Upside down $15,000 and need suggestions

[sjt]

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@Anonymous wrote:

I went to the dealership yesterday to trade in my 2014 Jeep with approx 91k miles because I wanted to purchase a used Range Rover. When I purchased the vehicle about 2 years ago, I was in a desperate situation and I needed a vehicle quickly. My credit score was probably not even 600 so I got an extremely high interest rate. Tough lesson learned.....

I called Capital One and they told me that I owed $30k on the vehicle. The salesman told me my trade in value was only $15k. He had a few suggestions for me.

Option 1 - Pay the $15k that I was upside down (which I didn't have!) and then purchase the RR

Option 2 - Come back to the dealership with a cosigner that didn't have a car loan and pay a $2-$3k down payment and don't trade in the vehicle

I told him that in I did Option 2, how would that benefit me because I would have 2 car payments. He suggested that I could sell it or do a voluntary repo. No way could I sell it for $30k with a $15k value. Carmax gave me a quote of $20,000.

Right now , I don't know what to do. I don't have $15k and I don't want to do a voluntary repo. My TU credit score is low 600s and I don't want my credit score to drop because of a voluntary repo. Does anybody have any suggestions what to do when you are upside down this much?

TIA

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What was the purchase price of the vehicle and the interest rate of the loan. A $30K pay off seems really high. Are you sure the CSR told you the early payoff as oppose to them telling you the term of the loan.

[Anonymous]

I have been in the car business for 10 years and we see this every day. You mentioned that you were not in a good position when you purchased the Jeep to begin with. Did you trade in something & roll over negative equity then? Was the Jeep purchased pre-owned? (Might explain some of the high mileage). Refinancing would help but if possible, double up on the payments. Try to pay a lump sum to the balance. (income tax money maybe) You may be in a better position to trade in about a year. The first 2 new vehicles I bought were at 12% & now I have 0% and 1.9%. The "wants" will be way easier to obtain as you improve your credit situation. 

Best of luck!

[sjt]

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@Anonymous wrote:

I have been in the car business for 10 years and we see this every day. You mentioned that you were not in a good position when you purchased the Jeep to begin with. Did you trade in something & roll over negative equity then? Was the Jeep purchased pre-owned? (Might explain some of the high mileage). Refinancing would help but if possible, double up on the payments. Try to pay a lump sum to the balance. (income tax money maybe) You may be in a better position to trade in about a year. The first 2 new vehicles I bought were at 12% & now I have 0% and 1.9%. The "wants" will be way easier to obtain as you improve your credit situation. 

Best of luck!

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Do sub prime auto loans amortize loan repayment differently? 

[Anonymous]

It's the same. Everything that is being paid right now is going mainly to the interest first. Especially if he has only had the vehicle about 2 yrs (my guess is that it may be less). If you are one to trade regularly and do not want to roll over negative equity, my suggestion is to keep the vehicle atleast half of the term of the loan. For people who have average credit, this will usually get you to a place where you are about even. 

Let's not forget also, trade-in values are given based on the area you reside in. I love in Texas, so trucks always hold their value. 

[Credit_hawk]

As an admitted car guy who purchases too many cars, like a new one a year, you have to know how to play the game. Only people unfamiliar with the car market and different brand's rate of depreciation would ever think of buying a Range or BMW, Mercedes, etc. You lease those cars, you don't buy them. After that factory warranty runs out they're worthless. Ever wonder how you see poor people driving 5-10 year old Beemer, Benz, and Bentley's? They're cheap as dirt. They depreciate like nothing you've ever seen. You can get a $200,000 Bentley for $30,000 less than 10 years later. 

You buy Toyotas, Hondas, Fords, and Chevys.

As for the cost of that loan, something isn't right. You can buy a 2017 Cherokee new for $30k. Why is your used '14 $30k? Interest alone doesn't do all that in 2 years. You must of rolled another underwater car into that loan.

[rooeez]

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@Credit_hawk wrote:

As an admitted car guy who purchases too many cars, like a new one a year, you have to know how to play the game. Only people unfamiliar with the car market and different brand's rate of depreciation would ever think of buying a Range or BMW, Mercedes, etc. You lease those cars, you don't buy them. After that factory warranty runs out they're worthless. Ever wonder how you see poor people driving 5-10 year old Beemer, Benz, and Bentley's? They're cheap as dirt. They depreciate like nothing you've ever seen. You can get a $200,000 Bentley for $30,000 less than 10 years later. 

