Negative Equity

[katrinalbsn]

Hopefully someone can help.

I am thinking about trading in my 2008 GMC Yukon that has about 7K negative equity for a newer more expensive car. Wondering what kind of interest rate I might qualify for?

Credit report has about 4k in credit card debt-no late payments, student loans and that's it.

Credit score 579eq, 599 exp, 625 transunion

Income 70k

Couple old paid collections on account.

[MarineVietVet]

With all due respect if you have $7,000 in negative equity why would you want to buy an even more expensive car? Unless you have a very large down payment that negative equity would have to be rolled into a new loan which puts you even deeper underwater.

I suggest you keep your 2008 vehicle and continue paying it off at least until it's worth more than you owe.

Just my 2 cents.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work

[katrinalbsn]

I appreciate your two cents!! :-)

When I first bought the 08 my credit score was a lot lower than it is now, so my interest is very high.  My boyfriend and I were doing the math and was thinking it would be better to trade my 08 in (losing value very quick) hopefully getting a lower interest rate for a car that will hold its value more.

[MarineVietVet]

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@katrinalbsn wrote:

I appreciate your two cents!! :-)

When I first bought the 08 my credit score was a lot lower than it is now, so my interest is very high.  My boyfriend and I were doing the math and was thinking it would be better to trade my 08 in (losing value very quick) hopefully getting a lower interest rate for a car that will hold its value more.

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All you can do is talk to some lenders and see what they have to offer

I hope you find a good deal.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work

.

[GregB]

Once you have purchased a car, it takes the big hit in value instantly. Most slower depreciating cars are just advertising nonsense.  Adding the diffence between wholesale and retail just makes it worse. More loses in registration, insurance, etc. A dealer will try to show you how to trade your car in on a new car that might depreciate slower. If you really are trying to justify that you might be able to convince yourself of that. If you add up ALL the costs, it won't work.

I couldn't even claim to have done anything but lose money on the car I bought new for $8,300 that is now worth $100K.

[IOBA]

Have you considered refinancing your current auto loan?   

If you have an auto loan, you are usually upside down on the value for the life of the loan.

[IOBA]

Just food for thought...

I always buy my vehicles new.  I take care of them from their birth/home coming until they die.  My vehicles have always lasted many more miles than the drop dead estimated life of a vehicle.  I firmly believe that taking care of the vehicle for it's life is a factor.  (I pay cash for my vehicles.)

DH likes to buy used vehicles.  He does take care of them, but not quite like I do.  His reasoning for used versus new was that it was cheaper and you didn't loose as much equity.   When I presented my reasoning to him, *click*, it made sense.   

If my vehicles are paid for with cash, I have saved hundreds, thousands in financing fees.  On average, my vehicles last 1.5x LONGER than the known life spans for the vehicles.    More savings -- I don't have to replace a vehicle as often.  Over the lifetime of two vehicles, I have saved myself the cost of ONE new vehicle.  Roughly, about a 20k savings.

Used vehicle - you don't know the history, the problems, or how it was cared for.  Even if you have it inspected, you still won't know everything.  Most of the time, warranties are already gone.   Most used vehicles are repo's, demo cars, or car rental vehicles.  I know that repo's are not likely to be taken care of so well near the end of the relationship with the owner; I know demo cars from the dealerships are driven hard by employees and potential customers - they always encouraged me to drive it hard, burn rubber, hard corners, etc to fall in love with the car, then they sell me a brand new one without miles on it; I know car rental vehicles are not taken care of that well too -- numerous car rentals with maintenance problems and the rental place saying ignore the engine light, it's nothing, etc.  When I worked for a car dealership, the had "demo" cars for customers to test drive that employees took home at night.   OH, and then there's other thing that happens - the owner gets frustrating cuz the mechanic can't seem to fix the recurring problem so they dump the vehicle.  Or the vehicle is nickling and diming them, so they trade it in.

I know that what I described does NOT apply to every used car, but it does provide food for thought.

DH agrees with me that buying new is a better route, now that we have been through a few vehicles.  We only have one vehicle now.

Anyways, just food for thought.

[MarineVietVet]

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@IOBA wrote:

Have you considered refinancing your current auto loan?   

If you have an auto loan, you are usually upside down on the value for the life of the loan.

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A lot depends on the terms of the loan. For example if you've financed a large amount with little or nothing down for 72 months or longer at a high interest rate then yes you probably will be underwater for most of the loan if not all of it.

But if you can put down a fair amount and keep the length of the loan as short as posssible with low interest then the vehicle will be worth more than what is owed long before the payoff.

I've experienced both scenarios and the second makes it much easier to sleep at night. 

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work

[IOBA]

True Marine!

[katrinalbsn]

Yes I thought about that too. I'm considering both options.