Author Topic: Selling Car with Negative Equity  (Read 2314 times)

nom_nom_babies

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Selling Car with Negative Equity
« on: December 02, 2012, 11:34:07 PM »
Howdy all,

I've just been convinced that I should get a more fuel efficient car (and a bike), so I'm hoping for some sound advice.  I have a 2005 Mustang, but due to many ignorant decisions, I now have negative equity.  These are my thoughts, all of which include riding a bike:
1.   Keep car (high insurance & loan not preferable)
2.   Sell car, pay difference, take out loan for economic vehicle (But then I have a car loan again)
3.   Save cash until I can afford to:  Sell car, pay cash for economic vehicle

Car Loan Info
Interest:             %4.65
Original Loan:     $16,000
Current Owed:    $14,500
KBB Private:        $13,500
KBB Trade-in:      $11,000

Monthly Budget
Post Tax Income:   $3,400   *Majority tax free anyway due to Military BAH/BAS
Rent:                         $850
Phone:                        $88   *Should be reduced to $75 after Military discount, looking to lower further
Internet:                     $88   *Includes TV package, also reassessing speed requirement
Insurance:                $105   *Will go down with purchase of different vehicle
Utilities (Elec. only)     $90   *Bought  a clothes drier, and turned off the heat due to beautiful Albuquerque weather!
Food:                        $200   *Still trying to figure out how to eat Paleo as a single guy
Car Loan:                  $300
Student Loan:           $450   *Consolidated $23,000 Federal @ 6.5% to USAA @ 2.99%

Iíll be flying to visit family on the east coast for Christmas, so whatever I do will probably have to wait until afterwards.  So, whatís the verdict?  Can this only be fixed via time machine?


N

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Re: Selling Car with Negative Equity
« Reply #1 on: December 02, 2012, 11:51:44 PM »
just because you have a quote for kbb equity does not mean that is what you can get for your car.
you may be able to get what you owe for it, its not that far apart. Even if you had to pay 1K or less,  you would make that up in less than 3 months from saved carpayments/insurance and fuel.

take your car to carmax and get a quote. its free and nonbinding. clean and spiff it up first :)

the carmax quote I got for my 2009 car was 10,5 and I sold the car privately for 11,5. ( I also took it to a dealership stealership for a quote and after several hour and some lies and runaround, they offered me 10, and maybe minus some sort of fee, by that time I was too irritated to listen to them anymore-but my point is, try to get a few quotes, maybe)

In my case, an aquaintance on my fb friend list happened to write that she was looking for exactly my type of car. I emailed her and she and her husband ended up buying it. It cant hurt to start spreading the word that you are looking to downsize your car ownership :) you never know.

can you be car free for a while and save up for a different car?
or is there any savings or any other funds you can use to pay cash for a car?
Would you consider buying a very very used but cheap car to drive while saving for another more mustachian car that you would really want?

consider watching the CL offerings for types of car you would want, and see what they list for, how long they stay listed, etc. go see a couple, get an idea of what you would like to drive and pay for it.

let friends know you are in the market for a used car...again, you never know.

n
aka, "startingfromthestart"

thurston howell iv

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Re: Selling Car with Negative Equity
« Reply #2 on: December 03, 2012, 11:11:08 AM »
Try to sell for more than you owe. If not sell for what you owe and pay off the debt.  KBB is not the rule, just a guideline.

Ride bike. Save cash... If you need car later buy super cheap car with saved cash. (cheap car=cheap registration, cheap insurance, and ideally great mpg!)

SwordGuy

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Re: Selling Car with Negative Equity
« Reply #3 on: December 03, 2012, 07:23:27 PM »
If you can do without the car, sell it.  Get several quotes and sell it for the best price you can get.

If you lose $1000 on it, you're only in the hole for $1000 instead of $14500.   

With $450 a month in savings (car payment, insurance and gas, it won't take much to pay off that $1000, even if you have to get a high interest loan to do it.

You then have several options. 

  • Put aside a year's worth of payments and buy an inexpensive car for cash.
  • Put that $450 a month on those student loans.  You'll be putting an extra $450 a month straight to the principle.   Then invest.
  • Or, you could invest that $450 a month and pay off the student loan at the regular rate.  You'll have a leg up on your stache but it will be awhile before you get a more pleasant cashflow situation.

Mathematically, if you can make more with your investments than you can by paying down the loan, it makes sense to invest.

However, there's something to be said for highly positive cash flow.  Personally, I would pay those loans asap off to free up the $900 a month.  You lose a couple of years of compounding but gain a lot more years of stress-free cash flow.

