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Refinancing Very Upside Down Car Loan

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Refinancing Very Upside Down Car Loan

Hello -

 

I have a 2016 jeep renegade latitude that I bought Nov 2016, a few months shy of a year ago. I have a $675 car note a month and 16% APR. When I went in to buy my car I knew nothing about car loans so I got jugged.

 

The car is worth around 18K and I owe around 29K. So im a good 11K+ in the hole. I actually am not THAT upset about how negative I am, it sucks but my credit was in the 500s when I bought the car. So now, I have credit closer if not past 700.  My main goal is to get a lower monthly payment because this almost 700$ car note is just killing me.

 

I have heard it is bad to trade it in because I wont get much for it all and I would be transferring a negative equity. I also read that I could sell it but that still has the issue of me coming up with $11k+ possibly - that I definitely don't have. I have seen that I could take out a personal loan to pay off the negative equity but that will leave me with a 300$ personal loan payment and a $300 car loan payment after refinancing and I'm back to paying $600 a month for this dang truck.

 

I am aware of how bad of a decision it was to get the truck. I had no guidance and the people at the dealership just wanted to make a sale and did not have my best interest in mind. So now I just have to deal with it and make the best decisions I can.

 

Does anyone have any suggestions for what I can do to get a lower car payment that does not include me paying $10,000 ..... I would really appreciate it!

 

Thanks !! 

18 REPLIES 18
Moderator Emerita

Re: Refinancing Very Upside Down Car Loan


@jeepchick92 wrote:

Hello -

 

I have a 2016 jeep renegade latitude that I bought Nov 2016, a few months shy of a year ago. I have a $675 car note a month and 16% APR. When I went in to buy my car I knew nothing about car loans so I got jugged.

 

The car is worth around 18K and I owe around 29K. So im a good 11K+ in the hole. I actually am not THAT upset about how negative I am, it sucks but my credit was in the 500s when I bought the car. So now, I have credit closer if not past 700.  My main goal is to get a lower monthly payment because this almost 700$ car note is just killing me.

 

I have heard it is bad to trade it in because I wont get much for it all and I would be transferring a negative equity. I also read that I could sell it but that still has the issue of me coming up with $11k+ possibly - that I definitely don't have. I have seen that I could take out a personal loan to pay off the negative equity but that will leave me with a 300$ personal loan payment and a $300 car loan payment after refinancing and I'm back to paying $600 a month for this dang truck.

 

I am aware of how bad of a decision it was to get the truck. I had no guidance and the people at the dealership just wanted to make a sale and did not have my best interest in mind. So now I just have to deal with it and make the best decisions I can.

 

Does anyone have any suggestions for what I can do to get a lower car payment that does not include me paying $10,000 ..... I would really appreciate it!

 

Thanks !! 


Welcome to MyFICO! Smiley Happy

 

I am sorry that you ended up here based on what happened to you with this dealership (I assume).  However, in the long run the dealer may have done you a favor - even if it is in a back-handed kind of way. 

 

First, congratulations on moving your FICO score up over 700.  I hope you are not relying on Credit Karma or one of the other fako score services. Let us know the source of your score and we can confirm if it is FICO or not. You may be able to look at the score and see what it says. If it says for 'educational purposes only' then odds are that it is a fako score and not a fico score.

 

The very first lesson to learn is that no car salesperson has the best interest of the consumer at heart. They have the best interest of their employer to keep at the top of their mind at all times before, during and after the negotiations. This is business basics 101.  The seller wants top dollar and the buyer wants to pay as little as possible. You can be friendly while negotiating, but the seller's rep is not your friend. This is why you have to look out for yourself during the purchase process or have a knowledgeable friend help you through the process.

 

Trading in an upside down car can result in a larger negative equity balance because most dealerships will short you on the value of your trade.

 

You are upside for a couple of reasons: 

1) You most likely paid top dollar. 

2) You may have been succered into an extended warranty - at great expense.  Check your contract. These dealerships use the extended warranty as a huge profit center. You may also have the ability to cancel the warranty and receive a credit toward your outstanding loan balance.  This will help reduce the negative equity.

3) You may have also been succered into a very high priced GAP policy. There are excellent GAP policies that are not nearly as expensive - the dealership sells the most expensive GAP policy on the planet. You can cancel the remaining policy and have the pro-rated premium credited to your balance + get a good gap policy from your insurance company for a lot less. 

