Another upside down auto question

[Anonymous]

Hello Friends, 

what a wild ride the last 2 years have been.  
desperatley needed a vehicle 2 years ago and secured a used 2007 Ford Focus with 22% interest.  Bad I know.  But I didn't know any better.   
fast forward 2 years...  

scores range from 645-682

looking to get a used car 2018 Honda Civic $14,000 or a 2020 civic $22,000

Note:2007 focus is reaching the end of its life before a major repair is needed.  I'm guessing 3 months 

i guess my question is do I have an option here to roll negative equity into a loan for either of these cars.  Its worth noting that I have between $5-$6,000 as a down payment and still owe $7,000 on the focus 

[sccredit]

How much is the Focus worth?

[Anonymous]

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@sccredit wrote:

How much is the Focus worth?

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Kbb is 1250

95,xxx miles and normal wear and tear 

[sccredit]

IMO I would try to sell the car privately, maybe get $4k for it and pay the difference in cash. Then you have $2k-$3k cash to put down and no trade.

[Mv350]

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@sccredit wrote:

IMO I would try to sell the car privately, maybe get $4k for it and pay the difference in cash. Then you have $2k-$3k cash to put down and no trade.

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+1 on this

Private party sale, pay the remainder off and have the title sent to the new owner. I've done this multiple times. Then take your remainder and put that down on the new car.

[Anonymous]

Not a bad idea. Thanks   Never thought of that.    So what if no one bites at 4K.   I mean private party value is only 2,500

not trying to sound rude. Just trying to cover all my bases 

[sccredit]

Even at $2,500 it is double what you will get from the dealer and worth it IMO

[SarahJo]

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@Anonymous wrote:

Not a bad idea. Thanks   Never thought of that.    So what if no one bites at 4K.   I mean private party value is only 2,500

not trying to sound rude. Just trying to cover all my bases 

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I wish I could tell you different but a 2007 Focus with just shy of 100,000 miles on it won't capture the price you need to pay off the loan.  Yes, you have your down payment for another vehicle, and can combine the funds with a private sale to pay off a loan but there is the issue of the lien.  When selling the particular car you have privately with a lien, which must be disclosed, throws up certain issues with finding a quality buyer (i.e. someone who won't waste your time).  How close and what is this major repair? Can you manage to scrape up the extra funds with a little more time and combine the down payment to own the Focus car free and clear? A listing of a vehicle with that mileage and age that has no lien will sell more effectively.  Then you can take the cash from the sale and use as a down payment.

[Anonymous]

You are absolutely correct to wonder if someone will bite at the 4k...as you state private party is only 2500 ish and most will definitely try to negotiate you down from that anyway.  Even if you did find someone willing to give 4k, many may be hesitant to hand over 4k cash and not be able to receive the title promptly.  I think you have an excellent chance of rolling the negative equity in to the new loan....I’m typically not a proponent of tacking on such a large amount of negative equity on the new vehicle as this starts you off in such a negative position for this one, too.  Just based on the info/DPs you listed and barring any real baddies you should be ok as you have 5,000 - 6,000 to put down to absorb the bulk of the negative equity and still be within a decent LTV (loan to value) ratio.  Many automobile finance companies will want to stay within a specific percentage of the new car invoice i.e. they may finance 125% of invoice or some other number they qualify you for based on credit, etc.  It has been a while since I stayed up to date, so not sure if Honda has much in the way of rebates as they typically did not offer much in the past compared to the large rebates you see advertised for the big 3, but any rebates, discounts and your cash down will help you absorb that negative equity to get you in line with what a lender is willing to finance.  Do you have a credit union?  If so, check with them for their new car rates and how much loan to value / percentage of invoice they are willing to carry....they may also be the lowest apr available to you.  If you can’t make the numbers fit within those perimeters, you might see if there is another vehicle you you like that offers larger rebates to help cover?  Many have multiple rebates available including additional trade-in rebate and/or conquest rebates which you receive if you are trading in a vehicle that is a different make than what you are buying.....so you can stack extra “money down” against the purchase price to be in line with where a lender is comfortable.  Good luck!🤞🏼

Edit to add:  Formerly in the car business 21+ years 

[Anonymous]

Seem like you are set on not keeping the focus. If you can cushion the brunt if the negative equity roll with the downpayment then do it.  I do highly suggest going for the 2018 used instead of the 2020 new.   From your numbers thats almost a 6k savings.   Other option is to save up a little more and just pay off the focus then private sell.  Take the proceeds and use as a smaller down payment.