I expect you'll get plenty of advice to invest instead (and it's good advice).
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nom_nom_babies

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Re: Selling Car with Negative Equity
« Reply #4 on: December 10, 2012, 07:48:13 AM »

take your car to carmax and get a quote. its free and nonbinding. clean and spiff it up first :)

can you be car free for a while and save up for a different car?
or is there any savings or any other funds you can use to pay cash for a car?
Would you consider buying a very very used but cheap car to drive while saving for another more mustachian car that you would really want?


My car's always in spiffy condition and inspection ready!   I'll definitely get a quote from Carmax, although it's a little embarrassing because that's where I bought it 7 months ago.


If you lose $1000 on it, you're only in the hole for $1000 instead of $14500.   

With $450 a month in savings (car payment, insurance and gas, it won't take much to pay off that $1000, even if you have to get a high interest loan to do it.

You then have several options. 

  • Put aside a year's worth of payments and buy an inexpensive car for cash.
  • Put that $450 a month on those student loans.  You'll be putting an extra $450 a month straight to the principle.   Then invest.
  • Or, you could invest that $450 a month and pay off the student loan at the regular rate.  You'll have a leg up on your stache but it will be awhile before you get a more pleasant cashflow situation.

Mathematically, if you can make more with your investments than you can by paying down the loan, it makes sense to invest.

However, there's something to be said for highly positive cash flow.  Personally, I would pay those loans asap off to free up the $900 a month.  You lose a couple of years of compounding but gain a lot more years of stress-free cash flow.


That's very true.  I'll have the cash to sell the car at  the end of January, then I'll invest what I'm saving.  From reading around the interweb, I heard that I can make 2012 contributions to my Roth IRA through April 15.  With the car gone and biking to work, I can max out my contributions.

Thanks for all of the advice, it's greatly appreciated.  With help like this, my financial mustache will by fully grown in no time!

mlipps

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Re: Selling Car with Negative Equity
« Reply #5 on: December 10, 2012, 10:53:44 AM »
take your car to carmax and get a quote. its free and nonbinding. clean and spiff it up first :)

the carmax quote I got for my 2009 car was 10,5 and I sold the car privately for 11,5. ( I also took it to a dealership stealership for a quote and after several hour and some lies and runaround, they offered me 10, and maybe minus some sort of fee, by that time I was too irritated to listen to them anymore-but my point is, try to get a few quotes, maybe)


We made 0 effort to clean our car before going to CarMax & still got a good quote (I thought anyway). We did some negotiating and got the same price form a local dealership. Worth a try anyway. Just know in your head what you need to get for the car and what you want to spend and walk away until you get it. This time of year, some places are really desperate to make a deal.

Meadow Lark

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Re: Selling Car with Negative Equity
« Reply #6 on: December 10, 2012, 11:15:13 AM »
We recently sold a car back to Carmax.  We were $8000 negative - b/ c we had added another car loan on top of it when we bought it.  But I figured it was sunk cost, so not important when deciding what to do now.  I got a cc with 0% interest for 18 months, with a 3% initial fee for cash out, pulled out $8000 and sold the car back.  We're on schedule to have it paid off well before the 18 months is finished, and we're paying around what we would pay if we had kept it for the payment, plus insurance, oil, etc.  We now have one 8 year old SUV that we need to keep for it's 4WD until we sell our mountain house ( next year, God willing.)  Then the plan will be to save up enough to buy something with cash when we need to replace the SUV. 
  This has changed a bunch of things for us.  We bike a lot more.  Drive a lot less.  Our quarterly 2200 mile round trip to the family we will fly, and rent a car when we get there.  Working on accumulating airline miles for those.  This is a big quality of life improvement for us, believe it or not.
Come check out my blog at www.learnplaygive.com!

Jake P

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Re: Selling Car with Negative Equity
« Reply #7 on: December 11, 2012, 08:58:24 PM »
Do you have anything else of value you would be willing to sell?  I was in the same situation a few years ago.  My wife and I had the "what the hell are we doing" moment and started purging ourselves of all of our "typical middle class" American debt.  I had an old truck that I was tinkering on for fun and since it was tax return season I put it up for sale and got $3500 for it.  I paid down $2500 on the wife's car ( we were backwards on it by about $2000 according to KBB).  I then took the other $1000 and paid off the credit card and also put the wife's car up for sale on craigslist for 12k, although I now had it paid down to 11k. It only took 6 weeks to sell the car for the full 12k.  After I paid the car loan I had $1000 left and sat on that for a month until we got our tax returns back and then let the wife pick out any vehicle she wanted, as long as it cost less that 3k... she found a reliable volvo beater wagon for $1800 and is still driving it!  we're going on 2 years without a car payment and loving every minute of it.