Author Topic: Stupid Truck Purchase, How to Fix??  (Read 8747 times)

lauralish

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Stupid Truck Purchase, How to Fix??
« on: February 20, 2015, 08:02:10 AM »
Hi all.. first timer here.

I have an idea to help my bf with this enormous mistake of a truck he has.. but I was hoping you all could tell me if there's a better way.

Details:  Bf has auto loan for 2012 Toyota Tundra. Not positive of the rate, but payments are $746/mo.  He has 60 more months left on lease, owes a total of $39k+, and the truck is now valued at $24-26k.  So we're very upside down.

My thoughts are to sell truck, and convert the ~$14k into a 36 mo signature loan.  The interest would be about 14% if we used my credit union.  (PS, his credit score is HORRIBLE and I would have to co-sign) Payments would be about $450.  If he were to make regular payment amounts only, he would be paying about $450/mo so a savings of $300/mo and 2 years less payments.

He's having a hard time wrapping his head around paying so much money for a loan for nothing.  Am I way off here?

Bikesy

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Re: Stupid Truck Purchase, How to Fix??
« Reply #1 on: February 20, 2015, 08:19:15 AM »
I used a loan calculator and am coming up with a current rate of 4.5%, someone may need to double check that.  Hopefully someone else will chime in with some good advice as I'm not sure what I'd do exactly. Most people suggest stopping the bleeding; however, a 14% rate on the upside down amount is painful...especially if you pay it off over 3 years.  If you post your income/expenses you'll get much better advice from our crew.  I would guess you have areas to lower expenses, which would allow you to aggressively pay down the truck note now, or the loan if you choose to sell.

slugline

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Re: Stupid Truck Purchase, How to Fix??
« Reply #2 on: February 20, 2015, 08:21:52 AM »
I get shivers at the thought of co-signing a loan with someone to whom I'm not married. Remember, you would not be merely "helping" him. You would be agreeing to take sole responsibility for re-paying his debt in the event he doesn't. Does this still sound like a good idea?

boarder42

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Re: Stupid Truck Purchase, How to Fix??
« Reply #3 on: February 20, 2015, 08:22:24 AM »
i wouldnt cosign for a boyfriend. or a girlfirend etc.

RunHappy

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Re: Stupid Truck Purchase, How to Fix??
« Reply #4 on: February 20, 2015, 08:23:17 AM »
Need more information but I would not cosign a loan with someone I'm not married to.

Retire-Canada

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Re: Stupid Truck Purchase, How to Fix??
« Reply #5 on: February 20, 2015, 08:29:09 AM »
So you'd pay $14K + 14% interest for 3yrs and be without a vehicle to avoid the current monthly payment?

Are you then going to buy a used car for him?

I've got a F150 [the MMM clown car supreme] with no loan and I'm not selling it. I'm just going to use it up and buy something more sensible next vehicle.

Personally I'd keep the truck. Forget about the current value in $$ and look at how many years/miles it will be good for so maybe 12yrs+ and 180K more miles. Pay it off as fast as possible to reduce the interest portion.

A 2012 has just lost so much book value [as you note] yet has a ton of real value so selling it now is a bit crazy.

-- Vik
« Last Edit: February 20, 2015, 08:33:46 AM by Vikb »

sandandsun

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Re: Stupid Truck Purchase, How to Fix??
« Reply #6 on: February 20, 2015, 08:43:33 AM »
Do NOT co-sign for him... his credit is terrible for a reason...

JLee

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Re: Stupid Truck Purchase, How to Fix??
« Reply #7 on: February 20, 2015, 08:47:47 AM »
So you'd pay $14K + 14% interest for 3yrs and be without a vehicle to avoid the current monthly payment?

Are you then going to buy a used car for him?

I've got a F150 [the MMM clown car supreme] with no loan and I'm not selling it. I'm just going to use it up and buy something more sensible next vehicle.

Personally I'd keep the truck. Forget about the current value in $$ and look at how many years/miles it will be good for so maybe 12yrs+ and 180K more miles. Pay it off as fast as possible to reduce the interest portion.

A 2012 has just lost so much book value [as you note] yet has a ton of real value so selling it now is a bit crazy.

-- Vik

Other than the initial depreciation hit, Toyota trucks generally hold their value very well. As you said, it might be worth just holding onto it now - the gap between loan value and vehicle value should be narrowing now, instead of the other way around.

