After getting my personal finances in order over the last year, I'm trying to help out my family wherever I can. My step-sister worked herself into a bind and came to me for advice (since these days all I talk about it credit, lol). I want to see what people here think, so here's the situation:
Car: 2007 Honda Ridgeline in need of cosmetic body work and has been poorly maintained, however runs just fine, ~85k miles
Car loan balance: $10k ($350/mo 7%)
Complications: This car is in her and her mother's name, the loan in solely in her mother's name. The mother "gifted" the car/loan to step-sister/husband a few years ago and now step-sister is divorced. Mother wants out from the car completely and fast as she thinks it's hurting her credit (a bit of a falling out between them is fueling this, too). Step sister also does not want this car anymore if at all possible and would like to sell/trade it in for something with better fuel economy. Mother isn't really able to help financially and wants step-sister to come up with a plan. Step sister has no issue accepting that the car is her full responsibility now as that was the original agreement. Anyhow:
Options she came to me with:
- Her idea: She'd love to trade it in, but doubts she'd be able to trade in a car with a $10k loan against it that's in rough shape (I googled NADA trad-in value: about $8/9K on the bottom end). I'm not car finance savvy at all (I drive beaters and pay cash, lol). Would a dealer even touch a deal like that?!
- Mother's idea: Try to refinance the car in her name, get it fixed up, and keep it (which may end up costing a few thousand from what I can tell). This is also her least favorite option as she really wants to just be rid of the car and start over.
- Her "bright" idea: She confirmed that she is able to secure a personal loan from her bank for the balance of the car loan and can just buy her mother out. She'd then own it outright and would do what minimum repairs she had to to sell it and hopefully recoup as much of that buy-out as possible to pay off the personal loan and start over with a car loan on a new/used car she wants. She even said she'd be ok loosing a little money just to be done with it. This plan sounds flawed at best to me, but maybe I'm wrong?
Which of these is even possible, let alone a good idea? Her income and credit would support all three options, but what is the cleanest way out of this mess and best for overall credit health given she's hell-bent on not owning this car anymore?
If she can refinance the vehicle and get the mother's name off of it, that's the way to go. Then she could do what she wants with the vehicle.
July 2013 score: EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
Goal Score: All Scores 760+, Newest goal 800+
Take the myFICO Fitness Challenge
Current scores after adding $81K in CLs and 2 new cars since July 2013
EQ:809 TU 777 EX 790 Now it's just garden time!
June 2017 update: All scores over 820, just pure gardening now.
Thanks, that's what I think, too.
She keeps asking me if she should try to trade it in. Anyone know the likelihood of a dealer touching a car with a $10k loan against it when it's under water? She'd really have to take it in to be evaluated to know how much under, but from what I can gather it's probably $2k under water. I've never dealt with trade-ins before let alone such a complicated one.
