Having difficulty refinancing, thinking to trade in

[Anonymous]

Hi all,

Here is my current situation.

My BK was discharged Nov 2, 2015, I was able to finance a car through Honda Financing 25 days after discharge.  So now I have a 2015 Honda Civic Coupe LX with 18.99% financing with Honda Financial.  I am in good standing with Honda Financial since I have paid on time with them for over a year.

I have tried to refinance through sub prime auto lenders and all they do is drop my apr to 16.49% and save ~20 bucks a month.  Kind of sucky.  My Credit Score has gone up and down since my BK but mostly up.  Last time my credit score was checked by a dealer I was at 524,

I burned Capital One one auto loan and two credit cards in the BK  so I can't seem to get back with them for refinancing.  I am not sure if I could get refinancing through a CU with that low of a score.

I am so frustrated, that I checked with my local Honda Dealer and they confirmed I am in good standing with Honda Financial and I can get financing on a new 2016 Honda Civic Coupe LX-P with 5.99% apr but I would have to roll over ~$4,000 negative equity with my trade in.  My payments would be close to what I am paying now but my APR would be greatly reduced and it would show a paid off car loan in my CR.  

I was really hoping to refinance and greatly reduce my payments but that is not happening.  I guess my other option would be to sell it for what I owe on it but I am not sure if that would be possible.  My BK seems to be the main drag.

Looking for some sage advice. 

 Edit:  My general scores go up but my Auto Scores despite my payments with Honda Financial are staying around 500.  BK and surrendering my car with a Capital One is really dragging down my auto scores.

[StartingOver10]

If you sell it you probably won't have any negative equity to carry on the new purchase. Do you need a new vehicle or is this a want rather than a need?

[Anonymous]

In addition to the 4k of negative equity you would want to factor in the transaction costs as well as the initial depreciation you will experience that comes with driving any new car off the lot. Personally I think you would be better off making extra principle payments till your loan to value ratio is good enough to refinance with a credit union.  You may already be closer than you think to being able to do do that.  One thing anyone rebuildng should invest in is their actual fico scores, I am happy to pay the myfico monthly fees for my wife and I so we know exactly where we stand and can make decisons based on that information.  Buying a new car is not the solution to this delima, it will only put you in a deeper hole.   I would encourage you to join DCU and PenFed, build a relationship with them and when you have aged your BK and built better credit refinance with them. I was able to go from 12.57% to 4.29% in 5 months by doing some rebuilding and working with a credit union so it can be done more easily than most think but the key is to have a decent LTV ratio and work on that credit.  Set the goal of paying the least amount for the car (interest, transaction costs and depreciation) over a monthly payment and you will come out ahead in the long run.

[DeeBee78]

You're only a year and change into the loan, and unless you put 20% down at time of purchase, you're going to be upside down for at least a couple more years. 

You can save yourself thousands in interest by making additional principal payments on your loan every month. Allocate every extra dollar to your car payment and you can unbury yourself. Bring the LTV back down, and you should be able to secure a refi through DCU. 

Also, get your FICO scores. Discover gives you your Experian FICO 08 score for free, so you don't have an excuse.

[Anonymous]

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@DeeBee78 wrote:

You're only a year and change into the loan, and unless you put 20% down at time of purchase, you're going to be upside down for at least a couple more years. 

You can save yourself thousands in interest by making additional principal payments on your loan every month. Allocate every extra dollar to your car payment and you can unbury yourself. Bring the LTV back down, and you should be able to secure a refi through DCU. 

Also, get your FICO scores. Discover gives you your Experian FICO 08 score for free, so you don't have an excuse.

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Also, if you do go ahead and join DCU they give you the score they use every month on the last Friday of the month. Additionally, they're very straight forward. I've called customer service and asked them which rate tier I would be in based off of the score they sent me and they've told me. They're very easy to work with and not so shrouded in mystery.

[Raziel77]

I’m with selling your car and buying the lower interest one. Have you tried CarMax or if another Honda dealer would buy your car outright? If so, what’s the offer amount vs. the amount owed?

The high interest rate that you currently have with the car is a problem and is partially solved with extra payments. There is still big chunk of money wasted on interest. See how much is your car worth in  the market and sell it if the loss is minimal.

Also, you can try negotiating with the current dealer that you are dealing with, to lower the difference if you have a better offer from CarMax or another place. The trade-in advantage is to decrease your taxes paid, but if they are going to lowball your car, then you are better off selling it yourself.

[Anonymous]

I thought I would go to the local Carmax this weekend and see if what they value my car at.     It probably will be a problem as far as trading it in or selling it since my pay off is about $16,000-16,500 and Carmax is selling similiar cars at about $15,500-15,999.   So I figure Carmax may value it at about 14,000 give or take a few thousand.  My mileage is average and the car looks good plus I tinted the windows.  I guess I would have to come up with the difference right away if I sold my car.

The dealers have been valuing my trade in about $11,500 which is towards the low end of what KBB says the trade in value is. 

