Author Topic: Automotive Debt Help  (Read 2641 times)

just1nh

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Automotive Debt Help
« on: August 15, 2016, 01:05:28 PM »
Hello all,

I'm 27 and looking for some advice on what to do about an automotive debt I've mistakenly put myself into.  I'll keep the story telling short...

-Ohio: Graduated college in 2013, engineering major / business minor.  I thought I was a hot shot being in my early 20's making a salary in the $50,000's while most of my millennial friends couldn't find any job at all.  Naturally, I bought a brand new $25,000 car.  In two years, I drove it to the moon and back and accumulated 50,000 miles as well as moving to Denver, Colorado. As I'm sure you could guess, the vehicle depreciated faster than I could make payments due to the mileage.

-Colorado: After one winter in Denver, I just had to have 4WD, and of course something to put my dirtbike in and go snowboarding with.  I noticed everyone and their grandmothers either had fancy trucks or lifted jeeps out here.  So I traded my car in for a new F150 (funny how MMM used F150s as an example. I'm that guy.)

So now, after reading several blog posts here, as well as going back through my business education, and a Dave Ramsey book, I'm in a bit of panic mode.  If I sell my truck outright to a dealer and use public transportation or street legalize my dirtbike, I'd still end up with closer to $10,000 in automotive depreciation debt.  Should I do that and pay off the debt, then buy a cheap car in cash off craigslist?

My other consideration was trading in for an 05-10 Subaru to reduce the debt, but still have a reliable vehicle with 4WD.

I know this isn't an ideal situation, and I'm certainly learning the hard way, but I want to fix this and learn from my mistakes.

Thanks!

mindaugas

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Re: Automotive Debt Help
« Reply #1 on: August 15, 2016, 01:13:20 PM »
Don't trade in, you'll just roll the debt into the new loan. Your best option is to try and sell the truck and make up the difference in depreciation. idk if it is available but I am in a similar situation and listed my brand new car on Beepi.com. They take care of all the paper work and the quote they gave me was the blue book value, I actually might get a couple hundred back and $16k of debt gone. If you can't sell the car, just start paying it off as quickly as possible.

I'm listening to and reading Ramsey as well. baby step 2 and getting rid of this car is part of that. Dave would tell you to follow the debt snowball, but I'm modifying mine and paying off the debt that increases my cash flow first. So a car payment frees up a significant part of my budget to throw at other debt. If I were you I would be paying down that car as quickly as possible.

Sibley

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Re: Automotive Debt Help
« Reply #2 on: August 15, 2016, 01:20:46 PM »
Ok, slow down a bit. You're running around in circles, that never helps. First step in fixing a problem is knowing you have a problem.

The depreciation doesn't matter anymore - it's in the past. And it's non-cash anyway. How much do you actually owe on the truck? How much is the vehicle worth/could you sell it for?

Do you ACTUALLY need all wheel drive? Really, actually need it. Not want it because everyone else has it, or its cool, or it snows sometimes. Would snow tires on a standard 2wd vehicle be good enough (along with decent driving skills, which includes knowing when to stay home)?

Are you going to keep using the dirtbike? How much do you use it? What else do you use the actual truck bed for?

Could you walk/ride a bike (real bike, not dirtbike)/take public transit in daily life?

nereo

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Re: Automotive Debt Help
« Reply #3 on: August 15, 2016, 01:22:54 PM »
Congrats on seeing the 'light' and working to get your financial life in order.
A few things:

1) I would reject the notion that you need 4WD/AWD in a snowy location. Instead, invest in a set of dedicated snow tires.  A FWD car with snow tires beats a car with AWD and all-season/"mud-and-snow" tires, period. FWIW, I live in Quebec, where our winters are long and filled with snow, and most of the cars. MMM lives in colorado and had blogged about the ridiculousness of our desire for AWD.

