Author Topic: Bad Auto Loan - How do I get rid of this car?  (Read 2356 times)

vbrunner

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Bad Auto Loan - How do I get rid of this car?
« on: February 20, 2017, 08:13:23 PM »
My first time to this forum and what an amazing group!  I probably should write a case study question but for now I'm better off asking a quick question that has been burning a hole in my head and my pocket!  My husband and I have always paid cash for very used cars and never more than $5,000.  Well last year our Hyundai 2002 suddenly needed $2,000 in repairs.  Instead of going and buying another cheap used car or repairing the Hyundai we foolishly decided we'd really like a newer, fancier car.  We have terrible credit (500s and that's a long unusual story on trying to start not one but TWO social enterprise type businesses, hence the case study) and got a 2012 Dodge Journey in September.  For  $400 a month with 63 months left (currently we owe $17,000 but will pay alot more than that if we pay until Sept. 2022)! After discovering MMM I wanted to bang my head against a wall with this car and spending $700 a month btw gas/insurance/loan is just not desirable to begin our desire to be FI.  We have NO savings to speak of and the conundrum is should we sell the car privately and hope to get the $9500 max we could get (blue book) but then how to pay out the remaining amount on loan?  No one will buy the lease, it's not a good deal and not a new enough car.  Should we just give it back and let it ding our credit if we don't pay it as our credit sucks anyways? 

Dave1442397

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #1 on: February 21, 2017, 06:09:55 AM »
The problem with giving the car back is that you will still be liable for the debt. When you turn the car in, the dealer (or lender) will typically resell or send it to auction, and whatever they get for the car is subtracted from the amount you owe. The lender will then come after you for the money, and turn it over to a collection agency if you can't pay.

http://jalopnik.com/why-you-should-never-ever-do-a-voluntary-repo-1727556245

If you sell it, I doubt you'll get the blue book value. Check the car sites (Truecar, Autotrader, ebay motors and Craigslist) for cars like yours and see what they're selling for in your area. Private party sales will give you a better idea of what you might get. At this point, you might be looking at more like $8k, leaving you with no car and still owing $9k.

It's a bad situation. If at all possible, your best bet might be to see what you can do to bump up your credit rating. If even one of you can get your credit score bumped up, you could apply for a refinance on the car loan. Even then, you can only get a loan for up to 110% of the NADA value of the car, so you might have to borrow money from somewhere to pay the difference, but it would at least lower your monthly payment.

https://www.penfed.org/refinance-auto-loan/

Hargrove

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #2 on: February 21, 2017, 06:45:36 AM »
Sometimes it's best to sell it at a loss, and compare the number of that loss against how much you would have overspent keeping it for the life of your loan. Your FI journey starts with raising your credit score and getting out of debt. However...

Since you made the pretty outrageous decision to buy this thing at an unbelievably high price, and your credit score is what it is, a case study may actually help you determine if you could do things slightly differently - pay off the car in less than a year as part of getting your finances on track. I suspect that will save you much more than "managing your payments" because I'm going to assume you have a comical 15-29% interest rate on this loan.

Two working people, if they have no kids, should be able to do that if the rest of your finances and your spending gets cleaned up. Your final price on the car is only if you let all those payments pile up and the outstanding debt to keep gaining interest. You'll pay much closer to the blue book if you pay off the car ASAP, then you could sell it for a reasonable used car and feel like you pocketed the difference (that will be your starter savings).

soccerluvof4

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #3 on: February 21, 2017, 07:14:37 AM »
^+1..  Yea , your between a rock and a hardplace on this one. I agree mostly with Hargrove. The info Dave(*(*+*^ provide is spot on.

vbrunner

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #4 on: February 22, 2017, 01:10:58 PM »
Thanks for the responses and UGH!! My fear was this exact thing.  You are correct that the interest is 17.24%.  I will post a case study as there are other factors at play with our other debts  but hopefully some kind of path out. My husband sometimes says he wishes someone would just steal the car *sigh*. We do still have our Hyundai Santa Fe (paid for) so if we can get rid of the Dodge we could potentially repair it if we felt we really needed it.