The salesman I am working with is going to call me in a day or two and see what decision I have made.  The deal they are offering me is with a $1,000 down and my car payments would be about $430 a month.  I am now paying $424. 68 in payments plus I have gap insurance and Honda Service Plan on my current car which the salesman says can be rolled over to the new car.   Unfortunately, my loan total would be around $27,000 if i go with this deal with the 5.99% interest rate.   I am really torn, this deal would be at a much lower interest rate with a higher trim car with me taking the hit with the negative equity.   The trim level I am going for they have 6 cars on the lot and according to the salesman they are slammed with the amount of cars they have and need to get rid of the 2016's.  I know they have a 2016 CR-Z EX on the lot with $4000 off MSRP but my financing would be at 12.99% instead of 5.99%.  But that is very compact car.

My car is running fine and I like it.  It is just I don't think I can live with 18.99% financing at this point.   I guess my getting a new car is combo of want and need. 

Also the thought this would help my auto enhanced score since it would show a paid car account after BK. 

Question:  What is DCU short for?  D? Credit Union  There is a Navy Federal Credit Union branch about 1-2 hour drive away from where I live.  So it is not very convenient if I need to go into the branch.

[Anonymous]

I don't understand why you are trading unless it's because you just want to. You say it is the interest, but the payment is going to be more and you are starting all over with payments. It seems it would make more sense to keep your car, build scores, and possibly refinance.

[Raziel77]

Points to keep in mind:

The car max valuation is lower than what you can sell it for as a private seller. CarMax will give you a printed offer that you can present to the Honda dealer and ask to price match. If not, then they are lowballing your car by around $3k, this gives you the right to negotiate the new car price by $3k.

Don’t let them give you a deadline, if the sales person calls you then ask him to call back in a week since you still need to go to CarMax and do your researches and shopping around! After all, you are doing them the favor of buying a car from them.

I’m sure there are multiple Honda dealers that are willing to do similar deals so don’t think of this dealer that you are working with as the only one.

Also, no one goes by the MSRP, do if they offer $4k below the MSRP for 2016 then that’s nothing and can be negotiated even further. I usually knock off an additional $1,000 of a car that I want to purchase only by walking out of the door and seeing the manager following me asking me “what can I do to get you to buy the car?”

Gap insurance and service plans can be cancelled and refunded “prorate”, the refund can be added to the principle of the car. Don’t be amused by the dealer telling you they will roll it over. They will cancel the current ones and establish new coverage and they definitely add up the price difference in the bill of sale. Plus, these service contracts and gap coverage are always marked up by the dealer. For example, I got an original extended warranty for my infiniti for $2k while the dealer asked for $3500. Just looked up another dealer that did it online for me and I mailed a check. The same can be said to Chrysler warranty, they sell them online for cheap, but the dealer will add $1000 just because people don’t know. It is exactly the same warranty. The same with Gap Insurance, I get them offered by the business office of the dealership for $1100 but find it online for half the price. I usually don’t buy them because I pay on the principle of the loan and never become in negative.

You are better off refinancing your current car. If Honda capital is willing to extend a low interest rate then I’m sure you will get good rates from other places. I highly don’t recommend staying with the current loan. Either refinance or trade-in but decrease you lose in the trade-in.

DCU =  www.dcu.org

[Anonymous]

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@Anonymous wrote:

I thought I would go to the local Carmax this weekend and see if what they value my car at.     It probably will be a problem as far as trading it in or selling it since my pay off is about $16,000-16,500 and Carmax is selling similiar cars at about $15,500-15,999.   So I figure Carmax may value it at about 14,000 give or take a few thousand.  My mileage is average and the car looks good plus I tinted the windows.  I guess I would have to come up with the difference right away if I sold my car.

The dealers have been valuing my trade in about $11,500 which is towards the low end of what KBB says the trade in value is. 

The salesman I am working with is going to call me in a day or two and see what decision I have made.  The deal they are offering me is with a $1,000 down and my car payments would be about $430 a month.  I am now paying $424. 68 in payments plus I have gap insurance and Honda Service Plan on my current car which the salesman says can be rolled over to the new car.   Unfortunately, my loan total would be around $27,000 if i go with this deal with the 5.99% interest rate.   I am really torn, this deal would be at a much lower interest rate with a higher trim car with me taking the hit with the negative equity.   The trim level I am going for they have 6 cars on the lot and according to the salesman they are slammed with the amount of cars they have and need to get rid of the 2016's.  I know they have a 2016 CR-Z EX on the lot with $4000 off MSRP but my financing would be at 12.99% instead of 5.99%.  But that is very compact car.

My car is running fine and I like it.  It is just I don't think I can live with 18.99% financing at this point.   I guess my getting a new car is combo of want and need. 

Also the thought this would help my auto enhanced score since it would show a paid car account after BK. 

Question:  What is DCU short for?  D? Credit Union  There is a Navy Federal Credit Union branch about 1-2 hour drive away from where I live.  So it is not very convenient if I need to go into the branch.

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I don't get how this would be a win, sure you will pay less in interest but your deeper in the hole.  You have to do what you think is best but I don't see how you strengthen your hand with this situation.  Your credit and equity situation will improve if you put in place a plan and you will be able to refinance but won't have an extra 4-5k to try and refinance when you do. 

DCU is short for Digital Credit Union.  I do all of my banking with NFCU for the last few years and live 100 miles from the nearest branch, I have never had a need to go to one, they service customers all over the world so they make it very easy to do business from anywhere at anytime.