Author Topic: Upside down on car, need help on what to do  (Read 6263 times)

MelissaK

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Upside down on car, need help on what to do
« on: November 19, 2013, 09:35:27 AM »
I'm reaching out to this community because my friends and family are giving me the normal "just trade it in for a something different and roll the negative equity into the new car" type advice. I have been reckless with my spending over the past few years and only recently have I started to turn things around. The thing that I am really wanting to curb is my excessive car payment, which is something I have always had since turning 18. Nice, shiny new cars.

My Husband and I recently paid off all of our credit cards and we both some debts remaining that we are hoping to pay off within the next few years (student loans, etc). I currently have a 2012 Volkswagen GTI that I leased brand new. My car payment is $500 a month and I have approximately 30 payments left on my 4 year lease. Since I started reading about MMM, I have attempted to get rid of my car several times. The current payoff on the vehicle is around $26,500 and I have received offers of $19,000 and $20,000 from different dealerships. I currently work from home, but I'm not sure how much longer I'm going to have my job since I moved in June and the company I worked for at the time wanted to keep me around so they offered me a "temporary" remote position (the length of my employment has not been disclosed, despite me asking several times). I would look for something more long term, but I'm moving again at the end of January so my hands are tied as far as my employment goes. I figure if they let me go, I can rely on unemployment for a little while until I can find something new once we arrive at our next destination. My Husband is active duty in the military and is getting out at the end of May 2014. So both of us are potentially looking at a loss of income sometime in 2014. To prepare for this change, we have decided to start putting as much money in savings as we can (rather than throwing it at our debt). We paid our credit cards off last month and are hoping to put back around $3000 a month starting this month which is more than doable based on our current income and monthly obligations.

My car loan is currently our highest monthly obligation (besides rent) and I would really like to get out of it. I have roughly $14,500 left for my portion of the lease (the amount not including the residual). I feel like sucking it up and forking out the $6,500 to get out of the car and then saving up a little to buy a beater would be the best option for me, but at the same time I'm hesitant to empty our savings since our situation (income, location, etc) is all changing in 2014.

Carmax offered me $20,000 to buy my car, so I could sell it to them, pay for as much of the $6,500 as I can with the cash that we have, and then maybe use the overdraft line of credit tied to our checking account to cover the rest. I feel like saving the $500 a month (from no longer having that car payment) would enable us to pay this off quickly. I can go without a car for a few months since I currently work from home, but I am moving to Alaska in February (my husband won't be joining me until June) and I will need a car to get around, especially so I can apply/interview for new jobs if my current employer decides to let me go between now and then.

I'm planning on living with family upon my arrival in February, so I'm not looking at any housing expenses until my husband gets to Alaska in June. At that point, we can either continue to live with family ($0 housing fees) or rent a cheap place and continue to try to pay off our debt. With no housing expenses or a $500 a month car payment, we are looking at monthly obligations totaling around $1200 (my husband's car payment, student loan payments, furniture loan, and cellphones). I feel as though my unemployment alone will cover that and my husband will still have his military income until June 2014 so we are looking at a few months where we could potentially save a lot of money (roughly $3000-$5000 a month).

I'm just trying to make the right decision to get out of an expensive FWD car that I don't feel would be well suited for Alaskan winters. Should I wait it out and wait until I owe closer to what the car is worth? Or GTFO now?

Any advice would be appreciated.

Forcus

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Re: Upside down on car, need help on what to do
« Reply #1 on: November 19, 2013, 10:38:12 AM »
Since it is a lease, can't you break the lease and pay a penalty?

Also why does your husband have a car payment for a car he doesn't drive (assuming he is deployed, not local)? Just asking.

huadpe

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Re: Upside down on car, need help on what to do
« Reply #2 on: November 19, 2013, 10:47:39 AM »
If you can save $3000 a month, I would take a deep breath, wait the 2 months until you've moved, and then use the money you've saved up to pay the deficit on the lease.  If you can't save the $3000 a month because the work from home dries up, you're gonna be really stuck if your checking is stuck in overdraft.

Yes, you need to get rid of the car, but don't panic and get yourself into an even worse situation out of haste.

MelissaK

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Re: Upside down on car, need help on what to do
« Reply #3 on: November 19, 2013, 10:49:58 AM »
He drives his car to work everyday, mine just sits because I currently work from home. Our situation changed in June and will change again in January (that's the military for you) so before we were both commuters and now only one of us is. Right now we only need one car, but he's going to be in Missouri from Feb-June and will need a car to get to and from his classes there and I'll need a car once I get to Alaska in Feb since it will still be winter time.

