocash
Valued Contributor

Re: What should I do to get out of this situation?

you have alot of negative equity! It really doesn't matter what you do. the negative eq will still be there. 

if you drove 30k in one year, leasing is not the option for you. 

 

the only possible thing is too pay off the car, and try and sell it for more, then whatever you made put down too buy a new car.

 

what does your mom drive if i may ask? 



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Message 3 of 26
Dustink
Valued Contributor

Re: What should I do to get out of this situation?



Well she's the one that has decided to buy me brand new cars since I was 15, she could have easily said no. And she's the one that pays for everything on the vehicles. I've been more focused on school and finishing up my associates degree in a few months than a job. But sorry, not gonna drive a junker or a no optioned car. However this is getting off topic of my question so yeah


Good luck,

 

You may need to get a part time job and help your mom pay extra on the car until it is worth more than what is owed on it. Then once you graduate and have a good job, you can trade it in and get the vehicle you want.

 

edit by webhopper

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 4 of 26
webhopper
Moderator Emeritus

Re: What should I do to get out of this situation?

Hi and welcome to MyFico Forums!

 

With the negative equity, your options will be very limited. 

 

My suggestion is that you make do with the current vehicle, especially since it has a lot of highway miles.  When you're out of school then you can look at an upgrade.  In the meantime, I agree with making extra payments towards the car.

 

a 75 month car loan is usually a bad idea because it builds negative equity. Did you have gap insurance on the previous vehicle?  Gap insurance is a MUST anytime you're financing a vehicle that will go upside down in value vs. what's owed.

 

Unfortunately, many folks on this forum may not be able to relate to your particular situation and may not be very understanding of your issue.

 

Good luck in your future endeavor!

FICO 9:
Filed Chapter 13 on 6/1/2017 after job loss. Discharged 6/1/2022.

Goal: Gardening!


Message 5 of 26
gk94254
New Member

Re: What should I do to get out of this situation?


@creditnocash wrote:

you have alot of negative equity! It really doesn't matter what you do. the negative eq will still be there. 

if you drove 30k in one year, leasing is not the option for you. 

 

the only possible thing is too pay off the car, and try and sell it for more, then whatever you made put down too buy a new car.

 

what does your mom drive if i may ask? 


I was just thinking leasing because of the supposed lower payments and ford offeres like 19,000 a year mileage. But of course not knowing the exact mileage penalty, it may cost more which is why I'm here to get advice from those with more knowledge in this subject

 

My mom drives a 2002 PT Cruiser that she bought cash when it was a couple months old on a used lot. I tried to convince her to buy a new vehicle between 2006 and 2010 but it only had like 70,000 miles then(only 110,000ish now) so she decided to keep it plus she loves it

Message 6 of 26
gk94254
New Member

Re: What should I do to get out of this situation?


@webhopper wrote:

Hi and welcome to MyFico Forums!

 

With the negative equity, your options will be very limited. 

 

My suggestion is that you make do with the current vehicle, especially since it has a lot of highway miles.  When you're out of school then you can look at an upgrade.  In the meantime, I agree with making extra payments towards the car.

 

a 75 month car loan is usually a bad idea because it builds negative equity. Did you have gap insurance on the previous vehicle?  Gap insurance is a MUST anytime you're financing a vehicle that will go upside down in value vs. what's owed.

 

Unfortunately, many folks on this forum may not be able to relate to your particular situation and may not be very understanding of your issue.

 

Good luck in your future endeavor!


So best bet is keeping it and paying it off until I graduate with my bachelors(winter 2015) and then go from there with it?

 

Yes, we have GAP insurance on it. Every financed vehicle has had it and will never have a vehicle without it in the future, it's a life saver in case the unexpected happens

 

I figured they wouldn't be so understanding, just wanted solid advice from those more experienced in the matter than I am or even my mother.

 

Thank you!

Message 7 of 26
Dustink
Valued Contributor

Re: What should I do to get out of this situation?

This is the most troubling thread I have seen on these forums.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 8 of 26
webhopper
Moderator Emeritus

Re: What should I do to get out of this situation?


@gk94254 wrote:

@webhopper wrote:

Hi and welcome to MyFico Forums!

 

With the negative equity, your options will be very limited. 

 

My suggestion is that you make do with the current vehicle, especially since it has a lot of highway miles.  When you're out of school then you can look at an upgrade.  In the meantime, I agree with making extra payments towards the car.

 

a 75 month car loan is usually a bad idea because it builds negative equity. Did you have gap insurance on the previous vehicle?  Gap insurance is a MUST anytime you're financing a vehicle that will go upside down in value vs. what's owed.

 

Unfortunately, many folks on this forum may not be able to relate to your particular situation and may not be very understanding of your issue.

 

Good luck in your future endeavor!


So best bet is keeping it and paying it off until I graduate with my bachelors(winter 2015) and then go from there with it?

 

Yes, we have GAP insurance on it. Every financed vehicle has had it and will never have a vehicle without it in the future, it's a life saver in case the unexpected happens

 

I figured they wouldn't be so understanding, just wanted solid advice from those more experienced in the matter than I am or even my mother.

 

Thank you!


Honestly that's what I would do. Just wait it out. If you're going into a really lucrative field then you can get just about any car. Also, you will get a much better rate on the new car after you have positive payment history.  I just got a new car in March 2013 and the rate is 1.79%.  Its definately doable if you focus on making all payments on time, and sticking with a vehicle that is within your budget...   A lot of folks damage their credit by going too deep in the hole to finance assets which depreciate. The smart folks choose short repayment terms on these items and put a ton of money down, so that the asset is paid for long before it has negative equity.  My family has 3 cars, and 1 is completely paid for, 1 is worth about 10k more than what is owed, and the other has less than 200 miles and retails for 50k and we owe 41k now.

On the prior car that was smoke damaged, did you try to file a claim against your collision policy? I think I would have fought harder for insurance to reimburse the damage, or for the friends insurance to reimburse the damage.

FICO 9:
Filed Chapter 13 on 6/1/2017 after job loss. Discharged 6/1/2022.

Goal: Gardening!


Message 9 of 26
Dustink
Valued Contributor

Re: What should I do to get out of this situation?

Generally, it is very hard for an insurance company to get out of paying for body damage. Sometimes if the insurance company can prove the damage was done while racing in an organized track event, they will be able to deny the claim. As for the smoke damage, if the "friend" smoked in the car. That is not an insurable claim, but a good detailer can get that out for a couple hundred dollars. If the smoke was caused by a fire, then it would be a viable claim.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


     $17k       $8.5K          Closed          $19k      $6.5k        $24.2k        Closed         $5k       Closed     $8.5k        Closed      @2.49%
Message 10 of 26
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