Upside Down Car Loans
Head auto loan?
So I bought a car three years ago and could not get a better interest rate because my credit score was not good. I'm in a better situation now. I went to refiniance my car loan, and I could not because I owe $ 7000 ($ 315 a month – two years back onit) on it and it is worth $ 4,500. Is it worth buying a new car for a decent price, let us say $ 12,000, receive $ 4,500 to trade in and then add the $ 2,500 difference to newer car? I want to lower my car payments so I can pay for school. I have a 2000 Mercury Mountaineer V8 and would like to have something that does not suck my wallet dry for gas. Barry, because then I would be stuck paying $ 2,500 after the car was all because insurance covers what your car is worth not what you owe on it … stupid thanks all!
I have answered this one in here countless times. Your best bet is to tighten your belt and pay this thing off. When you roll the negative from one car to a second, you end up more screwed than when you started. Here's an answer I gave to a lady in a similar situation. That figure will not match you exactly, but math is the same. I'm just lazy to change them – lol ——— Here is how bank loans work when it comes to negative equity. You have to get what is known as an over-advance '. This means that the bank is lending more than the value of cars purchased. Typical over-advances run in the 125% range. So if you're on a 20,000 car and have a 125% advance, they will loan $ 25,000 (20k * 1.25) You are running into a big problem trying o trade down. Overadvances not hide negative equity when you goes down in price. For a cheap car, the size of hte advance is not sufficient to hide the negative. In your situation, this is how it would look like. You think you are only $ 5,500 on his head, but its probably more. For illustraction, I will use your numbers Let's say you land on a $ 10,000 can and get a gold-balls credit over-advance on 135%. This means that they will loan $ 13,500 on this car. You have to hide $ 5,500 plus taxes. So you come up $ 2k short, plus fees. Taxes DMV etc is usually around 10% of the sale price as $ 1,350. You're $ 3,350 short make the deal. You have to pay this cash to make it happen. The only way to hide $ 5500 in negative, on an average over-Advance is to enter a $ 23,000 car. (23000 *. 25 = $ 6,250) So, your loan will be close to 30,000 + $ taxes. Approximately $ 33,000. On a car worth $ 23,000. Before they hand you the keys, you have gone from being $ 5500 upside down, to over $ 10,000 on his head. When your rear cross the brake, you will be $ 14-15000 head. So – As much as you do not like to hear this, I will tell you. Its not going to work. You can not roll back to a $ 7,000 car, and hide $ 5000 in negative plus fees. It would be an advance of more than 200%, and no bank will do it. Your best bet is to tighten the belt, a dmake these payments. Even if you find a dealer and bank willing to do this, it is a HUGE mistake. You will be a slave to the car for the next six years. And there will be absolutely no way to get out of it. Any dealer who would do that would make you a huge disservice in the long run. Good Luck