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reaffirmations on cars - educate me!

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missrachelk
New Member

reaffirmations on cars - educate me!

Hi Again - I'm just blowing up the board tonight!  Happy to finally have joined and stopped lurking.

 

DH and I have 2 cars that we plan to reaffirm.  

 

One has only a little over a year's worth of payments left before it is paid off.  We bought that car brand new and plan to keep it for a looooong time, it's a Toyota and we've only put 24k miles on it so far, so it has a lot of life ahead of it.

 

The other is more of a problem child, it won't be paid off until 2017, and we owe more than it is worth (about $1500 by KBB private party value, way more than auction or trade in value).  That being said, we have a lot of money in the car and would prefer just to keep it, pay it off, and like the other one keep it for a nice long time.  

 

Our attorney advised us that reaffirming both of them makes good sense for us, and we are well within our exemptions on both cars, so there's no worry about needing to liquidate them.

 

What would you do in a similar situation?

Message 1 of 8
7 REPLIES 7
StartingOver10
Moderator Emerita

Re: reaffirmations on cars - educate me!

I think car 1 is a no brainer. You are doing the right thing by reaffirming it. I did the exact same thing in your situation, only I renegotiated the payment slightly and the interest rate just a little. That can be done right on the reaffirmation agreement. I also inserted a phrase that the lender (it was a CU I was burning on a cc account) would send the title to the car to me promptly after the car payoff was made to them. They did. I don't know if they would have done that without having that right in the reaffirmation though. So be wise in your reaffirmation language - even though its a standardized form, you can insert other language.

 

Car 2 - don't know enough to help you with that decision. It depends on the finance co and the current payment and the condition of the vehicle.

Message 2 of 8
missrachelk
New Member

Re: reaffirmations on cars - educate me!

thanks.

 

Car #2 is in really good shape (2008 with about 57,000 miles) no problems mechanically. It serves our needs now perfectly.  Once we have 'future baby #2' it will be a tad small, but still workable. It's financed by USAA (same lender as car #1)

Message 3 of 8
SoulMaster
Established Contributor

Re: reaffirmations on cars - educate me!

I agree with StartingOver on the first car... that one's a simple no-brainer even though I HATE car loans.

 

The second car I wouldn't do.  You're underwater, which means you'd be reaffirming bad-debt.  I'd probably (though see below) keep paying on it, and work with USAA so that they don't take it from you... but the reaffirmation makes zero sense.  You don't know what will happen a year from now, or even a month from now, and you don't want to have that to deal with if the stuff hits the fan.  If they threaten to take it, try a 722 redemption, that should lower the balance to auction value (though it's a PITA).  Aso, it's got 57K miles, which means it probably has about $1500-$3000 in service coming up in the next 3-33K miles, so it's probably worth even less than KBB trade/acution value. (if you can do the work yourself, ignore that).

 

As for "we've put alot of money into it", that's a really bad reason to want to keep a bad-debt-asset.  Think of it from an investor standpoint... when things go south, investors cut their losses.  Since you're talking about having a 2nd kid anyway, you might as well start trying to build some generational wealth and measuring financial decisions the same way rich-people do.

 

Plus, you said the car will be a little small.  So, this one I'd really consider surrendering, then save a couple bucks and buy a good, used car that will fit your family.  Why deal with small car/high payment when you don't have to at all?  In any event, I'd definitley weigh options other than reaffirmation remembering to put your needs in front of your wants.

 

That's my 2¢,

 

-SM

I am not an attorney and none of what I write should be construed as legal advice. For legal advice please consult an attorney.

Starting Score: ~470 preBK(8/2010)
Current Scores as of Late January 2016 All 700+. Last CR pull from a lender(housing) was mid-score 749.
Goal Score: 700+ - reached.
Message 4 of 8
grassfeeder
Frequent Contributor

Re: reaffirmations on cars - educate me!

Soul Master has hit is on the head again.

