10k underwater on loan. Should I volunteer for repo?

[Anonymous]

Long story short: lived and worked in Singapore for years but did so much partying that I barely saved. Returned to the US in January 2016 when I closed my business there. After a month I realized it would be impossible to live without a car as I was staying in a deceased relative's house 15 miles from civilization. Always maintained US citizenship, address, and credit.

Purchased a new 2016 Subaru Forester in February 2016 with no money down. After a year of doing some long dreamed of road trips around the country and putting 35,000 miles on the car, I decided that America is not for me. So I moved back to Singapore and opened a new business. I will not return to the US for at least a year. I probably won't return for several years. I have no plans to apply for any new credit in the next few years either as I already have $55,000 in available credit. My score is 660, no negatives, 1 inquiry, but high utilization rate.

So my car is parked in a relative's garage. No one is driving it. I don't want it anymore but I am unable to sell it as it is only worth about $15,000 and I owe $24,705. The loan was for 72 months with 8.6% interest (supposedly so high because it was my first new car purchase in the US). My monthly income is $6700 but my cost of living is pretty high.

My monthly payment is 503 for the car and 106 for insurance. That's 609 a month for a car I can't and won't use at least for the next year and possibly not for even longer.

As bad as it is, a voluntary repo is starting to look good. Here's what I see for options:

1. Keep paying 609 for 60 months, which equals 36540. At that point (in 2022!) the car should be worth about 8900. So even if I sell it for value I will lose 27,640.

2. Keep paying 609 for 32 months for a total of 19,488. At that point I can sell the car and get out of the loan, but I would then lose 19,488.

3. Pay $10,000 difference between what is owed and the value and get out of the loan. In that case I lose $10,000. Currently I have about $300 in savings, so this isn't really even an option.

4. Do a voluntary repo. Take a hit on credit score that I don't need but still lose $10,000 in deficiency. By 2022, my credit score would be almost back to normal and the repo would be just 24 months from disappearing from the report all together.

Are there any other options? Nearly everyone recommends against a repo, but how is it the worst option here? I would save $17,640 over paying off the car as scheduled. So I could even buy a newer Subaru for cash if I were to want a car in 2022!

Thanks for any help.

[Anonymous]

At this point I would start making extra payments on principle to start to bring that loan balance closer to value.  Any extra you put toward the balance now, is money right off the top of any deficiency you end up taking later on.

[Anonymous]

The reality is if they repo that car the debt doesn't magically go away.  They will sell it at auction for even less than KBB and you will be legally responsible for the balance plus interest plus all of the other fees.  I realize if sucks that you bought a car that depreciated but guess what? Cars are depreciating assets.  You play you pay.  

Rather than taking the chance of having a higher legal liability I would take out a loan for the 10k difference sell they car and use the 10k to pay it off and release the title and chaulk the whole thing up as an expensive lesson.  That would be better than destroying your credit and having to pay far more than 10k for all of the stuff I talked about above and you will have crappy credit, get a judgement against you and all kinds of other harrasments.

[DeeBee78]

Is it worth ruining your credit for $10,000? Your credit card lenders aren't going to let you keep your $55K of available credit if you default on a car loan. They'll all take AA against you so fast, you'll think you have a wallet full of Barclay's cards. 

Can you put the car up on a ride share service like Turo? Is there anyone you trust looking for a car that could take over payments?

[Dalmus]

Or maybe if nobody wants to take over the complete payment (it's kinda high), you could subsidize a lower payment for a younger relative. Have them pay you $300 and you eat the rest, for example.

If you do that, make sure your insurance has gap coverage. Maybe you'll get lucky and the younger relative will total the car, then you'll be off the hook! (Just joking!)

[StartingOver10]

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@Anonymous wrote:

The reality is if they repo that car the debt doesn't magically go away.  They will sell it at auction for even less than KBB and you will be legally responsible for the balance plus interest plus all of the other fees.  I realize if sucks that you bought a car that depreciated but guess what? Cars are depreciating assets.  You play you pay.  

Rather than taking the chance of having a higher legal liability I would take out a loan for the 10k difference sell they car and use the 10k to pay it off and release the title and chaulk the whole thing up as an expensive lesson.  That would be better than destroying your credit and having to pay far more than 10k for all of the stuff I talked about above and you will have crappy credit, get a judgement against you and all kinds of other harrasments.

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^^^workingfor850 makes an excellent point.  To add a couple of comments to his/her point, see below:

• Yes, they will sell it at auction for a very low amount and you will be responsible for the deficiency balance and fees as mentioned - how do they collect it - by getting a judgment against you
• How long does the judgment last? Depends on your state's statutes (where the vehicle is repo'ed) - usually 20 years +  a renewal if not paid by the end of the 20 years. Some states are 10 years + renewal
• the judgment accrues interest at the statutory rate the entire time it remains unpaid.
• A voluntary repo is the same as an involuntary repo as far as consequences go - makes no difference on your CR or in the judgment. Might be slightly lower fees, but even that is unknown.
• Why would you destroy your credit for the next 10 to 20 years (or more) over $10k.  It makes no sense at all when you are bringing in $7k/month. 

Sell your vehicle private party and I bet you aren't as upside down as you think....

[Anonymous]

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@DeeBee78 wrote:

Is it worth ruining your credit for $10,000? Your credit card lenders aren't going to let you keep your $55K of available credit if you default on a car loan. They'll all take AA against you so fast, you'll think you have a wallet full of Barclay's cards. 

Can you put the car up on a ride share service like Turo? Is there anyone you trust looking for a car that could take over payments?

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That was good(Barclay). Can't stop laughing...

[Anonymous]

Can you refinance for a smaller interest rate and minimize some of the potential loss as you continue to make payments?

[willwar14]

Hmmmm.. from what I have seen Subarus tend to hold their value more than most brands. That being said, what trim level is your Forrester?

[Anonymous]

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@willwar14 wrote:
Hmmmm.. from what I have seen Subarus tend to hold their value more than most brands. That being said, what trim level is your Forrester?

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The OP posted once and then checked out.  My guess is he fled the country and left the car to be repossessed. I hope I am wrong.