Negative equity (upside down)

riverajuan · ‎06-25-2009

Hello to every one in this forum. My situation is the following, I had an old car that died on me and was force to purchase a car in oder to travel back and forth to work. Because of my low credit score I was able to purchase a 2005 Stratus with 52,000 miles and a low down payment of 400 dollars. The problem is the interst rate is 25% and my monthly payments are 370 per month. Now I am trying to buy an BMW, but they only offer 4000 for my trade in and that will bring a negative balance of 9000 into the BMW which is only 8000. I was thinking what if I take the car back to the original dealer and tell them I can no longer make the payments for this car and pursue the other car. Would this worsen my credit report?

Please help

Anonymous · ‎06-25-2009

If you were to take the car back to the original dealer telling them you cannot make the payments anymore, this would most likely be coded as a Voluntary Repossession as opposed to Involuntary. Whether it negatively effects your credit or not, from an underwriting point of view it looks as though you have been unable to manage your obligations.

It is difficult now to finance a vehicle upside down. My best advice is to either find a dealership willing to pay off your trade or keep your current car and pay off as much as you can each month. In my experience financing vehicles for customers, it is hard to catch up once you have gone upside down. So I would highly recommend against it, for your personal financial sake. Good Luck with everything!

riverajuan · ‎06-25-2009

I appreciate your response and advise. I spoken to a dodge dealer who mentioned it might work to get into 1 of their newer cars since they might be able to get me the most for my car plus they have huge discounts they can offer to me. All I am trying to accomplish is to lower my payments if possible. Do you have any other advise you can offer?

Your input is and will be greatly appreciated.

BTW I plan to visit the dealer to get an accurate dollar amount qoute for my trade in should I decide to pursue this route.

Anonymous · ‎06-25-2009

Returning your car to the dealer is a voluntary reposession, however your credit report doesn't care. It codes "resposession" same loss if they take it or you give it back.

It will tank your scores. Doing so and buying another car before it hits your report and lying about it on the application is illegal.

riverajuan · ‎06-25-2009

I have no intentions of lying, my intentions are solely to seek a solution to my high payments.

Can you offer any other advise?

llecs · ‎06-25-2009

1111mel wrote:
Returning your car to the dealer is a voluntary reposession, however your credit report doesn't care. It codes "resposession" same loss if they take it or you give it back.....It will tank your scores.

+1

OP DON'T DO IT!!! A repo is bad and under a manual review, voluntary, involuntary, and redeemed repos are all viewed as a very bad thing. The lender will wonder if it will happen to them. Plus, OP, you will still be on the hook for the CO and you'll still have to pay the $$$ amount between the balance w/ the bank and the amount the Dodge sells for at auction. If you do not pay the balance ASAP then the OC could either sue you or will pass it to a CA who could sue you. In any case, you could see a CO w/ a repo reference, a CA, a judgment, and a potential garnishment if you don't pay.

OP, have you considered a refi? Maybe someone more up on this topic could chime in. If not, PIF this car ASAP, then save money for a larger down payment and then go for the BMW. Or if you can refi, improve your scores and sign a deal for much under 25%.

riverajuan · ‎06-25-2009

Can I refi with the original dealer or should I seek some one else? Please advise

riverajuan · ‎06-25-2009

Should I refi right now? My car is only 3 months into the loan and my EQ = 594 don't know my TU please advise

it will be greatly appreciated

Anonymous · ‎06-25-2009

@riverajuan wrote:
Should I refi right now? My car is only 3 months into the loan and my EQ = 594 don't know my TU please advise
it will be greatly appreciated

Ok first of all, lets just rip that band aid off real quick and say whats what: You made some really bad decisions and you have to accept the situation you put yourself into.

You signed for the deal you are in, you paid nothing down and yes you are in a huge negative equiity situation. You signed up for it, you signed the paperwork.

Why you are suddenly trying for a BMW 3 months after just buying that car I do not know.

You have three options:

1- Keep making current payments and save money in the bank at the same time for when the car you are driving dies or needs repairs.

2- Try to find another brand new car with high rebates and see about having those suckup the negative equity for a new car. BW AWARE: High rebates do not nullify negative equity, they just sop it up for you to get financed. A $25,000 NEW car with 7K in rebates will, 6 months later on trade in be only worth $12,000-$14.000. You are simply shiftimng negative equity around. I am not sure if your current credit scores will qualify you.

3-Quit paying on your car and have it repo-ed- which honestly you probably do not want to do.

An important fact is that with the interest rate you have and the fact you put no money down, unless you have GAP coverage you are completely and totally screwed in the event your car is totaled or stolen.

If you take your financed car back to the delaership they really do not care, the financing is between you and the BANK. The dealership is just the middleman.

riverajuan · ‎06-25-2009

I appreciate your honesty, one last question. The bigger the payments I make the more I am contributing to the principal payments and getting rid of all the interest?

Is this correct? I need guidance please excuse my ignorance.