topic Re: Thinking about Trading-In, but I'm Upside-down.... in Auto Loans

Thinking about Trading-In, but I'm Upside-down....

taylorcherri — Sat, 12 Dec 2009 22:29:37 GMT

Hello Everyone,

Here's my situation. I have a 2007 Ford Focus that I have a 72 month loan at 4.5% for $318.64 per month. I bought it in May 2007, and owe about $13K on it. The trade in value for this car is about $6K, and the retail value is $9K (according to kbb). So as you can see I'm upside down.

Now that I'm living in Chicago, I would like to get a small SUV to navigate through the snow. I'm also 6ft tall and it really cramped in the Focus. But I'm trying to be smart about this. My credit score isn't very good (559TU), but my mother co-signed my loan and that's why it is so cheap. So what should I do:

-Should I keep my Focus and just pay it off?

-Should I trade-in my car and add the neg. equity to the new car loan?

-If I do this, would my best option be to get a cheaper car? Like something under $15K?

-Should I sell my car, pay off the neg. equity, and then buy a new car? (I could use public transportation....)

I really wouldn't want to spend much more per month on a car loan than what I'm already paying. If possible, I would like to be making payments that are under $300. Your responses are appreciated!

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Sun, 13 Dec 2009 05:44:13 GMT

From someone who has sold cars in the past hopefully I can help you.

1. DO NOT TRADE IT IN AND ROLL THE NEGATIVE EQUITY!!!

I have taken many peoples trade who were upside down from $1000-$8000. IT IS A MISTAKE. $1000 might be considerable in some situations. But consider this you are currently paying $318.64 per month and are we will say if you can find a generous deal $5000 upside down. When you finance a car you can approximate $20 a month per $1000 financed. So with $5000 you have $100 worth of car payment. If you bought another vehicle and traded this if that vehicle was the same cost as this one you would then have a $418.64 a month car payment. Since you are $5000 in the whole if you are trading here is what you have:

1. Car traded - Now you have no transportation and have a $100 a month car payment. This is not good.

2. Now you need a car and dont want to go over $300 a month so you can only afford to buy $200 a month worth of car. That is $10000 worth of car. This does not count interest. So that leaves you looking for a SUV for $10000. Obviously you cant get a new one which isnt always the best move anyway. But if you buy a used one for say $9995 then you have just effectively bought a $10000 SUV for $15000. You are now $5000 in the whole on resale value if you didnt pay over book value for the SUV. And if you look at trade in you are more than that.

See where this is going down the road now?

My recommendation would be if possible keep the car and drive it when you can. If it snows then you could fall back on public transportation?? This is if you want to keep it. If you dont want the car at all then you have three choices.

1. Trade it in and roll the negative equity (but trust me this is a vicious cycle that is the equivalent of getting caught up in payday loans. Because when you roll the equity it just follows you and gains interest on every loan. Odds are by the time the next car is non driveable or you want to trade it you still owe on it. I have seen very few climb out of this whole in any decent shape)

2. Sell it like you said and pay off the negative equity. (But here is the ? do you have the cash to cover the difference? If not you will have to obtain the cash first because if you owe $13000 and find a buyer for $9000 their $9000 will go to the loan owner and they still need $4000 before they will release the lien on the title. You cant sell it until it is paid for. So this leaves you borrowing the difference if you dont have it saved. ) (I am assuming you dont from the way you said you were negative otherwise you could pay it off at trade in and come out even)

3. Let the car go on repo (now you screw your credit further and I doubt your mom will appreciate the repo damage to her credit either.

I hope this helps and by all means if you have any more questions let me know.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Sun, 13 Dec 2009 22:09:56 GMT

Hello taylorcherri,

If you are willing to send me your trade in info such as miles, is it a 4 door? is it a S,SE,SES,ST trim? Color? If you want you can send me the vin # but you don't have to. I have a dealer log on and i can look up what those cars are selling for that wholesale. Please keep in mind Kelly blue book means nothing. The only thing that matters is wholesale becuase they buy the car at wholesale and resell it at retail.

Also, it depends on what your focus is wroth. I'd say it will be very hard for you to keep your payments the same or even close to the same per month. The problem is you took a 72 month loan. The longer you carry out an auto loan the more likely you are to go upside down.

Re: Thinking about Trading-In, but I'm Upside-down....

taylorcherri — Wed, 16 Dec 2009 04:22:45 GMT

Hi okstatefan-

Appreciate the response! LOL @ choice #3... my mother would definitely not appreciate that! Your point is well taken. I guess my logic was that I have 13K left on a car that I don't want anymore... so why not pay that 13K towards a car that I love? But you have opened my eyes alot.

I was wondering.... is there possibly a 4th choice? What if I traded in my car, but had 5K to put down on another car? Someone suggested that to me. Would that allow me to come out even? I'm not trying to get a new car right now, I could wait and do it in the summer or later.