Turning a lease in early in most cases means you are still responsible for all remaining payments. In my case, that's $14,700.



MelissaK

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Re: Upside down on car, need help on what to do
« Reply #4 on: November 19, 2013, 10:55:35 AM »
If you can save $3000 a month, I would take a deep breath, wait the 2 months until you've moved, and then use the money you've saved up to pay the deficit on the lease.  If you can't save the $3000 a month because the work from home dries up, you're gonna be really stuck if your checking is stuck in overdraft.

Yes, you need to get rid of the car, but don't panic and get yourself into an even worse situation out of haste.

Okay, that makes sense. My husband's decision to get out of the military was unexpected and occurred recently so I'm trying to plan plan plan and I'm starting to get confused as to what the best course of action is. Realistically we could have $20,000 saved by March if we have dual income until that point. The military will pay to ship my car to Alaska and I could get some cheap snow tires to get by until summer. My husband isn't upside down on his car so he's planning on selling it when he's done in Missouri in June. I guess having $20k in savings and a $500 car payment for a few months is the better route to go. It's hard to commit to paying off debt when you KNOW that you are facing a reduction in income in the months to come. I guess i need to skip that step and establish a nice emergency fund in the next few months. Thank you!

MelissaK

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Re: Upside down on car, need help on what to do
« Reply #5 on: November 19, 2013, 11:09:35 AM »
He has to go to Missouri for training for 4 months, so I'm moving to Alaska to get established and look for a job rather than sitting around in Missouri in an extended stay hotel for 4 months.

My lease is through Volkswagen Credit. I thought that since my husband is in the military and we are receiving orders from the CONUS to OCONUS, I could terminate my lease early under the Servicemembers Civil Relief Act, but he's not on the lease with me. I'm going to contact base legal to see if that still may apply, but chances are since I'm his dependent and he's not on the lease, I'm screwed as far at the SCRA goes. I'll contact them and ask about early termination either way!

huadpe

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Re: Upside down on car, need help on what to do
« Reply #6 on: November 19, 2013, 02:52:28 PM »
He has to go to Missouri for training for 4 months, so I'm moving to Alaska to get established and look for a job rather than sitting around in Missouri in an extended stay hotel for 4 months.

My lease is through Volkswagen Credit. I thought that since my husband is in the military and we are receiving orders from the CONUS to OCONUS, I could terminate my lease early under the Servicemembers Civil Relief Act, but he's not on the lease with me. I'm going to contact base legal to see if that still may apply, but chances are since I'm his dependent and he's not on the lease, I'm screwed as far at the SCRA goes. I'll contact them and ask about early termination either way!

This article indicates that SRCA does let spouses get out of car leases.

http://www.saveandinvest.org/militarycenter/DeploymentPCS/P124319

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A number of SCRA provisions also extend to spouses and other dependents, such as protection against eviction and relief related to the termination of residential and motor vehicle leases.

Check to make sure it's right, but if it is, then 100% go that route.

Nords

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Re: Upside down on car, need help on what to do
« Reply #7 on: November 24, 2013, 09:25:04 AM »
I'm going to contact base legal to see if that still may apply, but chances are since I'm his dependent and he's not on the lease, I'm screwed as far at the SCRA goes. I'll contact them and ask about early termination either way!
Actually I think you're covered by SCRA, although visiting the JAG is the only way to confirm it.  I'm not a lawyer but take a look at:
http://usmilitary.about.com/library/milinfo/scra/bl308.htm
which comes from:
http://usmilitary.about.com/od/sscra/l/blscramenu.htm
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Upon application to a court, a dependent of a servicemember is entitled to the protections of this title if the dependent's ability to comply with a lease, contract, bailment, or other obligation is materially affected by reason of the servicemember's military service.

Before you visit the office, let the clerk know that you're trying to find the actual citation of the SCRA law pertaining to spouse leases and that you want the JAG to help you with the SCRA filing.  They may have it in a pamphlet or they may have the reference to find it online.  By alerting them over the phone they may be able to put their hands on it (or tell the lawyer you're looking for it) before you show up.

As I understand the provisions of SCRA, the lending institution is not allowed to charge any fees for modifying the lease.  However you could use the threat of using the SCRA to negotiate a better exit from the lease, and they might charge fees for early termination.