How Much Will Turning In My Car Affect My Fico Score

[Anonymous]

Greetings,

I foolishly purchased a used car for $55,000 that I simply cannt afford at $1000 per month. I spoke to the dealer less than a month after purchasing and was informed that I would lose approximately $20,000 if I returned the car, which I found to be unconscionably excessive.

I have a credit score of 801. I have $116,000 available credit spread across 27 credit cards with a 1% utilization rate. My questions are as follows.

1. Will turning in the car destroy my credit score, completely?

2. If not, how big a hit off of that 801 score can I expect

3. Will the credit card companies get wind of this and cancel all of my cards?

I have no other outstanding debt other than a modest mortgage payment. I have no interest in filing for bankruptcy. I just want to get out from under this payment before I start to fall behind and destroy my credit, down the road.

Thoughts and suggestions would be greatly appreciated.

Cheers. - Frank

[Anonymous]

Yes, it will crater your score -- and the higher your score is, the more it will crater it.  It is quite likely you may see a 150+ point drop from a repo.  A voluntary repo is a repo and will report for 7+ years -- longer if they sue you for the balance and get a judgment.

You are upside down $20,000.  Your best bet is to liquidate other assets to pay the balance down and sell it.  You may get more selling it privately but that's difficult on luxury cars.  If you do this, you won't have any FICO ding (unless it's your only installment loan).

One thing to note: posting a repo on your reports may cause your credit card companies to close your accounts and even blacklist you for a period of time.  So this can have a massive downward spiral effect.

I would also suggest listing your car on Turo if you live in a popular area or near an airport.  This can bring in extra cash, and you can buy a reliable beater for $1500 to drive yourself.

[Anonymous]

Wow! That's quite ugly a scenario.

1. I live in the boonies, so Turo is not an option.

2. Don't really have any other assets (home equity, stocks, bonds, other real estate, etc.) so that's not an option.

3. I'm a 70 year old totally-disabled, combat-veteran, with an impressive array of extremely serious medical conditions, so there's a pretty good chance that I don't have to worry about this, long term. Can't say if this is a good thing or a bad thing. I should probably just learn to live with my mistake and enjoy a very beautiful car.  lol

4. I am able to meet all of my financial obligations and have a small cash reserve on hand, but any unexpected monkey wrench thrown my way would put me on the edge. The stress does nothing to help my medical condition.

5. I guess I'll just live my life to the fullest and deal with the situation when it actually becomes a problem needing immediate attention.

I do realize that many folks here are dealing with life-changing issues, so I do apologize if my situation seems in some way frivolous. I can see where that might be the impression folks would get, but I haven't had a good night's sleep since I bought the car and in my own way am feeling a very heightened sense of desperation.

Thank you for taking the time to answer my questions.

Cheers. - Frank

[Anonymous]

It's not frivolous at all, and no matter your age or health condition, there are options out there!

I am not ex-military so I'm not familiar with their programs but I'd look into if there are any options there.

How long ago did you buy the car?

[Anonymous]

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@Anonymous wrote:

It's not frivolous at all, and no matter your age or health condition, there are options out there!

Honestly, beating my head against the wall is probably worse for my health than just going with the flow, until if and when the situation goes belly-up. When I read my own words, they seem a bit irrational, in a way.

I am not ex-military so I'm not familiar with their programs but I'd look into if there are any options there.

Nothing in this vein. They already provide me with first rate medical care, a full disability rating and a VA mortgage. They have done their fair share to help me through my challenges - for decades. This is just not an area where they have anything to offer.

How long ago did you buy the car?

Around 4 months ago. I think I have put approximately 200 miles on it in that time as it is a convertible and was purchased to be enjoyed during the summer months. I have a 17 year old PT Cruiser that I use for hauling the dog to daycare and back and I generally drive that car. I am almost completely homebound and only average 100 miles per week on the road. The BMW is a 2014 with 26,000 miles on it.