4) It is possible that there are other non-sensical items added to your contract. Some may be cancelled and others it is too late to do anything about now. But a lesson learned is: read the contract before you sign. 

5) The single biggest item contributing to your underwater situation is what you identified in your post:  the high interest rate.  Every payment puts you further behind in a way. 

 

If I were in your shoes, I would:

  • cancel the extended warranty and get the credit
  • cancel the current GAP policy and get the credit
  • cancel whatever else you may have on the contract that would result in a credit to your balance
  • then see what the shortfall is for the loan.  Get your valuation from CarMax - as they will put it in writing and actually buy the vehicle from you.
  • Then, after you receive all of the credits, Refi the vehicle into a decent loan. You should be able to significantly save on your monthly payment. 

 

 

 

Message 2 of 19
Frequent Contributor

Re: Refinancing Very Upside Down Car Loan

all of the above is good information and great advice however, I would urge you to find a GAP policy before cancelling your existing GAP policy if you have one. You wouldn't want to chance wrecking your vehicle with all of that inequity and not have GAP coverage. Also be sure that the GAP policy you do purchase will cover your inequity (most GAP policies dealer's sell will cover UP TO 150% of NADA clean retail + your deductible) so make sure the policy you get will make you fully covered. In addition what valuation tool are you using to figure your vehicle is worth 18k? I would suggest getting a value on your vehicle from NADA and look closely at the NADA clean trade in value as well as the NADA clean retail value. Hopefully the value you came up with is inaccurate and your vehicle is in fact worth a bit more. Many lender's and CU's will finance up to 120% of Clean retail believe it or not. And from experience I have seen many lender's finance up to 135-140% of clean trade with excellent credit. By cancelling any products you may have you could possibly refinance once those refund's are reflected on your payoff. Note that your payment will not decrease by cancelling any aftermarket products such as GAP, service contracts, etc. the refund will be sent to your lender and be deducted from your balance. I would suggest not trading in your vehicle because it will only add to your current situation and you will find yourself even more so underwater.

AMEX BCE ($39,500) CITI AAdvantage ($20,500) Region's Platinum Card ($14,400) Discover IT ($23,000) Macy's ($7,000) Chase FU ($10,000) Barclay's Aviator ($22,000) TU:778 EX: 781 EQ:791
Message 3 of 19
New Visitor

Re: Refinancing Very Upside Down Car Loan

Thanks so much for your reply!

Yes, you are right they never will. This was just a rookie mistake. I use credit karma yes, I have never heard of a fako score. Where am I supposed to look? How is it legal for me to give them all my personal information and claim to give me my score with all the bureaus ad its wrong? What the hell! Wow…. I have checked other places when applying for credit so I do know my real score I just thought credit karma was accurate! I am mind blown….

I do have expensive GAP insurance and other things on my contract that I can take off. This is GREAT information and I really appreciate the time you took to answer! I really needed some guidance and I will defiantly start with your suggestions immediately.

Thanks a ton!

Message 4 of 19
New Visitor

Re: Refinancing Very Upside Down Car Loan


@SEMO wrote:

all of the above is good information and great advice however, I would urge you to find a GAP policy before cancelling your existing GAP policy if you have one. You wouldn't want to chance wrecking your vehicle with all of that inequity and not have GAP coverage. Also be sure that the GAP policy you do purchase will cover your inequity (most GAP policies dealer's sell will cover UP TO 150% of NADA clean retail + your deductible) so make sure the policy you get will make you fully covered. In addition what valuation tool are you using to figure your vehicle is worth 18k? I would suggest getting a value on your vehicle from NADA and look closely at the NADA clean trade in value as well as the NADA clean retail value. Hopefully the value you came up with is inaccurate and your vehicle is in fact worth a bit more. Many lender's and CU's will finance up to 120% of Clean retail believe it or not. And from experience I have seen many lender's finance up to 135-140% of clean trade with excellent credit. By cancelling any products you may have you could possibly refinance once those refund's are reflected on your payoff. Note that your payment will not decrease by cancelling any aftermarket products such as GAP, service contracts, etc. the refund will be sent to your lender and be deducted from your balance. I would suggest not trading in your vehicle because it will only add to your current situation and you will find yourself even more so underwater.