RexualChocolate

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Re: Stupid Truck Purchase, How to Fix??
« Reply #8 on: February 20, 2015, 09:27:14 AM »
Most likely it means he paid for a bunch of non value increasing stuff at the dealership. So basically he paid 40k for a 30k truck, causing the negative equity to be so high. Additionally, I'm sure he paid for gap insurance and every other scam they have.

A 2008 Chevy silverado I paid ~27 for is on KBB for 21k now. However there was an option to pay 15k more for dealership extras(exhaust, running boards, bed liner, etc) that wouldve added zero economic value to the car, meaning at year 2 or so I would've had the same negative equity gap even on my 0% loan. This stuff can be had for a fraction of the cost after market.

To pile on: cosigning is the same as taking a loan out yourself. Don't do it.

Guses

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Re: Stupid Truck Purchase, How to Fix??
« Reply #9 on: February 20, 2015, 09:46:04 AM »
Your BF has 44,760$ left in payment on a 4 year old truck. This figure is flabberghasting! That is like a mortgage!

Now that this is out of the way, you(i.e., your boyfriend) has to decide whether he wants to be on the hook to pay 44,760$ TODAY for a 4 year old truck. If he thinks this is crazy (he should), he has to sell it because keeping it is doing exactly that. A sunk cost is a sunk cost.

Does your BF need a truck(as in for work hauling big rigs and tools)? If not, this is even crazier.

Assuming a shortfall of 14K$, and a luxurious replacement vehicle of 10,000$ (used fuel efficient car with moderate mileage), you would be 24K$ in the hole. That is an improvement of 15K$. It is like being paid to "downgrade" to a less clownish car. Plus you would reap the benefits of better fuel economy.

If a truck is needed for work, your BF should ask for a raise because he apparently can't buy it on his current salary.   


SantaFeSteve

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Re: Stupid Truck Purchase, How to Fix??
« Reply #10 on: February 20, 2015, 09:52:39 AM »
I get shivers at the thought of co-signing a loan with someone to whom I'm not married. Remember, you would not be merely "helping" him. You would be agreeing to take sole responsibility for re-paying his debt in the event he doesn't. Does this still sound like a good idea?

+1000  this. 

If your boyfriends credit score is terrible, there is a reason.  A large part of that reason is probably that he doesn't make his payments on-time, or at all in some cases.  If this happens on a co-signed loan then YOUR CREDIT becomes terrible and you will be held responsible for that debt.  DO NOT COSIGN for him, please.

Instead, if his credit is terrible, tell him to simply surrender the vehicle back to the dealer and take the hit on his credit. Time heals all credit score wounds, and if he can begin making good decisions about his money, in 3-5 years his score will be above average, or better. 

Retire-Canada

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Re: Stupid Truck Purchase, How to Fix??
« Reply #11 on: February 20, 2015, 10:22:17 AM »

Assuming a shortfall of 14K$, and a luxurious replacement vehicle of 10,000$ (used fuel efficient car with moderate mileage), you would be 24K$ in the hole. That is an improvement of 15K$.

They'd be in the hole $24K @ 14% which over 3 years is = $29.5K. "If" she co-signs a loan with him.

Pay $746/mon for 3 years = $26.9K and then sell the truck to pay off the balance of the loan since it won't be depreciating quickly now. If he keeps it looking nice it can be sold for more than book value.

He gets to drive his truck and she gets to avoid co-signing a loan with him.

-- Vik



« Last Edit: February 20, 2015, 11:20:07 AM by Vikb »

Guses

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Re: Stupid Truck Purchase, How to Fix??
« Reply #12 on: February 20, 2015, 11:10:51 AM »
@Vik

I get that she should'nt co-sign with the guy, but I don't think that keeping the truck longer is a good solution.

They would have to be high to accept a loan at 14%.

If that is the only option, sell the truck and buy a 500$ beater until you can pay off the 14K loan.


Syonyk

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Re: Stupid Truck Purchase, How to Fix??
« Reply #13 on: February 20, 2015, 11:32:46 AM »
(PS, his credit score is HORRIBLE and I would have to co-sign)

Nope nope nope nope NOPE.  Don't do that.

Your BF has 44,760$ left in payment on a 4 year old truck. This figure is flabberghasting! That is like a mortgage!

Or, like, 2 years rent. :(  *grumbles about Seattle*

Is he doing truck-y things with it?  If not, could he start doing that to earn extra money to get it paid off?  Haul stuff to the dump, be "a guy with a truck" on Craigslist, etc?  I've got a huge truck (rarely driven) in an area where nobody owns a truck, and I've found it quite profitable to help people haul stuff in my free time.  It pays for my diesel, and I'm not even trying to earn money from it because I don't really need it, but "hauling half a ton of carpet to the dump" and such is something a lot of people are willing to pay pretty good money for in my area.

