Upside Down Loans

[baum]

OP i was in your shoes a couple years ago. except with different cars.

you really only have a couple options:
1. keep it and pay for it until there is no neg equity
2. if you must get rid of it lease and keep the lease for the 2 or 3 years and expect to walk away with nothing from the lease.
3. if you must trade, trade for something that has LOTS of rebates to cover the negative.

i personally did #3 and i was positive equity in a little over a year on that new car. i traded in a SUV for a Ram. the ram i was receiving about 12k off of msrp so the 6k i carried over was easily covered for. i did this because it lowered my payments by about 120 a month, after a little over a year i was out of any neg equity on trade in value.

i was young and dumb i always wanted something new (i still do but i wont go neg for it anymore) all the time.

[motorhead]

Keep this in mind. While you may be able to get out of a car or truck that you are upside down in by buying a new one with enough incentives to cover the amount you owe, that will only put you right back to being upside down with the new one. This is because vehicles with high incentives instantly loose their value by the amount of the incentives. So because you chewed up all the incentives with a previous debt now you are financing the MSRP or more on the new one, and you are probably taking out the loan for a term that won't pay down the principal that fast. Now you are instantly upside down again. It happens all the time. Just because you can make the payments, doesnt mean you can afford it. We are failing up kids in this country because we don't teach money. I would much prefer my kid to understand money than to be able to know where every Coma goes. There are a lot of very so called "smart" people that make very dumb decisions when it comes to money.

[thegreatwhite]

so is it safe to say that being "upside down" on a car loan is only bad if you want to sell the car or have an accident and your insurance only pays for the "value" of your car which is lower than what you still owe on the loan.

if this is the case then essentially isnt every brand new car owner upside down on their loan for some period of time. this is my understanding from the graphs above which are helpful. sry i know this isnt the original question im just trying to get my understanding of it down,

[baum]

Originally Posted by thegreatwhite

so is it safe to say that being "upside down" on a car loan is only bad if you want to sell the car or have an accident and your insurance only pays for the "value" of your car which is lower than what you still owe on the loan.

if this is the case then essentially isnt every brand new car owner upside down on their loan for some period of time. this is my understanding from the graphs above which are helpful. sry i know this isnt the original question im just trying to get my understanding of it down,

you are true!

this is also the reason they came up with gap coverage to cover you if you crash. Yes most are upside down on a new car IF they dont put money down. i thought a rule of thumb was 20% down from msrp (cash, rebates..)

[FilibustaRhymes]

I did something very similar when I was much younger and it took years to get me out of it. What a dumb, dumb thing to do. Then I did it again with the same result, thinking I was saving myself in the longrun when getting something with better mileage when gas really started rocketing upward in the late 00's. Nope, should have kept my GTO.

If you're anything like I was, though, no good advice will change your mind about getting another car.

[thegreatwhite]

Originally Posted by baum

you are true!

this is also the reason they came up with gap coverage to cover you if you crash. Yes most are upside down on a new car IF they dont put money down. i thought a rule of thumb was 20% down from msrp (cash, rebates..)

i made a large down payment on mine so now i see another benefit of that

[Dfault]

That really sucks that you're negative, but you've gotten some great advise from the members here. Take it in well, you might want to shop around through the many dealerships out there and walk in and ask to see the car with the highest incentives to cover the negative equity. It probably won't be the best looking car, or the car to get you the ladies, but it'll get you out of debt safely and maybe into a new car.

Also, from my experiences of growing up the hard way because I was a hard headed dumb butt, most women don't even care that you have a super nice car. Besides being a single male in a really nice sports cars makes women think you have more money than you really do and they're going to expect you to deliver if you expect to get anywhere with them.

[GretchenGotGrowl]

Originally Posted by baum

you are true!

this is also the reason they came up with gap coverage to cover you if you crash. Yes most are upside down on a new car IF they dont put money down. i thought a rule of thumb was 20% down from msrp (cash, rebates..)

Me too. It seems like no one does that anymore. It is good insurance that just costs you the time to save the money.

[maddoggyusa]

If you send in more than the payment, all the extra goes straight to the principle.

So if you send in an extra $200, it will reduce principle by $200 plus whatever the normal payment reduces. make sense?

I think your best bet is to be upside down by the discount amount on new car. So let's say you want to be $3,000 upside down and plan to get $3,000 off MSRP. So you need to pay off about an extra $4,500 by spring... $4,500 divided by say 8 payments, send in an extra $560. The actual amount is a little less than this as you're probably paying down principle faster than blue book value drops but either way you have long way to go.

Or you can just save your cash and put more down when you buy... prolly need at least $5,000 cash.

[PalmerGA]

Originally Posted by thegreatwhite

so is it safe to say that being "upside down" on a car loan is only bad if you want to sell the car or have an accident and your insurance only pays for the "value" of your car which is lower than what you still owe on the loan.

