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Upside Down Car Loan?

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Valued Member

Upside Down Car Loan?

I just wanted to know what can one do to NOT be in an upside down car loan? 

 

Other than leaving a hefty downpayment is there anything else that works?

 

21y/o trying to become an elite credit queen by 25.
Current: June 2019 EX 715; TU 723; EQ 720
Starting Score: TU 748; EQ 743; EX 739
Goal: 760 all round

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13 REPLIES 13
Super Contributor

Re: Upside Down Car Loan?

Haggle. You need to get the financed amount under the value of the car once it leaves the lot. You can also make some extra payments to principal. I didn't put a down payment on mine and wish I had because I'm about $2k underwater and don't have the extra cash to get it positive. 







Message 2 of 14
Valued Contributor

Re: Upside Down Car Loan?

buy a 2-4 year old American or German car.

Rebuild started in 2014  -  $100k+ unsecured credit in 2017  -  $250k+ unsecured credit in 2019.

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Message 3 of 14
Regular Contributor

Re: Upside Down Car Loan?

take a 36 month car loan.

Message 4 of 14
Frequent Contributor

Re: Upside Down Car Loan?

Certified Pre Owned is a great step because you often have better than new car warranty.

 

Nothing depreciates faster than a car.

 

Being upside down does matter to me if and only if:

1) I will be right side up before the warranty expires

2) I have a good interest rate

3) I have GAP insurance

 

I have a 2017 Audi I bought in November CPO.

My warranty expires 9/30/2022 and covers unlimited miles.

on 9/30/2022 I estiamte to have 64,381 Miles on my car.

I will owe <$10,000 on the car without making extra payments and should be right side up by a decent margin.

My interest rate is 3.75% for 6 years.

 

I see nothing wrong wih the fact that I am currently a little upside down.

 

The worst case scenario is I want a new car before 9/30/2022 but don't need one since it still has warranty and anyone who has really learned their lesson bouncing back from credit problems should just say oh well suck it up I have to wait.

 

Being upside down with a high interest rate is bad won't be able to refinance for a long time until the loan to value drops < 120%.

Being upside down without GAP insurance is very bad as if it's totalled you will still owe the difference between what insurance pays and what you owe and that's a tough pill to swallow owing money on a car you no longer have.

 

Based on your scores I am assuming you will get decent loan rates so I don't know if it really matters if you are upside down or not.  To me if my criteria is met I don't care.  Theoretically you are upside down on every lease for a while you can't trade it in in 6 months or a year without a big hit.  To me a longer loan 6-7 years is kind of like a lease.  Let's me get into the car I want, keep payments where I want, makes sure I am right side up before warranty expires....

 

 

Message 5 of 14
Frequent Contributor

Re: Upside Down Car Loan?

I'm not upside down on my 2016 Ford Focus ST, and I didn't put a penny down.  I also took out a 72 month loan and am not even half way done with the installments yet.  Here's the pay off on my car as of today, but I just made a payement on it today so subtract $347 from it:

 

  Capture.JPG

So I'm under $13k.  Here's the trade-in value.  I could easily get the high end of trade-in value selling it myself:

 

Capture2.JPG

 

How'd I do it?  Well for starters, I got a 0% loan, so every penny I pay on it goes to principle.  Manufacturers offer these often, so it helps to have good credit and be patient.  Also, I bought a car that keeps its value better than some.  I also negotiated the car down as low as I could possibly get it and was ready to leave the deal on the table at any moment.  There ya go.  




Message 6 of 14
Frequent Contributor

Re: Upside Down Car Loan?

My idea of being upside down may differ from other's, being upside down in my opinion is owing more than what trade in value would be on the vehicle, some people would consider owing more than retail value being upside down. The way I look at it, is if I owe more than trade-in value I consider that upside down personally, ways to avoid this are negotiating better prices, putting 20% down, and financing for shorter term's at better rates (anything over 60 month's is too long in order to maintain equity, without a significant down payment.) Financing for longer term's such as 72 mo's is okay, if it is manufacturer supported 0% financing.

