New Contributor
Posts: 72
Registered: ‎01-12-2008
Negative Equity for car loan
I have an 04 Mitsubishi Endeavor it has 95K miles (we went on a ton of road trips last year), the pay off amount on the loan is 17500, but KBB says it's only worth 6500 in fair condition for trade in value.  Is it even possible to rollover that much negative equity?  I know I could get a  better interest rate now with my getting better credit score (EQ 655) , (currently in DH's name at 10.7%) Should I suck it up and keep making payments or try and trade in or refinance?
I'm a homeowner! Woop woop-
Valued Contributor
Posts: 1,060
Registered: ‎02-13-2008
Re: Negative Equity for car loan
You won't be able to refinance the whole amount you owe on the car. A bank will only let you borrow the Fair Market Value for your vehicle for the area you live in.

I hear ads all the time for car dealerships offering to pay off your car up to $10K over its value to roll into the new loan, but I wouldn't suggest it.

That is a lot of negative equity to roll in and would make it very difficult to get out from under the car you replace it with. Unfortunately I think you are stuck for a while, but hopefully others will have some suggestions for you.

Although, in January I traded in my '07 Mitsubishi Eclipse and rolled in $5K to my new car (boy those cars don't hold their value!) Also, they only gave me $17,500 when KBB Trade In said it was worth $21K (Carmax only offered me $16,500)

Good Luck!!!
Mortgage Lenders Mid-Score 778 I AM A HOMEOWNER!!!!! 30 Year 5% Fixed Rate, closed on 3/18/09
Regular Contributor
Posts: 200
Registered: ‎03-11-2008
Re: Negative Equity for car loan
With that much negative equity make sure you have GAP insurance.  I hate to say this, but lets say the car gets in an accident, the insurance company thinks its better to write-off the car than to fix it.  They cut you a check based on the blue book value, your stuck with owing the bank an additional $11k and you don't have a car anymore. 
 
This is really important to have...............
Valued Contributor
Posts: 1,060
Registered: ‎02-13-2008
Re: Negative Equity for car loan
Yes and buy the GAP insurance through your Insurance Carrier, NOT the dealer.
 
The dealer will charge anywhere from $500 and up for GAP for the life of the loan.  Your Insurance carrier can offer it for a lot less and then you can delete it once you get the car right side up.  (My GAP insurance with my carrier is $11 for 6 months!!!)  The Dealership wanted to charge me $600.00.
Mortgage Lenders Mid-Score 778 I AM A HOMEOWNER!!!!! 30 Year 5% Fixed Rate, closed on 3/18/09
Regular Contributor
Posts: 200
Registered: ‎03-11-2008
Re: Negative Equity for car loan
I agree with 1111mel, go thru insurance.  On top of it probably being cheaper, its easier to deal with one company than it is two.
 
Regular Contributor
Posts: 201
Registered: ‎01-30-2008
Re: Negative Equity for car loan
I have bought new cars, then gotten rid of them 4 or 5 years later several times. I've finally come to realize how much money I have wasted that way. If you do the math, it spells it out pretty blatantly. For example, I bought a car in 2004. The payments are $490/month. So, to date it's been 43 months. So, I've paid about $21,000 so far. I owe about $13,000 on it now and it's worth about $10,000.

So, I've paid $21,000 over the last 4 years to have -$2,000 in my car. So now at this point, I could roll it over into a new car and be in the same situation (or worse) in 4 or 5 years). Or I could keep it for another 4 years and put that payment in the bank after it's paid. It will be paid off in about a year and a half, so at that point I'd have the loan paid off and 30 payments (about $15,000) in the bank. That's not counting any interest I could earn on it. Then I could buy a car outright that's a couple years old.

By the way, since I haven't been this disciplined in the past, I'm part writing this to convince myself to hold off buying a new car. Also, I have about 45,000 miles on the car, so I don't anticipate spending a lot of $$$ in car repairs. Since your car has 95,000 miles on it, that's a little different.

Either way you go, good luck! :-)



teamllovern wrote:
I have an 04 Mitsubishi Endeavor it has 95K miles (we went on a ton of road trips last year), the pay off amount on the loan is 17500, but KBB says it's only worth 6500 in fair condition for trade in value. Is it even possible to rollover that much negative equity? I know I could get a better interest rate now with my getting better credit score (EQ 655) , (currently in DH's name at 10.7%) Should I suck it up and keep making payments or try and trade in or refinance?




Starting Scores:10/09/13 EX ???; EQ 661; TU 668
Current Scores: 11/23/13 EX 655; EQ 679; TU 705
Goal Scores:700+ for all
Take the myFICO Fitness Challenge
New Contributor
Posts: 72
Registered: ‎01-12-2008
Re: Negative Equity for car loan
Thanks, y'all!  But you have only confirmed my worst fears!  I did buy GAP insurance, but from the dealer. uuugggghhh.  I guess I'll keep on driving it.  I love the car, just not in interest rate.  Lesson learned, right?
I'm a homeowner! Woop woop-
New Contributor
Posts: 72
Registered: ‎01-12-2008
Re: Negative Equity for car loan
Hmmm, I've only had the car since last March.  Will my i (State Farm) insurance company let me add GAP now? Do you think I can cancel GAP with the dealership and get refunded the unused portion? Luckily it's still under the extended warranty until 100K, but that's only for major stuff...
I'm a homeowner! Woop woop-
Regular Contributor
Posts: 200
Registered: ‎03-11-2008
Re: Negative Equity for car loan
It never hurts to try.
Established Member
Posts: 25
Registered: ‎08-19-2007
Re: Negative Equity for car loan
Hey buying from the dealer is not always a bad idea...did you compare the GAP policies?  I purchased gap through Enterprise Car sales for 350 versus paying 4/month through my ins carrier. The benifit of the GAP I have is that the GAP coverage would reimburse my 500 deductible should i total my car where as my GAP through the ins co wouldnt cover the deductible.  There is value in that!