On the other hand, if he refuses that idea outright because it'll scratch up the bed or something, yeah, sell it.

James

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Re: Stupid Truck Purchase, How to Fix??
« Reply #14 on: February 20, 2015, 11:37:41 AM »
Don't co-sign.

He definitely needs to get rid of the truck, just needs to figure out how. Maybe he just drops off the truck and walks away? He need to find out every option. In my view co-sign isn't an option, so is there any other way for him to get the money for a short sell? I don't know the ramifications of walking away, but worth finding out. The truck is collateral so they get that back, if they can't touch his income then that is probably best. Having horrible credit is probably good for him at this point, he can spend the next 5 years working on that rather than you paying off his truck loan...

rocksinmyhead

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Re: Stupid Truck Purchase, How to Fix??
« Reply #15 on: February 24, 2015, 06:15:00 AM »
Is he doing truck-y things with it?  If not, could he start doing that to earn extra money to get it paid off?  Haul stuff to the dump, be "a guy with a truck" on Craigslist, etc?  I've got a huge truck (rarely driven) in an area where nobody owns a truck, and I've found it quite profitable to help people haul stuff in my free time.  It pays for my diesel, and I'm not even trying to earn money from it because I don't really need it, but "hauling half a ton of carpet to the dump" and such is something a lot of people are willing to pay pretty good money for in my area.

That's a good idea! (if you live in an area where few people have trucks... might not work as well in Oklahoma, LOL)

Sibley

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Re: Stupid Truck Purchase, How to Fix??
« Reply #16 on: February 24, 2015, 08:17:33 AM »
(PS, his credit score is HORRIBLE and I would have to co-sign)

Nope nope nope nope NOPE.  Don't do that.

Your BF has 44,760$ left in payment on a 4 year old truck. This figure is flabberghasting! That is like a mortgage!

Or, like, 2 years rent. :(  *grumbles about Seattle*

Is he doing truck-y things with it?  If not, could he start doing that to earn extra money to get it paid off?  Haul stuff to the dump, be "a guy with a truck" on Craigslist, etc?  I've got a huge truck (rarely driven) in an area where nobody owns a truck, and I've found it quite profitable to help people haul stuff in my free time.  It pays for my diesel, and I'm not even trying to earn money from it because I don't really need it, but "hauling half a ton of carpet to the dump" and such is something a lot of people are willing to pay pretty good money for in my area.

On the other hand, if he refuses that idea outright because it'll scratch up the bed or something, yeah, sell it.

If you're near Detroit, MI, can I hire you for an hour or so this summer?

Syonyk

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Re: Stupid Truck Purchase, How to Fix??
« Reply #17 on: February 24, 2015, 09:49:04 AM »
I'm nowhere near Detroit.

But I'm sure there exist people with trucks out there.

Groovin Old Hippie

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Re: Stupid Truck Purchase, How to Fix??
« Reply #18 on: February 24, 2015, 11:38:43 AM »

"Bf has auto loan for 2012 Toyota Tundra. Not positive of the rate, but payments are $746/mo. He has 60 more months left on lease, owes a total of $39k+, and the truck is now valued at $24-26k.  So we're very upside down."

I thought a lease means you return the car at the end of the lease term - that it's more like a long term rental and you never own the car.  My friend had a lease on her car and there were some hefty fees to break the contract and return the car early.

If this is still true how does it impact the OP plans?

KD

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Re: Stupid Truck Purchase, How to Fix??
« Reply #19 on: February 24, 2015, 11:53:40 AM »
Would you buy this man a truck at that price point?  No?  NO.

I agree w/Groovin Old Hippie.  If it's a lease.  BF breaks it and HE pays the diff.

To Cosign?  Hell to the No NO N.O. Nanette!  NO.

The Beacon

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Re: Stupid Truck Purchase, How to Fix??
« Reply #20 on: February 24, 2015, 12:05:05 PM »
Most optimal solution is dump him. Then the next one is get rid of that truck ASAP as you said and pay 450/m. It is actually not for nothing. It is a good reminder for him for not being fiscally responsible. Think about the fuel that gas guzzler would take over the years.  Driving that boat to work with only one person in it 99% of the time is very depressing.

key thing here though is if he has learned a lesson here. If he has, that 450/m is money well spent. If not, you need to think about the most optimal solution.


