Best option for upside loan

Anonymous · ‎11-17-2014

In January 2013 I purchase a 2006 Jetta 2.0T throught Santander for $17,000. Payoff amount is $12,000. KBB value about $6000. I've had problems after problems with car and only 1000 miles left on warranty. I desperately need to trade this in. What are my best options? I have recent membership with NFCU- 15k CashRewards & 15k NavyCheck. Any advice would be greatly appreciated.

junebug225 · ‎11-17-2014

If you are in the car market, your best bet would be to go with something brand new with good rebates and dealer incentives and have some money to put down to help with the negitive equity on the old loan. It's possible. Do you have in mind what you want in your next car?

Fico's EQ 540 TU 529 EX 517 starting 3/2015
Fico's EQ 760 TU 775 EX 771 as of 04/204
Long term 775 across the board

Anonymous · ‎11-17-2014

I was hoping for a Chevy Cruz. I would like to do financing through NFCU.

Anonymous · ‎11-17-2014

You might check to see if the dealer has a new (leftover) 2013 model of the car you want. They may be in a better position to absorbe the negative equity you have in your current car. Another option is slecting a model with a large rebate to cover the negative equity. If I am correct, NFCU (I am a member there too) will finance 100% of the window sticker price and tax and license (usually). Try to negotiate a deal that fits the parameters of your credit union.

joedtx · ‎11-18-2014

@Anonymous wrote:
I was hoping for a Chevy Cruz. I would like to do financing through NFCU.
@Anonymous wrote:
I was hoping for a Chevy Cruz. I would like to do financing through NFCU.
NFCU auto refi is great or if you are buying used, but if you are going the new route manufacturer financing will likely be more competative.

Dj4Money · ‎11-18-2014

Go to NFCU as soon as your ready and see what amount you qualify for.
Go to True Car and get the price + options you want for the Cruze (There won't be any '13's left trust me, Cruze averages 30 days on dealer lots)
It is likely the CU will beat whatever rate you can get from GM or any other lender. But you'll go in with the power of a cash buyer
Make sure they give you $6,000 KBB value for the Jetta and don't budge. Make sure it's nice and clean inside and out, no sqeaks or other noises.

http://www.insider-car-buying-tips.com/car_buying_guide.html

The only reason you should take dealer finacing is because they have more pull with major lenders than you do alone. But in that case you would have other problems besides your credit score and a car likely in need of major repairs soon.

Remember most econimist recommend between 12-36% of income should be spent on a car. You'll be carrying an extra $6,000 into your next car loan, so getting the lowest interest rate you can is very important.

You might have to come up with some money down as well.

Current Incentives are 0% for 36 months or 2.9% for 60 months. You're unlikely to get this, take what the CU will give you likely 2-6% depending on your credit. You actually need the rebates more, which is currently $2,000.

That would knock you down to being $4,000 upside-down.

By using TruCar and getting that price as low as you can (you can see if your employer offers discounts too) that will help you get your payments down.

I don't know which trim you want, so I can plug in any values into a calulator.

StartingOver10 · ‎11-19-2014

I have an issue with this statement you made in the above post: Remember most econimist recommend between 12-36% of income should be spent on a car. You'll be carrying an extra $6,000 into your next car loan, so getting the lowest interest rate you can is very important

Naturally the conclusion is good - interest rate is important. But the I'm sure the statement regarding the economist is that 'no more than 12 to 36%' if the statement has any validity at all.

It is crazy talk to have a 36% of your income spent on a vehicle - think about it. The ideal number would be zero on a vehicle because of all the other required expenses: insurance, fuel, maintenance and repairs
However, many of us are not in the position right now to pay cash for a vehicle so a loan helps, but not when it is 1/3rd of your income, then the loan hurts more than helps

For the OP, you are buried in negative equity because of the terms of your current loan and the original purchase price + the low down payment. Don't compound your issue by trading in and passing the negative equity to the new vehicle.

sccredit · ‎11-19-2014

@StartingOver10 wrote:
I have an issue with this statement you made in the above post: Remember most econimist recommend between 12-36% of income should be spent on a car. You'll be carrying an extra $6,000 into your next car loan, so getting the lowest interest rate you can is very important

Naturally the conclusion is good - interest rate is important. But the I'm sure the statement regarding the economist is that 'no more than 12 to 36%' if the statement has any validity at all.

It is crazy talk to have a 36% of your income spent on a vehicle - think about it. The ideal number would be zero on a vehicle because of all the other required expenses: insurance, fuel, maintenance and repairs
However, many of us are not in the position right now to pay cash for a vehicle so a loan helps, but not when it is 1/3rd of your income, then the loan hurts more than helps

Capital One's underwriting guidelines state Max of 15%. I can't believe that any "Economist" would say anything above that. My truck, DW's Infiniti and our Travel Trailer are below 10% and that is scary enough for me.

Dj4Money · ‎11-19-2014

@StartingOver10 wrote:
I have an issue with this statement you made in the above post: Remember most econimist recommend between 12-36% of income should be spent on a car. You'll be carrying an extra $6,000 into your next car loan, so getting the lowest interest rate you can is very important

Naturally the conclusion is good - interest rate is important. But the I'm sure the statement regarding the economist is that 'no more than 12 to 36%' if the statement has any validity at all.

