Negative Equity - Ugh

[JackStraw]

Hey everyone,

First off, let me say that I know rolling negative equity into a new loan is a bad thing and should be avoided at all costs.

That being said, my current vehicle ('01 Blazer, 120k) is becoming a money pit. It seems like every month there is some kind of repair to be made, and now it feels like the transmission is starting to slip more than it should. Unfortunately, I still owe Americredit about $7k, and the truck is worth $2, maybe $2500.

I got approved through Roadloans for $22k (14.44%) with 120%LTV. I could probably come up with about $2k cash to include to help offset some of the negative equity in the Blazer.

My question is this - if I decide to go down this road, what is the best way to approach it at whatever dealership(s) I go to? Do I tell them no trade, get the price on the vehicle (I'm obviously shooting for something not too expensive) then mention the trade? Part of me is thinking I'm better off just walking and saying to the salesperson "Here's the deal...make it work" and seeing what they come up with. I can be a little abrupt sometimes.

Also, am I better off looking for something new or used in terms of having a better chance of making a deal like this possible?

Any advice is welcome.

Thanks.

[Anonymous]

I'm guilty of rolling negative equity into a new car loan more than once. Here's my experience:

- Tell them up front that you have a trade and you're upside down. They'll have to tweak the numbers on your new car to allow for a higher trade-in value for your car, which is one way to handle at least part of the NE.

- There's more "room", financially, in a new car for rolling in NE.

- Look for cars that have cash back incentives - if you find one that will work for you, it can help soak up some NE. edmunds.com has (at least they used to) a list of the current incentive deals for most auto makers.

- It looks like you're about 5k upside down, including your 2k cash. Have you thought about other options, like a personal loan or a BT to a CC, to pay off that loan completely? Depending on BT fees or personal loan rates, it may be a better option financially than that 120% auto loan - 14.44% is a pretty high rate. If you could get it down to 100% LTV or lower, you'd get a much better rate.

[Anonymous]

From a dealer perspective, it is best to be up-front about the trade. It is the only way the dealer can really help. Avoiding the trade can hurt you if the dealer doesn't know hwat they are up against. I used vehicle can work in rare instances, however, RoadLoans has already stipluated financing 120%LTV. That puts them in an o.k. position regarding lack of equity. Th dealer will work with you on new vehicles better because these vehicles have not depreciate and oftentimes offer rebates that will help with your O/A or over allowance on the loan. It will get you closer to that 120% with your $2K down.

Just be honest and lay your cards on the table. they may even help find you a better loan.

[Anonymous]

I have rolled in negative equity once and am about to do it again (side bar: (for the second roll over) Bought a stick shift like I have always driven, but recently moved to a city where this just does NOT work).

Anyhow be upfront......I hate to say it, but right now your best bet is a new car, a 2008 in fact that the dealers are looking to unload...It is a new car that gets the better APR option, but technically about to become old news.

You will end up sinking more money into the vehicle than if you just trade it in, take the hit and roll it into the new loan.

Good Luck!

[JackStraw]

Thanks for the responses.

Any ideas on which manufacturers would best suit what I'm trying to do? I was looking at the '08 Civic LX or Sentra 2.0S, but I think a Fusion or Focus from Ford might have more flexibility as far as what the dealer can do with the numbers. I'll probably check out a few dealerships today and see what I can do.

[JackStraw]

Got it done last night.

Got a new '08 Sentra 2.0S (6 speed manual - which I love). Only had to put $1000 down. I'm hoping to double up some payments right off the bat and re-fi in about a year. 36mpg (according to the display in the car) sure is nicer than 14 I was getting in the Blazer.

[Anonymous]

All that money you'll save in gas you can put towards extra payments!!

I just did a neg equity loan too.  I double the UGH.

[Anonymous]

So did you use your Roadloans or did the Dealer finance you?

Jonny