 

Car's are depreciating asset's, and they often depreciate faster than people are paying down their loan's, because they didn't put a down payment down and/or financed for extended term's. Doing research and buying vehicles that maintain their value is another good option, vehicles like Toyota Tacomas, Jeep Wrangler, etc typically hold their value very well as opposed to a Hyundai Elantra that sells new for 20k and a year later is worth 11k.

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Message 7 of 14
Valued Contributor

Re: Upside Down Car Loan?


@RobertJ wrote:

I'm not upside down on my 2016 Ford Focus ST, and I didn't put a penny down.  I also took out a 72 month loan and am not even half way done with the installments yet.  Here's the pay off on my car as of today, but I just made a payement on it today so subtract $347 from it:

 

  Capture.JPG

So I'm under $13k.  Here's the trade-in value.  I could easily get the high end of trade-in value selling it myself:

 

Capture2.JPG

 

How'd I do it?  Well for starters, I got a 0% loan, so every penny I pay on it goes to principle.  Manufacturers offer these often, so it helps to have good credit and be patient.  Also, I bought a car that keeps its value better than some.  I also negotiated the car down as low as I could possibly get it and was ready to leave the deal on the table at any moment.  There ya go.  


 

But you were upside down for at least 2 years.

Rebuild started in 2014  -  $100k+ unsecured credit in 2017  -  $250k+ unsecured credit in 2019.

DON'T WORK FOR CREDIT CARDS ... MAKE CREDIT CARDS WORK FOR YOU!

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Message 8 of 14
Frequent Contributor

Re: Upside Down Car Loan?


@Shooting-For-800 wrote:

@RobertJ wrote:

I'm not upside down on my 2016 Ford Focus ST, and I didn't put a penny down.  I also took out a 72 month loan and am not even half way done with the installments yet.  Here's the pay off on my car as of today, but I just made a payement on it today so subtract $347 from it:

 

  Capture.JPG

So I'm under $13k.  Here's the trade-in value.  I could easily get the high end of trade-in value selling it myself:

 

Capture2.JPG

 

How'd I do it?  Well for starters, I got a 0% loan, so every penny I pay on it goes to principle.  Manufacturers offer these often, so it helps to have good credit and be patient.  Also, I bought a car that keeps its value better than some.  I also negotiated the car down as low as I could possibly get it and was ready to leave the deal on the table at any moment.  There ya go.  


 

But you were upside down for at least 2 years.


Marginially so, and I also purchased GAP which was rolled into the loan.  What could happen to burn me during those two years?  I guess I could have decided I didn't want the car in the first two years and taken a beating, but that's not how I do things.  My car previous to the Focus was kept for six and a half years and was a high mileage commuter.  Lose my job?  I work for the federal government and have 25 years of IT work.  Doubtful.  

 

My thing was, why would I put any money down when I am getting free credit?  




Message 9 of 14
Valued Contributor

Re: Upside Down Car Loan?


@RobertJ wrote:

@Shooting-For-800 wrote:

 


 

But you were upside down for at least 2 years.


Marginially so, and I also purchased GAP which was rolled into the loan.  What could happen to burn me during those two years?  I guess I could have decided I didn't want the car in the first two years and taken a beating, but that's not how I do things.  My car previous to the Focus was kept for six and a half years and was a high mileage commuter.  Lose my job?  I work for the federal government and have 25 years of IT work.  Doubtful.  

 

My thing was, why would I put any money down when I am getting free credit?  


There is no marginally so about it. 

EVERYONE takes a bath the minute the car rolls off the lot.

I never said anything about GAP or your job or your decision changing attributes.

I simply stated that you were underwater for the first two years, which is accurate.

 

 

Rebuild started in 2014  -  $100k+ unsecured credit in 2017  -  $250k+ unsecured credit in 2019.

DON'T WORK FOR CREDIT CARDS ... MAKE CREDIT CARDS WORK FOR YOU!

10% Rotating - Discover                    5%-20% - Amazon & Lowes                3-6% Groceries - NFCU & Amex Preferred
3-5% Gas - NFCU & Ducks Unl         4% Dining & Entertain - Savor            3% Travel & Hotels - Flagship, Propel, & Uber
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Message 10 of 14
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