Upside down auto loan... Voluntary Surrender?

[Anonymous]

I am new member desperately in search of some assistance of guidance. I try to keep this short and sweet. My partner was in desperate need of a car, he stupidly ran out in got an auto loan through a shady dealership. He was very ignorant to how auto loans and credit work. He currently pays $183 every two weeks. We recently got engaged and have been taking about purchasing a house in the next year or two. While digging into our finances. We determined that he currently pays .22 % in interest plus an additional interest charge that amounts to $3.65 per day for a car that currently has a KBB value of $1700. I was totally shocked. Anyways, we are at a cross roads. We are still waiting on a copy of the official contract he signed, but according to the payment history statement they sent, the loan was for $10,000, so far he has paid $4000 towards the principle and $2500 towards interests. The statements say he has $6055 left, which I sure is really almost $9000 once the tag on more interest. In his situation would it be worth it to just cut his losses and voluntary surrender the car. The finance company sucks, no help what so ever. He makes good money and could use the extra $400 a month to hire a lawyer to take care of some other things on his credit as well has investigate if the finance company was exceeding the Michigan auto loan interest limits and pay the remaining balance when they bill him after the car goes to auction.  He could trade it in but he would have to roll over almost $4000 so he would still have a very high car note. The car is 2007 with 140,000 miles so there are not many lenders who will refinance the car. I just bought a new car and kept my old one so he would still have a car available to drive regularly even if turns in his car. I know money can buy you good credit. I paid off $3000 worth of credit card bills in the past few months and my credit went from a 629 to 750 from the months of Oct- March 2017. After my credit score jumped, I leased car with no problem, with a low down payment and a low car note.  How should my partner spend his money? Keeping the car is not an opinion it does not make since to pay another $6000+ over the next two year for a car that’s only currently worth $1700.

[Anonymous]

Welcome and congratulations on your upcoming wedding.  This is a terrible situation but not very uncommon unfortunately.  Hiring a lawyer really won't get you anywhere and it will just waste a ton of your money, I would file a complaint with the consumer affairs office of the attorney general and the Consumer Financial Protection Board.  CFPB has alot of authority for a little longer  (Trump has talked of stripping much of their authority), when you file a complaint they ask you what you want for the resolution so have an answer in mind.  I am guessing neither of those will result in much but they are worth trying.  It sounds like your partner has paid on this for some time and gotten some use out of the car at least.  I generally don't endorse this strategy but if I were in your shoes I would shop for a cheap new car that has a decent size rebate to consume most of that negative equity and be done with this car.  I suspect the payment will be the same or less but at least the APR will be much better and you will have a reliable car for several years.  I am a strong proponent of working with credit unions for financing as they provide the best rates consistantly (there are promotional rates that folks with good credit can get so do your homework).  DCU, NFCU and Penfed are the favorites here.  Do Not Repo this car, it will erase the good payment history your partner has, make it difficult to qualify for a mortgage for at least a couple of years and will destroy their credit for several years and it will stick on the report for 7 years.  Cut your losses and move on just do so as wisely as possible.  

[StartingOver10]

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@Anonymous wrote:

Welcome and congratulations on your upcoming wedding.  This is a terrible situation but not very uncommon unfortunately.  Hiring a lawyer really won't get you anywhere and it will just waste a ton of your money, I would file a complaint with the consumer affairs office of the attorney general and the Consumer Financial Protection Board.  CFPB has alot of authority for a little longer  (Trump has talked of stripping much of their authority), when you file a complaint they ask you what you want for the resolution so have an answer in mind.  I am guessing neither of those will result in much but they are worth trying.  It sounds like your partner has paid on this for some time and gotten some use out of the car at least.  I generally don't endorse this strategy but if I were in your shoes I would shop for a cheap new car that has a decent size rebate to consume most of that negative equity and be done with this car.  I suspect the payment will be the same or less but at least the APR will be much better and you will have a reliable car for several years.  I am a strong proponent of working with credit unions for financing as they provide the best rates consistantly (there are promotional rates that folks with good credit can get so do your homework).  DCU, NFCU and Penfed are the favorites here.  Do Not Repo this car, it will erase the good payment history your partner has, make it difficult to qualify for a mortgage for at least a couple of years and will destroy their credit for several years and it will stick on the report for 7 years.  Cut your losses and move on just do so as wisely as possible.  

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^^^Agree 100%.

Do NOT voluntarily surrender the vehicle. This will really hurt any chance you have of buying a home and getting a mortgage.  

If your b/f has the funds, have him pay the loan down and sell the vehicle to CarMax or trade it in as workingfor850 suggests. The silver lining in this is that your b/f will hopefully read the contract before signing.