Upside down options?

[Anonymous]

Last year I got into my first car loan after my previous car died. I was in a tight spot financially and needed a car asap for work, so I went to Drivetime where my unprepared self got into a bad loan. 200$ of my monthly $400 payments get credited to my loan, and the rest goes to interest on a car I don't truly want or plan to keep.

I have figured that in the long run I might as well be investing in something I want and plan to keep, and I need a truck for work. I also feel like I'll be stuck dealing with this nevative equity either way, so why not bring it onto a new loan?

I have a few thousand in negative equity that I can't seem to get on top of, and don't have the kind of cash to get rid of that negative equity anytime soon. Will I be taking too big of a loss by trading it in?

My payoff is $13k on a car that's now worth about $9k. A dealer advised me I'd only get financed by going for something newer than what I've got if trading in. I've been looking at trucks priced around $20k.

Thanks for reading my lengthy post!

[Anonymous]

More debt isn't a solution to debt. If you think about taking on $7k more of debt as a solution to being underwater on your current loan, doesn't that sound silly?

Figure out how to get on top of your current car loan before making any moves . . rework your budget . . lower expenses . .raise income . .throw extra $$ at your car note.

You'll just keep getting more underwater every time you roll negative equity over. Break the cycle.

[nykos5000]

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@Anonymous wrote:
Last year I got into my first car loan after my previous car died. I was in a tight spot financially and needed a car asap for work, so I went to Drivetime where my unprepared self got into a bad loan. 200$ of my monthly $400 payments get credited to my loan, and the rest goes to interest on a car I don't truly want or plan to keep.

I have figured that in the long run I might as well be investing in something I want and plan to keep, and I need a truck for work. I also feel like I'll be stuck dealing with this nevative equity either way, so why not bring it onto a new loan?

I have a few thousand in negative equity that I can't seem to get on top of, and don't have the kind of cash to get rid of that negative equity anytime soon. Will I be taking too big of a loss by trading it in?

My payoff is $13k on a car that's now worth about $9k. A dealer advised me I'd only get financed by going for something newer than what I've got if trading in. I've been looking at trucks priced around $20k.

Thanks for reading my lengthy post!

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As Steeler mentioned, adding more debt isnt the most ideal solution but if you can swing it because you hate your current car that much then yes you would have to get a newer car. Your loan to value ratio on a older car would be too high for the bank to approve without a nice down payment. A newer car would give you more wiggle room on the loan to value ratio and leasing is a way for a lot of ppl to get out of negative equity without increasing your payments too much. If you can deal with the mileage limitations, you can have a new truck discounted off of the MSRP and have the negative rolled into the lease for three years and you would be paying for the depreciation of the leased truck (three years worth), the negative equity that was rolled in from the prev loan plus interest. After three years is up...you can walk away or buy it out and keep it longer. 

[Anonymous]

Try to get a car from a dealership that offers rebates and incentives. Or try going to a dealership at the end of the month when they're trying to make quota.

[Kree]

I'm making a few assumptions here, so the actual numbers might vary.

Assuming you have 48 months left on a 60 month loan at 20% apr.

Currently paying 400 a month, will require about 5850 in interest paid over life of loan.

If you can rearrange your budget to pay 500 a month instead, would require about 4150 in interest paid over 34 months.

This saves about 1700 monies in interest and get your balance owed down to 9000 in about 12 months.

[Anonymous]

Do you have anything saved for a down payment on the new car? Most dealers like this.

Is the $9K trade in or selling value? You could possbly sell it out right for more?

You do have more wiggle room with a newer car, but the bank is still only going to loan so much on the car's worth.

With a $20K auto, they would at least like to see $2K down. More if there's going to be any kind of rollover.

You could maybe meet them in the middle and pay half of the upsied down amount, then roll the rest over to the new car. Assuming it's one you plan to keep for while.