Re: Thinking about Trading-In, but I'm Upside-down....

taylorcherri — Wed, 16 Dec 2009 04:28:45 GMT

DrummerboyChris-

Thanks for responding. I don't have my vin# in front of me, but here's the stats on my car:

Ford Focus SE

2007

4 Door

Black

I'm not sure what you mean about the trim.

Just a little background: I know NOW that a 72 month loan is ridiculous.... but at the time I was 22, living in Georgia without a car, and it was taking me 2hours to get to work everyday.... I was desperate and they GOT me... I think I put $250 down. Totally not worth it. But you live and you learn!

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Wed, 16 Dec 2009 04:45:33 GMT

Well yes if you wanted to go that route you could open that option. I didnt go into that simply because I did not have any idea as to your financial situation outside the car. If you put 5K with it that would essentially take you down to $8000 owed on the loan. Now this would open up two new options:

1. Now you owe $8000 on a car that trade in is $6000. This is not great obviously but is not horrible compared to the previous scenario. You might could even get up to $7000 for the car. I dont know where you got the $6000 and it will vary dealer to dealer even with a "book value". If the dealer has high demand for that car or knows they can move it quickly you could get more for it. This all factors into supply and demand. So I would definately shop around and see who will give you the most trade. If you are wanting to get a "New" car this may mean going to two or three ford, chevy, etc. dealerships because you obviously have to trade it to someone who has what you want. If you want a used car that has already had the depreciation then you would have more options of dealers to trade in. You may find 10-15 dealerships that all have cars you like and so you could let who gives you the most help you decide what to buy. This way if you did not overpay for your next vehicle and include the $5000 you would only add $1-$2K onto the car you buy which is not totally horrible.

2. Now for option 2 (The one I like and recommend). You said you have $6k trade in $9K retail. I would recommend calling and getting your exact payoff on the car. If it comes back $13K even for example and you have $5K to put with it that leaves you short $8K to payoff the vehicle. Now you take and list the vehicle on craigslist, autotrader, local papers, flyers at work etc advertising the car for sale. If you just want to clear the loan you need $8K out of it so I would list it for $9K-$9500. I say this because if you have ever tried to sell a car EVERYONE that looks at it will want a deal and will try to talk you down. This will give you $1000-$1500 that you can allow them to talk you down. This allows you to get what you need for payoff and this makes them think they are getting a great deal because they just saved $1000. Now you take and put your $5K with their $8K payoff the bank and have the bank sign the title as clear for the lien and you sign it to the new buyer. Now you have a clean slate and owe nothing and can go find your new vehicle. This may take a little time but you have had the car this long surely you can tolerate it for one or two months while you sell it.

Not to mention you say waiting until the summer which means 6 more car payments. So take those 6 payments after interest off of the 13K and you may have it down to $11K or so so now you add your $5K and if you sell it for $8K you have $2K left over after clearing your car and have $2K you can put down on your next loan so you are more likely to get approved, less likely to go upside down, and will have lower payments.

Trust me I used to sell cars when I was young and once I got in and saw this cycle and saw people go thousands of dollars upside down and get $400-$500 car payments that they could barely afford I couldnt take it and just quit. It didnt help I worked for a crooked dealer but thats another topic of discussion. I am glad my first response helped you see the big picture and hope this one may inform you alot as well. Like I said personally I think option 2 is best as you will get more for your car and will come out ahead of the deal on this one and your next one instead of getting screwed on this one and starting in the hole on the next one.

By all means if you have any more questions or want more explaining let me know I have no problem trying to help.

Good Luck on your situation and keep me posted.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Wed, 16 Dec 2009 04:50:44 GMT

@taylorcherri wrote:
DrummerboyChris-

Thanks for responding. I don't have my vin# in front of me, but here's the stats on my car:

Ford Focus SE
2007
4 Door
Black

I'm not sure what you mean about the trim.
Just a little background: I know NOW that a 72 month loan is ridiculous.... but at the time I was 22, living in Georgia without a car, and it was taking me 2hours to get to work everyday.... I was desperate and they GOT me... I think I put $250 down. Totally not worth it. But you live and you learn!

On this note not sure what drummerboy is using for prices and not sure where you got yours but different dealers use different guides. We ALWAYS used NADA and you will find very few people use kelley blue book. You can check the NADA value at www.nada.com

I just checked and without knowing your mileage and all options it looks like your car is worth more than you thought. With no added options and looking at 35K miles trade in was $6500 and retail was just over $10K. I think you should check that site enter exact mileage and options and see what you come up with. THis may even help you be more than $2K ahead if you take option 2 above.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Wed, 16 Dec 2009 04:58:00 GMT

Without having the miles on the car it could be possible to get around $6,200-$6,800 for you trade. With that being said if you still owe $13,000 on the note then in order for it to be an even wash you'd need to put down around $7,500 for a new car. Another option you can do is put $5,000 and roll the rest of the money that you are upside down into the new car note.