Great thank you. I will make sure to get my better priced GAP before canceling. And I used the kelly blue book website. I googled NADA but I cant find a tool to get my exact worth. Do you have a link to their calculatorI could use possily? If not, I will definatly still look into the NADA worth! I really do hope it was inacurate. 

 

I was wondering where the deductions will be seen, thanks for that info. And yes trading in is not an option after the info I obtained here.

 

Thanks so much you rock.  

 

Message 5 of 19
Frequent Contributor

Re: Refinancing Very Upside Down Car Loan

Credit Kharma uses Vantagescores to provide you, your credit score. This is a "legal" credit bureau and is a real credit score, however this scoring system isn't widely used especially in auto lending. In auto lending most major banks and CU's use your Transunion, Experian, and Equifax auto enhanced 08 scores which you can find here on myfico by purchasing them. Credit Kharma can be a great tool for credit monitoring and for a base point to watch your "scores" for large fluctuation's but don't solely rely on them as they are not what most lender's use when making a credit decision.

AMEX BCE ($39,500) CITI AAdvantage ($20,500) Region's Platinum Card ($14,400) Discover IT ($23,000) Macy's ($7,000) Chase FU ($10,000) Barclay's Aviator ($22,000) TU:778 EX: 781 EQ:791
Message 6 of 19
Frequent Contributor

Re: Refinancing Very Upside Down Car Loan

http://www.nadaguides.com

 

If you have trouble looking it up feel free to post the VIN here, the trim level, options, and mileage and location (central region/midwest/etc) and Id be more than happy to get you some values.

AMEX BCE ($39,500) CITI AAdvantage ($20,500) Region's Platinum Card ($14,400) Discover IT ($23,000) Macy's ($7,000) Chase FU ($10,000) Barclay's Aviator ($22,000) TU:778 EX: 781 EQ:791
Message 7 of 19
New Visitor

Re: Refinancing Very Upside Down Car Loan


@SEMO wrote:

Credit Kharma uses Vantagescores to provide you, your credit score. This is a "legal" credit bureau and is a real credit score, however this scoring system isn't widely used especially in auto lending. In auto lending most major banks and CU's use your Transunion, Experian, and Equifax auto enhanced 08 scores which you can find here on myfico by purchasing them. Credit Kharma can be a great tool for credit monitoring and for a base point to watch your "scores" for large fluctuation's but don't solely rely on them as they are not what most lender's use when making a credit decision.


Ok got it, thank you!

Message 8 of 19
Moderator Emerita

Re: Refinancing Very Upside Down Car Loan

OP, I agree that how Credit Karma markets their score is deceptive. It is a legitimate score - just not one that any lender actually uses.  That is where I think it is deceptive. If you look at their commercials you, as a consumer, would have no idea that the score they advertise is not a score that lenders use. That is my beef with them. The good thing is you can see your individual tradelines and balances and TL changes for free with Credit Karma - but as a general rule, ignore the scores as it will just confuse you (and all of us individually). 

 

SEMO is right, you can get the scores that actual lenders use here.

Message 9 of 19
Frequent Contributor

Re: Refinancing Very Upside Down Car Loan

As someone who just traded in a 2016 Hyundai Veloster that was $10k under water it was really easy for me. Don't get me wrong, I had to carry over some negative but not near as much as I thought because it ended up being about $6k.

I luckily found a lasting 2017 Hyundai Santa Fe Sport that had a lot of rebates and cash from the dealer cause they wanted to get rid of it with all the new 2018's hitting the lot and it only had 111 miles and drives/rides like a dream!

Luckily my bank helped me out tremendously with all of this so I didn't have to get the dealer to do anything at all.

Who do you have that car loan through? With you coming up on a year right now. You probably stand a good chance to refinance the vehicle for a much lower rate. Unless you have it with someone who won't refinance existing loans. But then you could look into moving it elsewhere.

All you would need to do is find the NADA value because most credit unions will finance it for anywhere between 125% to 150% above the average trade-in value as long as you end up getting GAP coverage.

I think you have a lot of avenues to go down on getting a lower payment. Just have to find the one that works best for you.
Starting Score: EQ 606 TU 623 EX 598 - April 17'
Current Score: EQ 644 TU 664 EX 667 - May 18’'
Goal Score: EX 750 TU 750 EX 750


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Message 10 of 19
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