Help me get out of my upside down auto loan

BoxheadTim wrote: In reply to alfadriver: There's a difference between being upside down (ie, owing more than the car is worth) and having equity in a depreciating asset. For example I owe some money on the ND, but I'm not upside down as the car is worth more than I owe due to me bringing a substantial down payment to the table. It still sucks from an investment standpoint but it's a different situation than the OP is describing (I think).

I agree. But the reason every single new car loan is upside down is because the asset depreciates, very quickly.

If you buy a car for $25k in cash and sell it for $12k a year later, you lose 13k. Just as if you get a 6 year loan at 0% for the same car, and sell it a year later for $12k, you owe someone $13k (or actually about $9k since you've paid off just over $4k by then). Both ways, you are out $13k.

I know there's no love lost here for Jalopnik, but there was an article on this last week. At the very least, you're in better shape than the guy who wrote the letter!

Jalopnik

To clear up some questions.

the payment is affecting every aspect of my life, i.e. food/rent.

I had bought this car because I had a "stable" job makng a decent amount of money (~46k/yr) and now that job wasn't as stable as I thought, and Now im about 10k/yr less for income. so paying the car down faster is not an option. my credit is not great ~670 score. I had thought about surrendering the car but I really don't want that on my already terrible report. and I appreciate everyones input on this, very taxing for me at this time and it helps!

I have 69 payments left I think I am at 5.99%. next may I can refinance at 3.99% to save some coin. The issue with selling the car and paying the bank back is Its probably worth 13,500 wholesale, and that's a 10k loan on nothing. but again I guess I'm already there...

alfadriver wrote: I'm confused.... Ever since I've been a grown up, I've known that new car purchases via a loan are "upside down" the moment I sign the paper. Cars depreciate. Even if you buy it with cash, a new car will be worth a lot less- so if you sell for cash a year later, you will get less than you paid. Do people think that has changed? The number of new cars that normal people can afford and will appreciate is zero. Heck, the number of new cars that will appreciate is so very tiny. Even a 1, 2, or 3 year old car will continue to depreciate. Are people getting cars and not knowing that?

E36 M3 happens, life changes. I wouldn't have bought my BRZ if I knew in 6 months I'd be laid off and giving up my house in a divorce.

Granted I live far enough below my means it's not a big deal.

And I'll say my usual, if no one bought new cars, you guys wouldn't have used ones to buy. So layoff the "holier than thou why are you so stupid to buy a new car" E36 M3. berkeley.

tjbell wrote: I have 69 payments left I think I am at 5.99%. next may I can refinance at 3.99% to save some coin. The issue with selling the car and paying the bank back is Its probably worth 13,500 wholesale, and that's a 10k loan on nothing. but again I guess I'm already there...

At the moment you have an asset that's worth less than you owe on it, but if you sell it you have nothing but the loan, so it's not quite the same. Also, if you sell it/surrender it you don't have any wheels, correct? How would that affect your work?

To me it sounds more like you have an income problem - is there any chance you can pick up some sort of side hustle to make some extra cash? I assume with your not-so-stable job you're not necessarily working 40h/week or more?

All that said, your credit score itself is the least of your problems right now so I wouldn't worry to much about that part.

tjbell wrote: To clear up some questions. the payment is affecting every aspect of my life, i.e. food/rent. I had bought this car because I had a "stable" job makng a decent amount of money (~46k/yr) and now that job wasn't as stable as I thought, and Now im about 10k/yr less for income. so paying the car down faster is not an option. my credit is not great ~670 score. I had thought about surrendering the car but I really don't want that on my already terrible report. and I appreciate everyones input on this, very taxing for me at this time and it helps! I have 69 payments left I think I am at 5.99%. next may I can refinance at 3.99% to save some coin. The issue with selling the car and paying the bank back is Its probably worth 13,500 wholesale, and that's a 10k loan on nothing. but again I guess I'm already there...

No, you're past there--you're at a $25,000 loan on a $13,500 asset at 6%.

Call the bank, call local credit unions. Tell them the situation. See what you can do to sell the car and take an unsecured loan. 6% on $10k is a lot. 6% on 25k is a lot more than that.

Otherwise, get a second job. It is what I do and am doing because between our mortgage and my wife's student loans, if one of us lost our job we would be selling guitars, probably her car (for a cheaper one), and we'd be struggling but still staying afloat. So just in case, I have a second job. Every little bit helps.

Last new car we bought was the truck at 0% APR. Everything else has been used one way or another. I want a new car so bad I can taste it, but the wife and I agreed to a "if we can't pay for it within 12 months we can't afford it" ideal and it's good for hte bank account, that's for sure.

Alas, I should have mentioned, I just got a 5k personal loan to cover piling credit card debt(Medical bills) so now my credit cards are clear, but have 5k hanging over my head to deal with, second job might be necessary

I think trying to refi your loan or just paying extra and ride out the storm are going to be your best options..

Yeah, so right now with your credit score and debt-to-income ratio, you're left without much choice. It sucks, but most banks probably won't even offer an unsecured loan with your credit score and underlying debt and reduced income, so that's probably off the table.

