7-8k negative equity, please help

Anonymous · ‎04-10-2015

When I had a credit score of 630, I bought a 2010 Corolla and signed on the dotted line and left. Almost two years later, I am in negative equity with 7-8k. My score is now 708. My monthly payment on the Corolla is around 354, and I have 53 payments to go. I test drove an Chevy Equinox today. Chevy is offering me a 430 payment for a three year equinox lease. The Corolla is worth around 9K but Chevy offered 11K for it due to the low mileage (36k miles). What should I do??!!!

jrrsmith18 · ‎04-10-2015

@Anonymous wrote:
When I had a credit score of 630, I bought a 2010 Corolla and signed on the dotted line and left. Almost two years later, I am in negative equity with 7-8k. My score is now 708. My monthly payment on the Corolla is around 354, and I have 53 payments to go. I test drove an Chevy Equinox today. Chevy is offering me a 430 payment for a three year equinox lease. The Corolla is worth around 9K but Chevy offered 11K for it due to the low mileage (36k miles). What should I do??!!!

I'm actually in a similar position to yours right now. Last year I bought a Cruze at a 17% interest rate due to my sub 600 scores. Over this past year I've worked on rebuilding and have gotten them into the 650-660 range, figured now is a good time to try and get out especially with all the rebates Chevy has out. Check out Chevy's website they list all the rebates and incentives they have out, make sure you're getting all that is offered to you. There is also a 15% off msrp deal (only on a buy) which is what I'm after to wash off some of this 6k negative equity.

Anonymous · ‎04-10-2015

@Anonymous wrote:
When I had a credit score of 630, I bought a 2010 Corolla and signed on the dotted line and left. Almost two years later, I am in negative equity with 7-8k. My score is now 708. My monthly payment on the Corolla is around 354, and I have 53 payments to go. I test drove an Chevy Equinox today. Chevy is offering me a 430 payment for a three year equinox lease. The Corolla is worth around 9K but Chevy offered 11K for it due to the low mileage (36k miles). What should I do??!!!

You can role the negative equity into your current lease but that will increase your payment. Or ou can try selling the car privately via carmax to see if they will give you something more than the dealer? The last option is to pay the difference .... That is a lot of money though..

Anonymous · ‎04-10-2015

I put myself through a cycle of trading in cars with negative equity and then a few years later doing the same. That was years back but it left a strong impression with me that rolling negative equity into a car loan or lease is a tough way to go. The reality is you will pay for the 7-8k and because the dealer has to move numbers around to get the deal financed you end up paying more for the car than if you had a clean and simple deal without the burden of this negative equity. My point is if you do a deal with negative equity do so fully understanding that you will pay for it, you are really the only one who can answer what is best for you. Unfortunately there are no magic bullets here. Leasing is a decent strategy for some folks, just make sure you do some research on the money factor they are charging so you can see the interest rate and of course make sure you can live with the mileage and condition requirements. Best of luck

B335is · ‎04-11-2015

So you have around $18k of remaining payments on the Corolla and Chevrolet is offering you $11k? How did they suggest handling the $7k difference? Depending on your credit situation you may have difficulty finding a lender willing to finance or roll that amount into the new Equinox. As pointed out already, you're going to most likely come out far ahead if you sell the vehicle yourself (dealers always low ball you for trade ins). Have you looked at the KBB for your Corolla?

RussianPassion · ‎04-12-2015

Negative will follow you around. I would suggest you lease whatever you want to lease for the shortest term possible and trade your old car in rolling the negative into the new lease payment. Some leases include GAP coverage in their aquisition fee which you MUST have (read: NEED and SHOULD get, but not obligated to get). Then when your lease is up, walk away from it and get another lease. That way you'll rid yourself of the negative in the shortest amount of time possible.

RussianPassion · ‎04-12-2015

By shortest I mean your typical 30-36 months leases. Do not "stretch" it to 48 months just to get the payment down.

SamsungHDTV · ‎04-13-2015

I think that buying a new car is counter-intuitive. They are offering you more on your trade because they are making more money on the sale. Its not going to help you get out of negative equity.

The best way to get out of negative equity is to pay extra to principle. As much and as fast as you can afford to. Then refinance when and IF you can catch up to where the LTV is at around 110% where lenders will find it an acceptable range.

StartingOver10 · ‎04-13-2015

@SamsungHDTV wrote:
I think that buying a new car is counter-intuitive. They are offering you more on your trade because they are making more money on the sale. Its not going to help you get out of negative equity.

The best way to get out of negative equity is to pay extra to principle. As much and as fast as you can afford to. Then refinance when and IF you can catch up to where the LTV is at around 110% where lenders will find it an acceptable range.

^^^Agree 100% with Samsung.

It is very easy to have negative equity by not putting enough down on the original purchase and/or having a high(er) interest rate and stretching out the payments for a longer period of time (60 months, 72 months, etc). Or rolling negative equity from your current vehicle into a new vehicle purchase. Or a combination of all these things.

You cure negative equity with $$$ and/or time and money.

It's a matter of deciding when you are going to pay the extra principal: 1) at the time of purchase so you have lower payments and present as a stronger buyer or 2) later on after you have had the vehicle for a few years. Sometimes it is unavoidable to put down less money at the time of purchase, but you can fix that at any time by paying extra toward your principal to bring you inline with market values like Samsung suggests.

RussianPassion · ‎04-13-2015

I don't agree at all... You guys are over simplifying it. So let me give you an example... 2010 Corolla with 8k negative... Yes you can pay it of and have a Corolla, but what is important is the book value of that vehicle. So in other words your 2010 Corolla will cost you whatever its worth plus the negative. If you have a chance to upgade the vehicle in a number of way, it is the way to go. Would you rather have a 2010 Corolla that you overpaid for by 8k or would you rather have a newer vehicle with less miles that will cost less to upkeep that you overpaid by 8k?

There really is no direct answer, however, if you make it trivial, rolling huge negative into a short term lease is THE best option if you want to start fresh and drive a car that will not cost you more than lease paymetn + insurance and fuel to operate.