I can assure you, being upside down on a car loan is NEVER a good thing. First: if you're upside down on a car loan, you couldn't afford it to begin with. Second: if you can't provide a down-payment that will cover tax/title/license expenses, you couldn't afford it to begin with. Lastly (and this is the real killer), if you have to finance the payoff on your trade-in, you couldn't afford it (or especially the new car) to begin with.

OP, I assume you are fairly young (no offense to responsible young car owners). If that is the case, NOW is the time to straighten out your finances. Bite the bullet NOW and keep paying on your present car until it is at least worth what you owe on it (preferably more). Rolling over loan balances onto new loans will KILL YOU in the long run. You may NEVER be able to recoup if you continue to live on the financial edge. Cut your losses now (or as soon as possible) and you will be MUCH better off down the road, when you are looking for a home, second vehicle, etc.

**NOTE: I am not a financial advisor, economics professor, or the like. I learned the hard way. Been there.... done that. I was upside down on several vehicles in a row up until some 25 years ago. Finally kept one long enough to get even on the new loan, paid extra on the premium, and paid the car off early. Traded and added some cash for the next car and have been paying CASH (+ trade in) for every vehicle for the past 15 years (3 vehicles in all). NO PAYMENTS from the get go. It's a very liberating feeling. Good luck.

[Dfault]

Originally Posted by PalmerGA

I can assure you, being upside down on a car loan is NEVER a good thing. First: if you're upside down on a car loan, you couldn't afford it to begin with. Second: if you can't provide a down-payment that will cover tax/title/license expenses, you couldn't afford it to begin with. Lastly (and this is the real killer), if you have to finance the payoff on your trade-in, you couldn't afford it (or especially the new car) to begin with.

OP, I assume you are fairly young (no offense to responsible young car owners). If that is the case, NOW is the time to straighten out your finances. Bite the bullet NOW and keep paying on your present car until it is at least worth what you owe on it (preferably more). Rolling over loan balances onto new loans will KILL YOU in the long run. You may NEVER be able to recoup if you continue to live on the financial edge. Cut your losses now (or as soon as possible) and you will be MUCH better off down the road, when you are looking for a home, second vehicle, etc.

**NOTE: I am not a financial advisor, economics professor, or the like. I learned the hard way. Been there.... done that. I was upside down on several vehicles in a row up until some 25 years ago. Finally kept one long enough to get even on the new loan, paid extra on the premium, and paid the car off early. Traded and added some cash for the next car and have been paying CASH (+ trade in) for every vehicle for the past 15 years (3 vehicles in all). NO PAYMENTS from the get go. It's a very liberating feeling. Good luck.

This X100. I was once in this position of not being able to afford a car. I had a job that allowed me to own a brand new Solstice GXP I was 18 and then I lost my job, I was stuck with a $700 car payment and no way of paying for it. I had to get 3 jobs just to keep working so that I could make the car payment and insurance payment and be able to afford groceries, gas and rent. I spent more time at my jobs than I did in that apartment for 7 months. I finally got a break and got a better job and have been on the incline since then.


You're going to have to bite the bullet and just pay for the car for at least 2-2.5 years until you are not under anymore

[kmarshall2121]

SN∀O˥

[Kens ss]

Originally Posted by thegreatwhite

so is it safe to say that being "upside down" on a car loan is only bad if you want to sell the car or have an accident and your insurance only pays for the "value" of your car which is lower than what you still owe on the loan.

if this is the case then essentially isnt every brand new car owner upside down on their loan for some period of time. this is my understanding from the graphs above which are helpful. sry i know this isnt the original question im just trying to get my understanding of it down,

Yes and no
If you buy a car with 0% down, and if the new incentives are not that great (rebate etc ), then yes you probably would be upside down for a while. Then of course if you owed on your trade, this makes it worse.

Most will put down a down payment (20% or so), or trade a car that was paid off. In this case your would be positive equity right off the bat.

The cash money down or trade in equity makes the loan positive equity or ability to sell while under a lien easier.

Of course the up front equity is diminished to some extent when driving a new car off the lot.

But for sure in the event of a bad accident causing the car to be totaled, your insurance should cover the full loan.

Finally, if you are upside down, you should consider Gap insurance. The gap is just what it sounds like... Say your car is valued at $30,000, and you owe $35,000. If totaled your insurance will not pay any more than $30,000 and you will probably have to fight for that. The Gap insurance would cover the difference. I have never needed to buy Gap insurance, so I have no clue what it cost. You would have to wiegh the cost of the extra insurance cost to the potential loss if totaled, and decide for your self, the risk factor.

[thegreatwhite]

i just dont see how it could be considered a bad place financially to be upside down if your not selling the car. if you keep the car that difference between the value and the remaining loan never matters unless in a sale or total loss