Lesson learned here is always do a background check (criminal and credit score) before entering into a relationship. There is a upfront cost. But it is worth it as we can see in this case.

« Last Edit: February 24, 2015, 12:21:40 PM by Sharpy »

Syonyk

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Re: Stupid Truck Purchase, How to Fix??
« Reply #21 on: February 24, 2015, 04:56:49 PM »
Lesson learned here is always do a background check (criminal and credit score) before entering into a relationship. There is a upfront cost. But it is worth it as we can see in this case.

That's a novel way of remaining perpetually single...

GregO

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Re: Stupid Truck Purchase, How to Fix??
« Reply #22 on: February 24, 2015, 06:07:40 PM »
He definitely needs to get rid of the truck, just needs to figure out how. Maybe he just drops off the truck and walks away? He need to find out every option. In my view co-sign isn't an option, so is there any other way for him to get the money for a short sell? I don't know the ramifications of walking away, but worth finding out. The truck is collateral so they get that back, if they can't touch his income then that is probably best. Having horrible credit is probably good for him at this point, he can spend the next 5 years working on that rather than you paying off his truck loan...
+1 to this.

This is what I was thinking the whole time I read the thread.  If he has horrible credit and is that upside down on the loan, why not walk away?  That's a risk the bank or dealership took when they gave him the loan.  On the plus side, he wouldn't qualify for another car loan for a while so this wouldn't happen again in the near future.  The bank might even be willing to make a deal if he threatens to walk away.  I don't really see any downside to this option...

Big Boots Buddha

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Re: Stupid Truck Purchase, How to Fix??
« Reply #23 on: February 25, 2015, 12:54:17 AM »
This belongs in the Anti-Mustachian area. I got a good laugh out of the situation.

My Bf is terrible money, has a stupid truck with a huge upside down loan, has terrible credit (if that truck represents his ideas of money, clear why). Should I co-sign?

Please don't cosign.

boarder42

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Re: Stupid Truck Purchase, How to Fix??
« Reply #24 on: February 25, 2015, 07:20:53 AM »
I doubt the OP is even reading this they have yet to post again since the first post.

iknowiyam

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Re: Stupid Truck Purchase, How to Fix??
« Reply #25 on: February 25, 2015, 07:30:31 AM »
I doubt the OP is even reading this they have yet to post again since the first post.

I hope lauralish sees everyone's very sage advice about NOT co-signing a new loan.

Mutton Chop

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Re: Stupid Truck Purchase, How to Fix??
« Reply #26 on: February 25, 2015, 08:01:48 AM »
I'd never co-sign on this.  Terrible idea.  I'd dump him also.

Call Dave Ramsey on this one !!!

pagoconcheques

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Re: Stupid Truck Purchase, How to Fix??
« Reply #27 on: February 25, 2015, 07:25:04 PM »
Kudos to the OP for posting this question in this forum--it's her first post ever and she's taking a positive step by asking for advice before taking action. 

I'm assuming OP is seeing a long-term relationship here since she is willing to contemplate co-signing a loan.  The boyfriend needs to step up to the plate and get rid of the truck, take the (additional) hit on his credit score, and get into a vehicle he can afford.  The OP's role in this scenario is to be supportive and help him understand the math behind his situation.  Then, if the OP wishes to help the boyfriend she can find a way to help him deal with his transportation needs (bus route maps, craigslist bicycle, or even helping to pay for a price-appropriate mustachian-approved vehicle).  If both can get through these steps and prevail for a couple years then they have a solid foundation for a much longer-term relationship.  This could be the beginning of something big....

Go for it!  And whatever you do, OP, DO NOT cosign a loan!

Ricky

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Re: Stupid Truck Purchase, How to Fix??
« Reply #28 on: February 25, 2015, 07:42:45 PM »
Don't co-sign.

He definitely needs to get rid of the truck, just needs to figure out how. Maybe he just drops off the truck and walks away? He need to find out every option. In my view co-sign isn't an option, so is there any other way for him to get the money for a short sell? I don't know the ramifications of walking away, but worth finding out. The truck is collateral so they get that back, if they can't touch his income then that is probably best. Having horrible credit is probably good for him at this point, he can spend the next 5 years working on that rather than you paying off his truck loan...
+2

Best option. Let them come get it. Buy a beater.

He'll still owe the difference of what it's worth now and what he owes but the rate will assumingly be the same, and they'll probably work with him on paying it.
« Last Edit: February 25, 2015, 07:44:45 PM by Ricky »