You buy Toyotas, Hondas, Fords, and Chevys.

As for the cost of that loan, something isn't right. You can buy a 2017 Cherokee new for $30k. Why is your used '14 $30k? Interest alone doesn't do all that in 2 years. You must of rolled another underwater car into that loan.

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^ This... Also, if the OP was the one that put the 90k of miles on the Jeep in two years; I would get a beater for a commuter.

[Anonymous]

This is an update to everyone's questions:

The jeep was purchased new on November 8, 2013. I didn't trade in a vehicle.

The list price was $37,500 and I got a rebate of $1,000. With all the taxes, fees and exteneded service contract, the balance was $41,183.16 and I gave a $2,800 down payment. Amount financed was $38,383.16 for 60 months at 15% interest!

I appreciate everyone's input.......

[rooeez]

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@Anonymous wrote:

This is an update to everyone's questions:

The jeep was purchased new on November 8, 2013. I didn't trade in a vehicle.

The list price was $37,500 and I got a rebate of $1,000. With all the taxes, fees and exteneded service contract, the balance was $41,183.16 and I gave a $2,800 down payment. Amount financed was $38,383.16 for 60 months at 15% interest!

I appreciate everyone's input.......

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@Anonymous to a quick online amortization schedule, for a 60 month loan @ 15% you have a payment of ~$913/month and that would put you ~$18,154 balance for 12/16, not the $30k you stated. Am I missing something?

http://www.bankrate.com/calculators/managing-debt/loan-calculator.aspx

[Credit_hawk]

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@Anonymous wrote:

This is an update to everyone's questions:

The jeep was purchased new on November 8, 2013. I didn't trade in a vehicle.

The list price was $37,500 and I got a rebate of $1,000. With all the taxes, fees and exteneded service contract, the balance was $41,183.16 and I gave a $2,800 down payment. Amount financed was $38,383.16 for 60 months at 15% interest!

I appreciate everyone's input.......

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Karamel, you paid MSRP on that. The rebate was a manufacturers rebate. You got ripped off in the worst way. Please believe me when I say I'm not trying to embarrass you or come off as a know it all, I actually sympathize with you. I think walking away from that Range dealer for whatever reason was the best thing that could have happened to you because it would have happened again but worse.

I want to give you a couple quick pointers and that will never fail you. Never pay MSRP for any "common" car. Meaning if it's not a limited number or hot car like a GT500 or Hellcat (at least when they first came out; now they're below MSRP) don't ever pay it. What that dealer did was make full 100% profit. That rebate came out of Chrysler's pocket, not the dealer's. Always shoot for invoice price (which is the amount the dealer SUPPOSEDLY pays) then try to get a few grand below it. How is this possible to get a car for what the dealer supposedly pays? Because they get other payments for moving the units from the manufacturer called "holdbacks" which is a percentage of the vehicles cost.

But consider the invoice price as your MSRP. The invoice is easy to get online and some dealers will give it to you there. Next, find all the rebates and bonus dollars on your own. Don't expect them to tell you. Then negotiate the actual price of the car not the monthly payment before adding any incentive/rebate on the car. You want to make sure you're getting a discount from the actual dealer. Don't let them mislead you into believing a manufacturer rebate is coming from them, it isn't. Lastly, lock in your financing BEFORE you ever go to a dealership. This is because it's actually legal for them to tack on a few points to your APR and they don't have to disclose it to you and they keep it as profit. Sounds illegal, right? It's not. If they told you your APR was 12% it was probably more like 10% or maybe even less.

Finally, always use competing dealers against each other. And negotiate 75% of the deal from home so you don't waste your time at the dealer where they have more of a chance to work you over. 

I hope this helps you. It's very accurate and useful information. I just purchased a new car that stickered for $41,300 and walked out the door with it for $36,800. That's before incentives! Not including tax of course, but that's how you work it.

[sjt]

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@Anonymous wrote:

This is an update to everyone's questions:

The jeep was purchased new on November 8, 2013. I didn't trade in a vehicle.

The list price was $37,500 and I got a rebate of $1,000. With all the taxes, fees and exteneded service contract, the balance was $41,183.16 and I gave a $2,800 down payment. Amount financed was $38,383.16 for 60 months at 15% interest!

I appreciate everyone's input.......

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Based on the information you provided I did an amortization schedule and I came up with a pay off balance of $18.8K after 36 payments. How did they come up with a 30K payoff?