Auto loans and cars post bankruptcy

[Anonymous]

Hi there,

First time posting to the forum, but have been lurking for a while.  My wife and I filed for Ch. 7 BK in Nov 2014 and were discharged in March 2015. We kept two cars, one that was reffirmed and another that was not. 

We have more than $10k in equity in the reaffirmed car, but are quickly approaching the end of the manufacturer's warranty (50k miles) and trying to figure out what to do.  We only have a little more than a year of payments but haven't built up the savings yet a major non-warranty item might cost. I'm thinking we either need to sell and buy another car with warranty coverage or buy the extended warranty coverage, which the best quote I have is $4k.  Obviously we don't have the $4k lying around at this point to buy the warranty.

Is a refinance of the auto loan a viable option? Can we even get a refi this close post BK? Our thinking is we take a a new car loan of $15k over 2 or 3 years, extending our car payments out a bit, but likely keeping the amount same or lower and buying the warranty.  The existing loan is at 3.5% on a 2011 so we figure if we need to sell and buy something else we would wind up with a much higher interest rate and around the same total loan amount so why not try to keep the same car.

Of course the other option is to roll the dice that we can get through the life of the existing loan without any major mechanical breakdowns.

Thoughts? Suggestions on places to look for the refinance of the auto loan. Or are we totally off base?

Thanks!

[bstone]

What kind of vehicle do you have where you are worried about major mechanical issues at 50K?  I wouldn't be too concerned about anything major.  I guess it could happen, but at 50K it's unlikely.

Have you received quotes from dealerships for the warranty or just places online?  I would only suggest getting a warranty from a franchise dealer, the ones you find online are generally worthless.  Also, most dealers will offer SPP on their warranties.  It usually allows you to put 10% down and finance the remainder over 12-18 months at 0% interest.  The only downside is they require auto payment, but for peace of mind knowing the warranty will actually cover repairs I guess it's worth it.

If nothing else you can probably refinance based on your equity, but your rate is going to skyrocket to probably mid-teens.

[DaveInAZ]

My gosh, you shouldn't be worrying about a warranty/repairs on a car with 50k miles, and $4k for an externded warranty is an absolute ripoff.

I bought my Kia Sorento SUV new in 2003, and the 10 yr/100k warranty was a major consideration. I used that warranty once - overheating, which turned out to be a cracked plastic overflow tank. That might have cost $150-200 if I hadn't had the warranty. 11 years & 120k miles later it's still going strong. I recently bought another car just in case something major comes up on the Kia, but I live alone in the boonies, so if I don't have reliable transportation I'm in a major pinch. You & the wife have 2 cars so if something happens you could get by for awhile without too major a disruption. But most likely you have years & years of carefree use of that car (with routine maintenance). Don't worry about the car, focus on rebuilding your credit instead.

[ezdriver]

I've learned that one can pay for a good bit of repairs when the auto is paid off. I'm very curious why you are concerned about costly repairs on a car with only 50k miles. My everyday work car is a 2002 Mercedes E430 with 185k miles on it and I'm enjoying the ride with no car payments. Sure I've paid for some maintenance and repairs along the way but it sure beats a monthly car payment. My tune will change when I buy my Porsche 911! lol

[Anonymous]

Weird, I thought I put the car after the year in my initial post.  Either way its a 2011 Audi Q5. I've been checking out some message boards that have me a bit concerned about potential issues after the warranty ends.  The more we've thought about it though since I posted we'd rather be payment free in a year. I also can't wrap my head around trading in a 3% loan for a teen or 20+%. Since it was reaffirmed it should report to credit reports.

In the meantime we'll start building up a bigger emergency fund so that if (knock on wood) anything happens to the car in the next year we are in decent shape.

On the warranty cost I checked with multiple Audi dealers and they were all in the same price range. Downside of German car and buying extended warranty well after the feact.

[Anonymous]

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@Anonymous wrote:

Weird, I thought I put the car after the year in my initial post.  Either way its a 2011 Audi Q5. I've been checking out some message boards that have me a bit concerned about potential issues after the warranty ends.  T

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You can't judge things based on messages boards. People with problems tend to search for solutions and eventually end up on message boards. People without problems don't bother. Sure, there are always a few fanatics that post there, but by and large it's going to attract those with problems. 

With that said, Audis scare me. The old adage was that one of the benefits of owning an Audi or VW was that you got to know every mechanic at the dealership on a first name basis. 

[TRC_WA]

150k miles combined on my last 2 vehicles...  a PT Cruiser and a Charger.  

I spent about $400 in repairs (radiator fan and a couple bad sensors) over those 150k miles.

2500 miles on my new Challenger.  If my previous 2 vehicles are any indication I'm good to go for quite a long time.

Cars today are much more dependable than years ago... and yeah, the extended warranty is a waste of money.  Why would I pay $3000 for a 75k mile warranty when there's a snowballs chance in hell of me having to use that warranty prior to 100k miles?

[Anonymous]

I would definitely continue to pay down your auto loan, and go warranty free. There's no reason to go from 3% to a ridiculous interest rate on a "what  if" worry. We chose to convert our vehicle leases to loans right before we filed (as in, as soon as those went through, we filed CH7). We previously had excellent credit, paid on time, etc. We relocated and had a house that was underwater so we stopped paying on it, and within 45 days, that great credit was gone. Our auto loans went from 4% up to 11.5%. Wish we had converted them over sooner, but we hadn't planned on filing so we waited.