 

Car #1 - absolutely keep, sound like you;ll hold the title outright in a matter of a few payments.

 

Car #2 - I wouldn't re-affirm.  Keep paying and keep it as long as possible.  Keep in mind that many here, including myself, have had great success securing solid car loans after discharge.  I would look to get into a car that fits your familys future needs, versus current.  Ford, although I hate their cars, has been VERY generous in the lending to sub-prime candidates.

 

I too am not a fan of car loans - but sometimes the bullet needs to be bitten.  I treated mine like a credit builder loan and I'll have it paid off in 1.5 years.  Iv'e got enough secured cash to pay it now - but I'm letting it work for me on a monthly.

Fico 8 Scores 5/1/22 :
799 EQ | 793 TU | 809 EX
Message 5 of 8
SoulMaster
Established Contributor

Re: reaffirmations on cars - educate me!


@grassfeeder wrote:

Soul Master has hit is on the head again.

 


HA!  I may have dealt with this once or twice... or dozens of times... lol!  Thanks grassfeeder.

 

-SM

 

C1 does really well with post-BK auto loans, too...  But I HATE autoloans, so I clearly didn't just say that.  Also, Ford cars aren't the garbage they used to be.  In fact, they're pretty good in the last few years.  I'm a Jeep guy myself though.

I am not an attorney and none of what I write should be construed as legal advice. For legal advice please consult an attorney.

Starting Score: ~470 preBK(8/2010)
Current Scores as of Late January 2016 All 700+. Last CR pull from a lender(housing) was mid-score 749.
Goal Score: 700+ - reached.
Message 6 of 8
missrachelk
New Member

Re: reaffirmations on cars - educate me!

thanks SM and GF!  

I guess I'm scared of dealing with the car, so keeping it seems easier.  

 

It needs an oil change so first thing I will find out what all it will likely need as far as maintenance in the next year.  That way we can be more objective looking at the best way to move forward.   Cutting our losses with this car does make more long term sense rather than thinking about the money we've put into it thus far.  Putting more money into it that we won't be able to get back whenever we sell doesn't make good sense.

 

Car #1 also needs tires.  I kind of wish I had realized that and charged them before we decided to file  :  )

 

We have to have 2 cars at all times, sharing is not an option with our work schedules.  I just don't know what kind of down payment we'll be able to get together (but I suppose I'll start feeling flush soon when the reality of not paying all those cc's sets in)

 

Can someone explain using the car loan like a credit builder loan?  And credit builder loans in general?  

 

Since car #1 will be paid off late next year we will theoretically be able to make double payments on car #2 and get it paid off quickly.

Message 7 of 8
SoulMaster
Established Contributor

Re: reaffirmations on cars - educate me!

Dump car 2.  Seriously.

 

As for credit builder loans... they're there to satisfy "mix of credit" w/o having to get a real installment loan.  If you reaffirm loan #1, and it reports that it was ALWAYS current, you won't need one.  In a nutshell, a credit builder loan secures itself with the funds borrowed, then you claim the borrowed funds at the end of the loan term.

 

4 tires: $200 MAX.  Don't get the awesome tires, get the cheap ones that are buy 3 get 1 free.  Or find a coupon in the paper.  They only need to last 30K miles or so until your back on your feet.  Again, it's needs, not wants.

 

Dump car 2.  Did I say that before?  Can you take the tires off car 2 and put them on car 1 before you dump it?  That saves even more.

 

Then, go get a $500/$1000 beater to be your second car for a bit and use the car-swap-ramsey-car-plan to build up to a good used one.  I hate car loans... did I say that before too?

 

-SM

I am not an attorney and none of what I write should be construed as legal advice. For legal advice please consult an attorney.

Starting Score: ~470 preBK(8/2010)
Current Scores as of Late January 2016 All 700+. Last CR pull from a lender(housing) was mid-score 749.
Goal Score: 700+ - reached.
Message 8 of 8
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