Dave1442397

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #5 on: February 22, 2017, 03:21:31 PM »
My husband sometimes says he wishes someone would just steal the car *sigh*.

That wouldn't help unless you have gap insurance to cover the difference between the insurance payout and what you owe on it.

A case study is a good start. Good luck!

NoStacheOhio

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #6 on: February 23, 2017, 06:42:11 AM »
Thanks for the responses and UGH!! My fear was this exact thing.  You are correct that the interest is 17.24%.  I will post a case study as there are other factors at play with our other debts  but hopefully some kind of path out. My husband sometimes says he wishes someone would just steal the car *sigh*. We do still have our Hyundai Santa Fe (paid for) so if we can get rid of the Dodge we could potentially repair it if we felt we really needed it.

What cars are currently in your household?

Could you reduce that number? Can you and your spouse share one car? Bike/walk more? Carpool with coworkers or friends who work nearby?

If you have a car sitting around broken that you aren't using, step one is to get rid of it. Even if you don't fix it, you should still be able to get something for it. Compare the resale value if you do repair, to whatever you get for as-is. That money immediately goes toward the auto loan.

doneby35

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #7 on: February 23, 2017, 02:42:35 PM »
You will only get 9500 for a car that you bought last year and owe 17,000 on? Is there something wrong with the car for you to only be able to sell it for half the price a year later?

A couple of months ago I sold a car that I purchased for 22k foolishly a year ago before discovering MMM for 19k. Are you sure you can only get 9,500 max for yours?

Dave1442397

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #8 on: February 24, 2017, 06:09:56 AM »
You will only get 9500 for a car that you bought last year and owe 17,000 on? Is there something wrong with the car for you to only be able to sell it for half the price a year later?

It's because of the 17.24% interest rate. I don't know if the car came from a buy here, pay here dealer, but it's not uncommon for someone to end up owing way more than a car is worth - http://thegarage.jalopnik.com/what-you-need-to-know-about-buy-here-pay-here-car-lots-1686495057

BigRed

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #9 on: February 24, 2017, 06:49:16 AM »
You will only get 9500 for a car that you bought last year and owe 17,000 on? Is there something wrong with the car for you to only be able to sell it for half the price a year later?

It's because of the 17.24% interest rate. I don't know if the car came from a buy here, pay here dealer, but it's not uncommon for someone to end up owing way more than a car is worth - http://thegarage.jalopnik.com/what-you-need-to-know-about-buy-here-pay-here-car-lots-1686495057

It's not because of the interest rate.  Even if no payments were made, which is obviously not the case, 17.24% interest would only lead to the current sale price being about 17% less than the amount owed after 1 year.  If you read the link, it's because they often sell the car for far, far more than the car is worth, so you are massively underwater even before a penny of interest is charged.  That's because they expect to only collect a fraction of the payments, then repossess the car, and then sell it again.

vbrunner

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Re: Bad Auto Loan - How do I get rid of this car?
« Reply #10 on: February 25, 2017, 10:53:42 AM »
 Not sure I'd even get $1000 for the Hyundai Santa Fe, but maybe. The car is indeed WAY over priced already when we bought it, apparently and I stupidly didn't pay attention/research.  My husband works from home so we are good there.  I am looking into taking bike and light rail to daughter's school and my work.  But we live in Denver CO so not always fun in winter.  EIther way car still costs me $720 a month btw insurance/loan if I pay minimum payments.  Just want to get rid of the thing - so what I am guessing is try to pay it off as FAST as possible and then sell it? Should I prioritize this loan over all other debts I assume?   I have terrible credit and it wouldn't affect my already bad credit if they repoed it but I know that's not the answer...