topic Re: Negative Equity for car loan in Mortgage Loans

Negative Equity for car loan

Anonymous — Wed, 19 Mar 2008 02:39:33 GMT

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?

Re: Negative Equity for car loan

Anonymous — Wed, 19 Mar 2008 04:07:18 GMT

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!!!

Re: Negative Equity for car loan

Anonymous — Wed, 19 Mar 2008 13:02:39 GMT

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...............

Re: Negative Equity for car loan

Anonymous — Wed, 19 Mar 2008 14:39:44 GMT

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.

Re: Negative Equity for car loan

Anonymous — Wed, 19 Mar 2008 14:52:09 GMT

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.

Re: Negative Equity for car loan

tryingtogetitrightnow — Wed, 19 Mar 2008 15:11:30 GMT

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! :-)

@Anonymous 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?

Re: Negative Equity for car loan

Anonymous — Wed, 19 Mar 2008 17:06:12 GMT

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?

Re: Negative Equity for car loan

Anonymous — Wed, 19 Mar 2008 17:09:58 GMT

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...

Re: Negative Equity for car loan

Anonymous — Wed, 19 Mar 2008 17:20:14 GMT

It never hurts to try.

Re: Negative Equity for car loan

tpere925 — Thu, 20 Mar 2008 04:31:58 GMT

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!

Re: Negative Equity for car loan

Anonymous — Thu, 20 Mar 2008 06:24:21 GMT

Careful. Sometimes gap only lasts so many months. Check how long your gap term covers your loan. YES. I have been in situations were it was cheaper to trade in the old vehicle at a loss to get out of a high interest payment and in to a new car at a promo cheap int payment. I've seen dealers roll quite a bit of negative equity. It can't hurt to ask. But it depends on your credit score how much they will roll over.

Re: Negative Equity for car loan

Anonymous — Thu, 20 Mar 2008 15:10:34 GMT

My boyfriend is in the car business and the best thing to do with negative equity is to roll it into a LEASE. I had an Xterra that I was upside down by about $5000 that I rolled into a 39 month lease. When you roll into a lease, your lease payment is a bit higher than a normal lease would be, but after the lease term the negative equity is gone. The one important thing to note that if you do this, you CAN NOT buy the car at the end of the lease, otherwise you'll still be upside down. Look around on the internet, you'll see it's a really common thing to do. Also, most leases included GAP insurance.

Re: Negative Equity for car loan

Anonymous — Thu, 20 Mar 2008 15:55:24 GMT

Just FYI, my State Farm agent told me they no longer write GAP policies.