2) spend some time reading up on "sunk costs".  That's what you have here with your vehicle.  If you need a vehicle find the least expensive one you can that will fit your needs, sell off your F150 (preferably private party to get the maximum amount.  Craigslist is GREAT for such things) and accept that you have to 'eat' the remaining $10k in depreciation debt.  That's the mistake of past-you, but it will help future-you.
The worst option would be to keep the F150, which will continue to depreciate at an alarming pace for the next few years and will cost you quite a bit on fuel.

just1nh

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Re: Automotive Debt Help
« Reply #4 on: August 15, 2016, 01:47:26 PM »
Thanks for the replies.

To answer a few of the questions/comments...

-No I definitely don't need AWD.  Looking back on it, my car was fine.
-I don't use my truck for much other than hauling my dirtbike 3-5 times a year.
-I will likely just sell it outright unless I can trade way down.  Beepi isn't out here yet, but that looks like a nice service.
-Currently, I'm too far to ride a bike to work.  But, my apartment lease is up in November, and my goal is to move closer and find cheaper rent.
-Denver has an extensive public transportation system.  It would be 40 minutes one way to use though, whereas my commute in a vehicle is only 15 minutes.

mindaugas

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Re: Automotive Debt Help
« Reply #5 on: August 15, 2016, 03:08:39 PM »
-No I definitely don't need AWD.  Looking back on it, my car was fine.
-I don't use my truck for much other than hauling my dirtbike 3-5 times a year.
-I will likely just sell it outright unless I can trade way down.  Beepi isn't out here yet, but that looks like a nice service.
-Currently, I'm too far to ride a bike to work.  But, my apartment lease is up in November, and my goal is to move closer and find cheaper rent.
-Denver has an extensive public transportation system.  It would be 40 minutes one way to use though, whereas my commute in a vehicle is only 15 minutes.

I'm not a fan of private party when you have a lien, yeah beepi has been awesome so far, sorry it's not in Denver. Try carmax and echopark auto, both have locations in Denver metro. I used to live in Highlands Ranch btw, just moved to Seattle end of May. Both will give you a quote and buy your car.

Can you live close to lightrail and take that to work? Even bike to lightrail and ride in. You can take your bike on the train and just sit on it at the end of the train car.

I had a rwd pickup and mustang for 5 years in Denver. Yeah, snow sucked but we still made it around. Good tires and sand bags in the back. Of course fwd makes all the difference and can be had cheap.

just1nh

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Re: Automotive Debt Help
« Reply #6 on: August 16, 2016, 09:55:07 AM »
-No I definitely don't need AWD.  Looking back on it, my car was fine.
-I don't use my truck for much other than hauling my dirtbike 3-5 times a year.
-I will likely just sell it outright unless I can trade way down.  Beepi isn't out here yet, but that looks like a nice service.
-Currently, I'm too far to ride a bike to work.  But, my apartment lease is up in November, and my goal is to move closer and find cheaper rent.
-Denver has an extensive public transportation system.  It would be 40 minutes one way to use though, whereas my commute in a vehicle is only 15 minutes.



I'm not a fan of private party when you have a lien, yeah beepi has been awesome so far, sorry it's not in Denver. Try carmax and echopark auto, both have locations in Denver metro. I used to live in Highlands Ranch btw, just moved to Seattle end of May. Both will give you a quote and buy your car.

Can you live close to lightrail and take that to work? Even bike to lightrail and ride in. You can take your bike on the train and just sit on it at the end of the train car.

I had a rwd pickup and mustang for 5 years in Denver. Yeah, snow sucked but we still made it around. Good tires and sand bags in the back. Of course fwd makes all the difference and can be had cheap.

I used the RTD website to calculate how my morning commute would look.  I'd have to bike to the light rail, take it two highway exits over, hop on the bus which has 11 steps before my intersection. 40 minutes total including wait times.  This would also cost money.

