Finally out from upside down loan...

[barbaralee]

I'm one of those people who feels the need to trade in a vehicle every two years, thus we always seem to have a car payment. I had a cute little pontiac vibe that after two years (and just two years away from PIF) I decided to trade it in for a used minivan of all things. Needless to say, I don't know what kind of water I was drinking to inspire me to do sure a foolish thing.

I hated the minivan almost from the beginning. It had one problem after another and unfortunately soon after I got it gas prices went up. It was then involved in a collision (someone hit me from the back pushing me into the car in front of me)... and then after a recent ice storm it had a major crack in the windshield. I knew I was upside down on it, but last week I decided to look up the numbers... I was floored. The minivan was retailing for $4500 at the most and I had a $15,300 loan on it! 

 After much discussion hubby and I decided we were going to try to trade it in and get out from under our loan. After a lot of research I was starting to become desperate because no one was willing to heelp us when we were that much negative.

For some crazy reason we ended up at a Porsche dealership that also sells Mitsubishi. I mentioned to the salesman in passing that my husband always loved Toyota Tacomas to which the salesman replied "What do you think of the Mitsubishi Raider? We have $9000 in incentives and rebates for the last one on our lot."

To make a very long story short we managed to get out from under our loan and purchase the Raider (which, btw, when I was involved in my wreck we had rented a Raider and had loved it). 

Here's how it ended up going down:

The Raider was new and retailed for about $29,000. The dealership had added $2000 worth of stuff, making the retail value $31,000. We traded in our van (we got $4750 trade in) and got the incentives and rebates which brought the price down to 17250. Hubby and I put down $1000 which brought it to 16250.

NFCU financed our loan (also the same guys financing our minivan loan). They took our negative equity and rolled it over to the new loan so that our new loan is just a couple hundred over 31,000. It is a bigger loan amount, and in a sense we paid full value for the raider, but it got us out from that crazy high negative equity. 

Long term plans: the truck is going to be my hubby's primary vehicle, and he keeps his vehicles until they fall apart around him. So we won't be trading in the new Mitsu anytime soon. I'm getting his 1996 BMW (that he has kept in excellent condition) and will be driving that around (once I learn to drive stick )

Even though our payments and insurance is a little higher it's worth it to us. NFCU's customer service is excellent, excellent, excellent, and the dealership that we went through was so... human? They were nice guys who didn't have that slimy car salesman ambiance around them. Also they gave us a $500 Sam's gift card for purchasing a new Mitsu.

Moral of the story: If you're upside down look for those dealerships with the big incentives and rebates! Try to get it apply to your negative equity. I may not have made the wisest decision purchasing a new vehicle, but it has allowed me to breathe easier.

Message Edited by barbaralee on 04-10-2009 09:10 AM

[Anonymous]

I am sorry to tell you this, but you are not out of an upside down loan.

You have translated one loan to another and have possibly lowered you overall negative equity in the new vehicle, but sadly if the dealership is giving a $9,000 off retail, your vehicle is not "worth" retail then.

It would be in your best interests to be sure to have GAP coverage with your NFCU loan.

The only way you can get out of negative equity is to PAY THE LOAN DOWN/OFF!!!!!!

If you plan on keeping the vehicle the length of the loan negative equity is really not an issue. If you do plan on keeping it that long you should consider securing an extension of the manufacturers warranty to cover you for a reasonable percentage of time of the loan term/estimated mileage usage.

a 72 month loan is 6 years and covering yourself at least for 5 of those years in extended warranty may make sense.

[barbaralee]

Yes, we did get the Gap, and yes we are planning on keeping it for quite a while, and hoping to pay it off before the time allotted. We did do quite a bit of research on the vehicle before the purchase and it did lower our negative equity by quite a bit (though you're right, I miswrote, we are not completely out from under it). Most importantly we have a warranty on a vehicle where as before we were lacking.

Though I wouldn't say the only way to get out from being upside down is to pay it down/off... well maybe in a round about way... but many people use rebates/incentives to get out from being upside down. 

Message Edited by barbaralee on 04-10-2009 12:36 PM

[203bravo]

Really, as long as you are happy with the purchase and can afford to the payments that's what matters

Congratulations.

[Anonymous]

It sounds like you went from a bad situation to a better situation and that's what counts. Personally I have given up on new cars. My Bk scared me out the high payments. If you are going to be making payments on a car anyways you might as well have an extended warrenty and have something that will last the life of the payments.

Good job on figuring out how to get out of the lemon mini-van.

[Anonymous]

Hopefully you don't get the "2 year itch" anytime soon

[Watchmann]

The auto business loves people like you!  Whether or not this deal makes sense is immaterial at this point.  What's done is done.  But please try to not get the two year itch in 24 months time.  You really can't afford to get a new vehicle every two years.  In the meantime, enjoy your new vehicle.

[Anonymous]

But I really want one!   Just joking.  Wow, it can be hard to resist....but it gets easier with practice....so practice finding joy in watching your bank account balance rise more feverishly than you do FICO