Cheers. - Frank

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[Anonymous]

Here's a thought: any friends or family you trust who live in a big city that you could drop the car off with to put on Turo?  Might be an option, especially if you can bring in $40/day or something to cover the loan.

[Anonymous]

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@Anonymous wrote:

Here's a thought: any friends or family you trust who live in a big city that you could drop the car off with to put on Turo?  Might be an option, especially if you can bring in $40/day or something to cover the loan.

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No. Not really an option. Although I recently retired from running my own home-based business, I think I'll just work enough to bring in an extra $500 per month and alleviate myself of the worry. I'll just bank that money as insurance in case a problem arises going forward.

Thank you. - Frank

[matrix12]

First of all, thank you for your service!  Just a couple of thoughts:

1. Have you checked the value of the car anywhere besides the dealer you purchased it from?  If the car was new, I could possibly see a big drop in value (especially a BMW).  However, the depreciation tends to level off a bit after the first couple of years.  I would check some car websites to get a better idea of the actual value.  You might be able to sell it yourself for a better outcome.

2. Since your score is so high, I imagine you got a pretty food deal on financing.  If not, have you looked into re-financing the car to get a lower payment.  Even if you have to stretch the length of the loan to lower the payment, that might be better than taking the credit hit.  I have read good things about Navy Federal Credit Union (NFCU) and Digital Credit Union (DCU) on these boards.

[Anonymous]

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@matrix12 wrote:

First of all, thank you for your service!

The pleasure was all mine. 

Just a couple of thoughts:

1. Have you checked the value of the car anywhere besides the dealer you purchased it from?  If the car was new, I could possibly see a big drop in value (especially a BMW).  However, the depreciation tends to level off a bit after the first couple of years.  I would check some car websites to get a better idea of the actual value.  You might be able to sell it yourself for a better outcome.

I plan to do that, this week. I have a feeling that the deler saw me coming a mile away and that I greatly overpaid for the car. Word to the wise - never drool when car shopping. It's a 2014 with 26k miles and looks like it just rolled off the showroom floor.

2. Since your score is so high, I imagine you got a pretty food deal on financing.  If not, have you looked into re-financing the car to get a lower payment.  Even if you have to stretch the length of the loan to lower the payment, that might be better than taking the credit hit.  I have read good things about Navy Federal Credit Union (NFCU) and Digital Credit Union (DCU) on these boards.

The best I could get on a used BMW was 3.9%. I don't think I'd get anything lower anywhere else. I'm a USAA member, so I might look into that.

Thank you. - Frank

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[DeeBee78]

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@Anonymous wrote:

Greetings,

I foolishly purchased a used car for $55,000 that I simply cannt afford at $1000 per month. I spoke to the dealer less than a month after purchasing and was informed that I would lose approximately $20,000 if I returned the car, which I found to be unconscionably excessive.

I have a credit score of 801. I have $116,000 available credit spread across 27 credit cards with a 1% utilization rate. My questions are as follows.

1. Will turning in the car destroy my credit score, completely?

2. If not, how big a hit off of that 801 score can I expect

3. Will the credit card companies get wind of this and cancel all of my cards?

I have no other outstanding debt other than a modest mortgage payment. I have no interest in filing for bankruptcy. I just want to get out from under this payment before I start to fall behind and destroy my credit, down the road.

Thoughts and suggestions would be greatly appreciated.

Cheers. - Frank

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Chances are you aren't as upside down on the loan as the dealer is leading you to belive. They sense your desperation to get out of the loan and are low-balling you, hoping they can turn the car around and sell it for $50K+  to someone else. A three year old BMW (guessing, from the other posts in this thread) has already had a steep depreciation curve, and shouldn't be losing value *too* quickly for you to get ahead of the loan. 

You talked about making some extra cash by going back to work part time. Throw that money towards the principal balance, and you'll be above water in no time, and in a great position to sell it private party. Do not sell it back to the dealership.