You could most likely talk them down to invoice price on the new car. If not invoice, very close to invoice. Keep in mind a dealers true cost is not the invoice price. If you want to get another ford focus currently on 2010 ford focus's they have $3,000 cash back or 0% APR for 36 months. That would cover the money you rolled into the new car plus take alittle more off of the price. Good luck and i hope i helped.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Wed, 16 Dec 2009 05:00:13 GMT

In my area we use Manheims.com which you need a dealer Log on to get on. I've never used Nada.com before but i'm sure it's one of the same. That being wholesale prices.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Thu, 17 Dec 2009 14:10:26 GMT

Keep the focus and suck it up as a decision you made but have to live with.

if you credit score is so low you will not be able to roll that much negative into a new deal.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Thu, 17 Dec 2009 18:16:02 GMT

@Anonymous wrote:
Keep the focus and suck it up as a decision you made but have to live with.

if you credit score is so low you will not be able to roll that much negative into a new deal.

usmc the OP has PLENTY of options. I dont see why they would have to "suck it up". I have outlined multiple options that are very doable. Not sure why the attitude but they are just looking for help. And I dont see why they wouldnt be able to roll negative equity I financed plenty of people with lower scores and they were upside down when I sold cars.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Thu, 17 Dec 2009 19:27:50 GMT

@Anonymous wrote:
@Anonymous wrote:
Keep the focus and suck it up as a decision you made but have to live with.

if you credit score is so low you will not be able to roll that much negative into a new deal.

usmc the OP has PLENTY of options. I dont see why they would have to "suck it up". I have outlined multiple options that are very doable. Not sure why the attitude but they are just looking for help. And I dont see why they wouldnt be able to roll negative equity I financed plenty of people with lower scores and they were upside down when I sold cars.

I differ.

the OP, with the information given in their first post has very few options.

1- HE IS NEGATIVE $7K

2- HE WANTS A PAYMENT OF LESS THEN $300.

3- HE WANTS AN SUV.

4- HE HAS A SUB 600 CREDIT SCORE

OK:

1- 7K negative is a $140 a month aspect of his payment righ there, asuming he rolls it. If he doesnt roll it, to be at his payment that leaves him with finding a less then 14K vehicle he can get financing on that meets his "needs" and which requires of course 7K-9K to put down.

2- If he rolls the negative then he needs to find an SUV under 7K that he can secure financing while carrying 7K in negative. I do not know anyone who will do that LTV. And I do not know if he will be happy with a 7K SUV

3-If he goes for new then he needs to find a SUV that will have enough rebates to offset the negative, but that requires a vehicle with a high MSRP and then the final transaction will bust him out of 300 a month in payment.

The numbers do not work out for what he wants and wants to pay.

Edited to add:

Also, and lets be honest, getting into any SUV will increase his monthly vehicle cost by about 100-150 in gas/insurance/maintenance a month from the Focus

Message Edited by usmc58555 on 12-17-2009 11:27 AM

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Thu, 17 Dec 2009 19:37:14 GMT

Let me start by saying after clicking on the nada.com link i can say it's way off. I tested that by looking at 3 cars and nada posted numbers that were too high in trade in value. Even my price of $6,200-6,800 was wrong. I was factoring only 20k miles on the car and i must of put in that it was an SES. If i had to guess that car has around 60k on it. If that is the case i'd only offer her $5,500 tops and with it being Black in color that doesn't help becuase 99% of black cars out there look very bad due to swirl marks in the clear coat.

Reselling the car in 6 months on her own really doesn't help due to the value will only go down more in 6 months and most likely it will go more upside down. Kepp in mind theres no really solid facts about it going more upside but there are facts about it will only keep losing value. I don't see how the party in question will spend $300.00 a month or less for an SUV with rolling in at least 7k on top of that car. usmc58555 makes a very good point. We are all here to help of course but the facts are the facts.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Thu, 17 Dec 2009 22:10:57 GMT

Opinions differ but as said I have laid out options that do work. The best option would be to sell private party. After we start climbing out of the recession and gas prices start skyrocketing again you will have no problem selling a ford focus for what the OP will owe. Then when they get a clean slate they can easily go from scratch and get an SUV for less than $300 a month. And NADA is going to vary with your guide but each dealer has a guide. You may use manheim but I never once used manheim we always went NADA so that is irrelevant. It just depends on the dealer. But either way the best option is a private party sale. If they do trade in you are right they will have to go up from the $300 but the deal is still workable if they can afford a little more.