My commute on a bike would actually only be 6.5 miles one way.  Not terrible, I used to recreational ride up to 50 miles in College.  So I think I might go down that path and I think it'd be faster and cheaper.  Sell my truck and dirt bike out right and free up about $30,000 in debt and buy a cheap road bike or mountain bike off craigs list.

just1nh

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Re: Automotive Debt Help
« Reply #7 on: October 03, 2016, 02:34:07 PM »
So I found a nice deal on a commuter bike on Craigslist, new in box - the owner bought it and never even took the straps off the shipping box.  It was $500 online marked down to $250 and I paid $180 for it.  Looks similar to bikes in its class on Nashbar (26" wheels, dual disc brakes, 21 speed, font suspension, etc.).

As for the truck, I'm having a difficult time dealing with the $10,000 in negative equity with the banks - which is funny to me that they're willing to allow me to finance $40,000 originally but can't fathom the thought of reducing it down to $10,000.  However, they're fine with me rolling it into another vehicle or lease.  It's like the entire industry is geared toward burning all your money away and not being able to escape it.  I contacted an automotive broker and a federal credit union within the past week.  Hoping I can work something out and get rid of the damn thing.

Cassie

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Re: Automotive Debt Help
« Reply #8 on: October 03, 2016, 02:48:52 PM »
To be able to sell it you would need the cash to pay off the loan. so it sounds like you need to have 10k saved to do that.

nereo

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Re: Automotive Debt Help
« Reply #9 on: October 03, 2016, 02:56:43 PM »

As for the truck, I'm having a difficult time dealing with the $10,000 in negative equity with the banks - which is funny to me that they're willing to allow me to finance $40,000 originally but can't fathom the thought of reducing it down to $10,000.  However, they're fine with me rolling it into another vehicle or lease.  It's like the entire industry is geared toward burning all your money away and not being able to escape it.  I contacted an automotive broker and a federal credit union within the past week.  Hoping I can work something out and get rid of the damn thing.

Banks don't want you to owe money with no asset they can seize should you stop payment. That's the problem with trying to sell a car that is "underwater"  - you'll likely need to bring cash to the table.  They also have a vested interest in giving you the biggest loan they think you'll be able to pay back.

Good luck

mindaugas

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Re: Automotive Debt Help
« Reply #10 on: October 03, 2016, 02:58:08 PM »
Is the $10k difference selling private party? Look up your model and mileage in Craigslist and see what other owners are selling for. Compare to KBB. KBB is usually off based on the market and I know F-150's have a much higher market value in CO.

therethere

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Re: Automotive Debt Help
« Reply #11 on: October 03, 2016, 03:06:31 PM »
F150's or any truck really are in-demand in CO for sure. Are you basing the price off similar listings on Craigslist in the area? I know when I was Subaru shopping KBB was way underpricing the value of older Subaru's for the Colorado market. Bring your F150 to CarMax and see what they will offer. You will need to get a personal loan for part that's underwater. That would need to be a separate loan with likely a 7-9% interest rate. You use the personal loan along with the proceeds from the sale to payoff the original car loan to release the title. Check into this with some local credit unions. Selling private party will be very difficult with a lien on the car.

just1nh

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Re: Automotive Debt Help
« Reply #12 on: October 03, 2016, 03:37:08 PM »
F150's or any truck really are in-demand in CO for sure. Are you basing the price off similar listings on Craigslist in the area? I know when I was Subaru shopping KBB was way underpricing the value of older Subaru's for the Colorado market. Bring your F150 to CarMax and see what they will offer. You will need to get a personal loan for part that's underwater. That would need to be a separate loan with likely a 7-9% interest rate. You use the personal loan along with the proceeds from the sale to payoff the original car loan to release the title. Check into this with some local credit unions. Selling private party will be very difficult with a lien on the car.

The value I'm basing it from was for trade-in.  Private party value is $2k to $4k higher based on value for private party.  I also have a couple accessories that might add value for private party (bed mat, roll-up soft bed cover, running boards, window tint, etc.)  I have already applied for a loan to cover the negative equity at a credit union - supposed to hear back today.  If I use the loan and cover the negative equity, then can I sell the truck private party assuming what I sell it for meets or exceeds the remaining loan balance?