It is crazy talk to have a 36% of your income spent on a vehicle - think about it. The ideal number would be zero on a vehicle because of all the other required expenses: insurance, fuel, maintenance and repairs
However, many of us are not in the position right now to pay cash for a vehicle so a loan helps, but not when it is 1/3rd of your income, then the loan hurts more than helps

For the OP, you are buried in negative equity because of the terms of your current loan and the original purchase price + the low down payment. Don't compound your issue by trading in and passing the negative equity to the new vehicle.

Actually Consumer Reports recommended up to 36%. I have seen articles on MSN Money and other places that say similar things. Only the MSN article is more conservative at 12-15% of income.

I didn't say I agreed with it, I found it provoking. I agree with Kiplinger and MSN Money = 10-12%, maybe 15%. of NET not GROSS.

I agree that factors have to be near perfect for you to spend a 1/3 on a vehicle but regular people spend up to that much and often does lead to financial disaster.

While the OP would be passing on the negative equity in the car, the obvious drop in interest rate, combined with aggressive negotiating tactics would lead to a better deal and car with a full warranty.

The alternative is to purchase an extended warranty and stay on top of the maintance of the current car (Jetta). The other is to step way down, think Chevy Spark, Nissan Versa sedan, not horrible cars.

That said the Versa sedan handles terribly with the sof t suspension and rock hard tires. I think you can get a Nissan Sentra for around $16,xxxx, basic equipement and maybe have to learn how to drive a stick, it's a much better car than the Versa.

Assuming the least expensive Cruze with Automatic (LT1), $2,500 rebate on 2014's, $2,000 down to cover tax/license and rolling the balance of the Jetta into the new car would come out to around $338 a month for 72 months.

With some agressive price negotiating, the OP can knock off another $5-10 a month off that.

I don't have an idea what the OP is paying currently but they could get a new Cruze, Dodge Dart Limited or Chevy Sonic LT Turbo Sedan. Payment would be roughly the same on all of these.

sccredit · ‎11-19-2014

@Dj4Money wrote:
@StartingOver10 wrote:
I have an issue with this statement you made in the above post: Remember most econimist recommend between 12-36% of income should be spent on a car. You'll be carrying an extra $6,000 into your next car loan, so getting the lowest interest rate you can is very important

Naturally the conclusion is good - interest rate is important. But the I'm sure the statement regarding the economist is that 'no more than 12 to 36%' if the statement has any validity at all.

It is crazy talk to have a 36% of your income spent on a vehicle - think about it. The ideal number would be zero on a vehicle because of all the other required expenses: insurance, fuel, maintenance and repairs
However, many of us are not in the position right now to pay cash for a vehicle so a loan helps, but not when it is 1/3rd of your income, then the loan hurts more than helps

For the OP, you are buried in negative equity because of the terms of your current loan and the original purchase price + the low down payment. Don't compound your issue by trading in and passing the negative equity to the new vehicle.
Actually Consumer Reports recommended up to 36%. I have seen articles on MSN Money and other places that say similar things. Only the MSN article is more conservative at 12-15% of income.

I didn't say I agreed with it, I found it provoking. I agree with Kiplinger and MSN Money = 10-12%, maybe 15%. of NET not GROSS.

I agree that factors have to be near perfect for you to spend a 1/3 on a vehicle but regular people spend up to that much and often does lead to financial disaster.

While the OP would be passing on the negative equity in the car, the obvious drop in interest rate, combined with aggressive negotiating tactics would lead to a better deal and car with a full warranty.

The alternative is to purchase an extended warranty and stay on top of the maintance of the current car (Jetta). The other is to step way down, think Chevy Spark, Nissan Versa sedan, not horrible cars.

That said the Versa sedan handles terribly with the sof t suspension and rock hard tires. I think you can get a Nissan Sentra for around $16,xxxx, basic equipement and maybe have to learn how to drive a stick, it's a much better car than the Versa.

Assuming the least expensive Cruze with Automatic (LT1), $2,500 rebate on 2014's, $2,000 down to cover tax/license and rolling the balance of the Jetta into the new car would come out to around $338 a month for 72 months.

With some agressive price negotiating, the OP can knock off another $5-10 a month off that.

I don't have an idea what the OP is paying currently but they could get a new Cruze, Dodge Dart Limited or Chevy Sonic LT Turbo Sedan. Payment would be roughly the same on all of these.

That isn't quite what they said. They said that your ENTIRE DTI (including housing and all other payments) should be no more than 36%

http://www.consumerreports.org/cro/2012/04/how-much-can-you-afford-to-spend/index.htm

To get a ballpark figure for the monthly payment, Consumer Reports’ financial experts recommend that your total debt payment be no more than 36 percent of your gross income. Going by this rule, you can use the following steps to calculate how much of your monthly income you can comfortably afford to put toward your auto payments:

Calculate what 36 percent of your gross monthly income is.
Itemize and total all your monthly payments, including your mortgage or rent, credit-card bills, and other installment loans.
Subtract the total of your monthly payments from the 36 percent figure.

For example, if your pretax income is $75,000, total debt payments should not exceed $27,000 a year. If your existing debt payments equal, say, $20,000 a year, you can afford to pay $7,000 annually, or $583 a month, for car payments.