And you are right Facts are Facts and the Fact is that NADA isnt higher than actual value to dealers who live by NADA. You like Manheim I dont thats a preference but the value guide a dealer goes by is the value you can get. So if Manheim is $1000-$1500 lower than NADA a customer would be ill advised to trade their car to your dealership when others will give them NADA value.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Thu, 17 Dec 2009 22:31:33 GMT

Sorry, but I have to go off topic for just one post. Here are the facts: Kelly blue book/Nada/Edmunds/etc. means nothing becuase consumers can view it and it is NOT gong by what cars have been sold at the acutions for lately. Dealerships buy at wholesale and sale back to consumers at retail. In order to log on to Manheims a dealer license # is required. This is a way of making it so Joe the home builder can't view the numbers. I've never heard of any new car dealer using a website that consumers can view to come up with their trade in offers. Also Manheim numbers change every single day. Look at all those sites and tell me how often they change??

Sorry i sound like a car salesman but that burns me out when people talk about all those consumer sites.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Thu, 17 Dec 2009 22:44:19 GMT

I dont care what bums you the FACT is that some dealers do use "consumer" sites. Not all dealers screw people over. "Dealer only" sites and numbers sound pretty inside to me but at ANY RATE when we took a trade in we used NADA when we sold used vehicles we priced them in accordance to the NADA values. No wonder people dont trust dealers.

Either way just because thats how your dealer does it doesnt mean the rest do it that way. There are thousands of dealerships across the nation Not all use your methods WE USED CONSUMER ACCESSIBLE NADA RELIGIOUSLY and showed it to the customers when we took trade ins and when we sold cars. Some dealers are honest with their consumers and some arent. I dont buy from dealers like yours for that reason. The dealer I use now is a Ford Dealer and they are very honest and open with their customers and thats why I ONLY buy from them. So sorry if you dont think the honest dealers exist but they do I have worked for them and buy from one now.

OP - Sorry your thread has been highjacked. I laid out all of the viable options I know of for you and hope one works well for you.

Drummerboy - message me again when you can open your mind to the way others think and do business not just yourself and dealer in your little bubble.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Thu, 17 Dec 2009 22:59:17 GMT

LOL, sorry to jump of thread again. Are you getting alittle worked up over nothing or what?? Funny you should think i'm a dealer, i'm not. I buy and sell cars on my own now. Funny you should use Ford as an honest dealer. I used to work for Chapman auto group (Ford) one of the biggest auto groups in the tri-state area. We were very honest as am I. Just beucase a dealer has numbers that the consumer does not have doesn't make you dishonest. Do you want a dealer to sell cars at cost?? If i walked into every car deal telling you what i paid for the car. I wouldn't make any money to feed my family. First rule in selling cars is to never lose your cool brother.

Now lets get back on topic and help OP find a car and stop all this threadjacking my fico friend.

Re: Thinking about Trading-In, but I'm Upside-down....

taylorcherri — Fri, 18 Dec 2009 00:49:28 GMT

Fellas! Fellas!!! Relax.... Woooo-saaaaa

I appreciate all your responses. And I'm glad you all are so passionate about it. First things first- this HE is a SHE, nice to meet you.

I am a lady.... and most ladies don't know much about cars so this is why I asked.

I don't believe in sucking it up. I realized that I messed up, but if there is an option out there for me to get out of the mess I created, then I will find it. Frankly, this isn't so much about me wanting a new car- yes I would loooove to have one- but this is more about me getting out of this situation I put myself in.

oakstatefan- I really like the option of paying $5K towards my loan and then selling my car on craigslist or something. That way my hands are washed of the situation, and I can start fresh on looking for a car. I have about 40K miles on my car- mostly highway miles from living in GA and travelling.

umsc- You are right about the credit score.... so this is why I'm asking questions and weighing my options. I most likely could get a co-signer.

Re: Thinking about Trading-In, but I'm Upside-down....

taylorcherri — Fri, 18 Dec 2009 00:54:31 GMT

I can afford the gas/maintanence/insurance increase.... I just don't want to be paying a ridiculous amount for a monthly payment because of bad decisions. If I pay $400 a month for a car, it better be a good deal- not because of being upside down, high apr, tricked by the dealer, etc.

Thanks for being the devil's advocate I like hearing both sides.

Re: Thinking about Trading-In, but I'm Upside-down....

Anonymous — Fri, 18 Dec 2009 01:11:40 GMT

It's so hard and unfair to say you made a bad deal on the focus and/or just tricked by the dealer. I don't know everything about the deal. What's inportant is with the next car. Just make sure you understand everything 100% before you agree on anything. Even if you gotta keep asking the same questions keep in mind they are their to sell you a car. So if that means going over everything 8 times then oh well. whatever car/dealer you decide on for your next car just shop around becuase your biggest concern has to be your trade in and what they are willing to give you for it as it will go up and down from dealer to daler. Good luck