Overhaulin'

I want to get out of an upside down car loan..what should I do?

Okay, I have a 2005 dodge neon with about 38,000 miles. I bought it a little over a year ago and it is in great condition. Problem is, it was my first vehicle purchase so my interest rate is pretty high and I owe about $11,000 on it and it's not worth that much and I really want to get something better. I went to look to trade it in only to find i wouldnt get over $6000 trade in value so that would leave me roughly with $5000 in negative equity. So basically I want to get out of this loan so I can get a car that I really want without being upside down again by rolling over the unpaid balance to the new car. What should I do????

Public Comments

1. Well I would just wait or find a really stupid person to buy it. Next time do your research and don't over pay on your car!
2. You would be dumb to trade in that car...all that negative equity will probably add at least $100 to your car payment. Do you really want that much of your payment going to paying off negative equity?? That's stupid. Unless you can find a car with a $5000 rebate it's not worth it. If it runs..keep it. You would also need very good credit for a bank to approve a loan like that. Be smart..pay extra until the payoff and the value of the car are around the same...then you can get rid of it. Otherwise you're going to get in over your head.
3. You might try to refinance the loan to reduce the interest rate and lower the overall balance owed. If you have the patience, you might try running a color picture ad on websites like craigs list, yahoo auto, or even ebay...You might find a buyer there.
4. Keep paying on the car until you can get rid of it, that will probably be when it is paid off. Look into refinancing the car to a lower rate, if you are $5k upside down in it that may not be an option either.
5. Ever heard "We'll pay off your curernt loan even if you owe $10,000 more than it's worth!" If you are upside down on your car loan and you still owe $10,000 for it, the dealer pays off your car loan, then you owe that $10,000 to the dealer. This gets financed along with your new car purchase of say, $15,000. Now you are financing 2 cars for $25,000! Your new car purchase payments are spread out over 60 or 72 months so you don't notice what just happened. The more months they add to the new auto loan, the lower the payments. In many cases the payments could be less than your current auto loan, so you think you're saving money when you just got shafted. Their ad made you think that trading in a car relieves you of your obligation to that car. It does not. This gets many car buyers into trouble. You are actually taking on double your current debt, when you thought you were dropping one debt for another and buying a new car.
6. Unfortunately, rolling negative equity from an old loan into a new loan makes you even more upside down in the new loan. Not a good idea. There's no way to escape negative equity. Even if your car burned, was stolen, or got destroyed in an accident, the insurance would only pay what the car is worth. You would have to come up with the negative equity in cash to pay off the loan. Your best option is to simply stick with your old car until you are no longer upside down, or very close to it.
7. The only way to get out from under the loan is to pay it off. Nearly everyone is upside down in their car loans to some degree, so you aren't unique. If you trade the car, where do you think the negative equity will go? it will be rolled into the new loan and you'll be even more upside down. My advice to you is keep paying on the car and when you buy your next car, make a larger down payment to minimize negative equity.