I'm not sure of your location, but right now is the perfect time for good paying seasonal jobs- USPS, UPS/Fedex all offer excellent pay and will pretty much let you work as much as you can stomach during the holidays. I'd do that, work as much as you can to barely maintain sanity, and get out from under the pile of debt.

mtn wrote: Call the bank, call local credit unions. Tell them the situation. See what you can do to sell the car and take an unsecured loan. 6% on $10k is a lot. 6% on 25k is a lot more than that. Otherwise, get a second job. It is what I do and am doing because between our mortgage and my wife's student loans, if one of us lost our job we would be selling guitars, probably her car (for a cheaper one), and we'd be struggling but still staying afloat. So just in case, I have a second job. Every little bit helps.

Its going to be hard getting an unsecured loan that has a lower than 6% with that credit and the income. I dont want to be a dick, but just being realistic.

I am with your other option and BoxheadTim's. Keep the car, find a way to supplement the income and keep plugging along.

I would even tell my friends and family that I can do their oil changes, even if you charge them $15 on top of supplies. Anything you can do to help make that payment at the end of the month.

Surrendering the car would not be an option for me. Your credit will suffer and then you have to find another car to take you to work.

I am upside down in a car.

We bought the car new, and at the time it was generating revenue. Much more than the loan payment.

Closed the business, and now the car generates no income. Still making payments, now coming from my personal budget. The only good thing is it was a 0% loan, so it does not cost me more to keep it, no matter how long.

Others have covered it- stay the course on the car you've got, and look hard for more income. Deliver pizza, paint houses, whatever.

BoxheadTim wrote: To me it sounds more like you have an income problem - is there any chance you can pick up some sort of side hustle to make some extra cash? I assume with your not-so-stable job you're not necessarily working 40h/week or more?

This.

If you're only making ~$36K/year and your lifestyle is based on $46K/year, you need to fix the income side. Or find cheaper rent/roommates, ramen noodles, etc. Going just cheaper doesn't fix things long term though, so get your hustle on, new jobs, 2nd jobs, etc.

Drive for Uber/Lyft?

The difference between keeping the car and paying the loan off versus selling the car and paying the remaining 10k over the same time frame, for a car you no longer have, is about $200/month. Plus you will still be paying a transportation cost of some sort so you wont really be saving $200.

I am with the "Try to earn $200 a month extra" crowd. That's $6.66 a day. I think you can donate blood often enough in a month to cover that. And while I would be the last one to advocate such an activity, do you have any vices that you could give up? Like smoking,drinking, gambling or a girlfriend?

The lower rate next spring aint going to make much difference as it will only save about $13/month off your existing situation.

also, just wanted to say: You can do this!

it sucks being in debt, and it can seem overwhelming, overthinking options, and feeling like you're stuck, but this is temporary. Get up, get out, and get after it. With a solid plan it'll be behind you before you know it.

Odd jobs and a second job to supplement your income problem and pay down your car is the best way. You might just have to hustle and bust your ass for a year.

Can you drive a forklift? Or stock shelves over night. Making an extra $300 to $1000 a month isn't hard if you can spare 5hrs out of your day about 4 to 5 days a week.

Everyone has said the basics... you owe the money, you need to find a way to pay it.

A second job will certainly help. I would be skeptical of Uber. Unless you are getting surge pricing, your hourly rate can be extremely low.

Do you own anything you can sell on craigslist? Anything you can use to pay down the principal is going to save you more $$ in the long run.

Also, stretching your dollars can be easier than making money. Check out MMM or similar blogs to see how you can save money. Join some of the forums and don't be shy about posting your entire monthly budget for others to criticize.

You can do it.

The advise my father always gave me when it came to money was to work more if I didn't have enough money. You may end up with little spare time but the easiest way to get more money is to work more hours in life. He added that if I ended up working more because I spent to much it would be a great life experience on why not to overspend.

slowride wrote: Drive for Uber/Lyft?

Must have a 4 door car.

Check out working for some kind of delivery service out there? I know you can get almost anything delivered these days.

z31maniac wrote:

slowride wrote: Drive for Uber/Lyft?

Must have a 4 door car.

Sadly not all GTIs are 2dr any more. His is in fact a 4 door

I'm with the work extra/sell what you have laying around. Working 12 hour days plus Saturday has helped my income. I only take Sunday off and my wife runs the family when I'm working. Young guys should have a backup type work skill - delivering pizzas? Lawn work?

Some guy near me rents a lawn aerator for a Saturday and goes door to door doing lawns at a cut rate price. He spends $50.00 and makes $300-$400?

I'm going to recommend once more to call the bank that the note is written on and see what your options are. I used to work in a bank collection center--I specifically dealt with the repo agents and auctions to sell repossessed cars.

You may have a better shot than you think to have the loan refinanced into an unsecured loan and have them remove the lien. If you're struggling to make payments, they don't want you to go further underwater than you are. It is not in their interest for you to not be able to pay.

EDIT: from their perspective, you have a high likelihood of going to repo. Then they sell it at auction. They get less at auction than you get private party. It is in their best interest to have you sell it and go unsecured as well as your own. Give them a call and give it a try. You may have a chance.

Im far from an expert but shortly after my wife purchased her saturn in 06 she ended up with a complicated pregnancy that pulled her off work for 6 months. I worked every odd job i could pick up just too pay for the car. When i was laid off we had a year left on the loan and managed to get a loan via our bank and pay it off. Ended up at a lower interest and drug out the loan an extra year but we got it done.

This is why i refuse to make payments on a car now. We went from a combined income of 70k a year too 39k in no time. Luckily lots of hard work and cutting back on everything we managed too keep the car and the house.