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Another dreaded negative equity thread

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Member

Another dreaded negative equity thread

I know i know.

 

Just hear me out. 

 

So in Oct of 2014 my spouse and I purchased a 2015 vw golf (non diesel, though we will get to that in a minute.) We initally planned to do the loan in my name, but my credit, (still recovering from a shortsale on my old home) was in the high 500 range. We put it in her name only, and because we had negative equity in our previous trade, we ended up financing in solely her name. 

 

Her credit scores from all 3 are in the 720-735 range. We got a so so rate (5.05%) mostly on account of the sheer amount that we financed and the term (over 72 months). 

 

To make a long story short, the value of the car has simply not held up, given vw's emissions scandal. I'm starting to worry about the long term costs of vw ownership, which I know are on the average, higher than japanese or domestic makes. However, what nada says my car is worth (14800, she is in tip top shape, 29k on the odo) is far below my outstanding balance, (which sits at right around 23k.). 

 

After doing the math, it seems like I'll never actually come out ahead as far as equity is concerned....basically, not until the car is paid off. 

 

I've had some people suggest leasing as a way to get rid of the negative equity...in simple terms, if could get a car on lease that is on manfrs' special, i could probably end up with roughly the same payment, but on a newer car that wont have any miles and will hold hits value better. (to mileage: i drive less now then i did most of the first year we've had the golf, so i wont have the same mileage a year from now on a newer car. to the value: we plan on getting something like a subaru or honda).

 

Granted, the only way this would 'work' is if the dealer let us walk away from the lease after 3 years. In 3 years, we'd be roughly in the same place as the golf: still too much negative equity and trading out would still drag some of that amount with us. Or, in 3 years, we could walk away from a vehicle that, yes, probably would still be too much to finance and keep...but as long as i was within my lease terms....thats it for the negative equity right? 

 

My credit score has improved (630 range) and hers is still great (same as above).

 

Does this sound like a reasonable scenario?

 

Would purchasing a car that has lots of incentives on it be a better alternative? (certain hondas and toyotas have 4-5k off sticker currently....i figured that would help take the sting off of some of the negative if the lease doesn't sound feesible)

 

 

all thoughts are welcome.

18 REPLIES 18
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Moderator Emerita

Re: Another dreaded negative equity thread

Why don't you keep the car for now and continue to make your payments as scheduled or acclerate the payments?

 

29k miles is nothing on one of today's vehicles.  

 

You only get hurt by negative equity if you choose to trade or sell at the time when you have negative equity.  If the vehicle is still in good shape, there is no earthly reason to hit yourself with the negative equity now. 

 

My vote:  keep your current vehicle

Message 2 of 19
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Re: Another dreaded negative equity thread

Fair point. I could just drive her into the ground. Its mostly knowing that by the time i do have equity in her, the cost of ownership is gonna be something I'm afraid of affording financially. 

 

I know 29 k is 'nothing' on a modern car....but it is 'something' to those determining what its worth. And since i bought the car when my commute was much larger than it is now, i'll never be able to recoup those miles...and on the flipside, a newer vehicle wont have the same misfortune.

 

if you look at nada, i'm getting dinged about 500 dollars on my trades value, which will only continue to increase since i started off on the wrong tire, so to speak.

 

also, if i were to walk away from a lease at the end of 3 years and start fresh, id techincally be in a better spot wouldn't I?

Message 3 of 19
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Re: Another dreaded negative equity thread

I just went down this road.  Almost exactly.  Every lease was 600-700 dollars (even though they started out at 299-399). This was with Tier 1 pricing.  Leases DO get rid of the negative equity in 3 years, but you pay for it monthly.  For me, at least, it wasn't even a realistic option.

Message 4 of 19
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Re: Another dreaded negative equity thread

If you don't mind me asking, what sort of negative equity were you dealing with in your case? I'm looking at almost 9k. i have a friend who was in the same situation and is in a ford lease that is running him in the high 200's which he plans on walking away from once the 3 years are over. He must've gotten either a killer rate or a lot of msrp.

 

 

How much was the car you were looking at, msrp wise? Right now the vehicle we are eyeing is a 2016 honda accord lx. The lease with no down is 250 a month. after our negative equity, we figure our payment would be in the same range it is now. (mid 400's)

Message 5 of 19
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Re: Another dreaded negative equity thread

7k neg equity.

 

30k vehicles.

Message 6 of 19
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Re: Another dreaded negative equity thread

I ended up finding a killer deal on a vehicle I liked better (was also one year newer and had 30k less miles) and chopped my neg equity down to 2k, keeping my terms and payment the same.  I ended up very happy.

Message 7 of 19
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Re: Another dreaded negative equity thread

Wow on a used car too? nice. I've always been under the impression negative equity was harder to pass off on used cars.

Message 8 of 19
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Re: Another dreaded negative equity thread


@eldaino wrote:

Wow on a used car too? nice. I've always been under the impression negative equity was harder to pass off on used cars.


It is.  100%.  I found the right thing at the right time from the right person.  It wasn't necessarily a "typical" deal.  They had a car that they didn't have a lot in and were able to make it work to my liking.  Salesperson probably made squat on the deal (they call that a mini) but they kept a customer happy. 

 

I'd be trying to do that for 2 weeks.  Took me until the last day I was planning on trying to find something that worked for me. 

Message 9 of 19
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Re: Another dreaded negative equity thread

 that is awesome. Maybe I just need to wait a day or so more and find a delaer that is really despearate to get something off of their lot, similar to you. I'm not conerned with a salesperson making as much money of of me as he or she could have, i've been screwed enough to know they always find a way to make i tup

Message 10 of 19
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