Overhaulin' - Upside down car loan?

Upside down car loan?

So I bought a car three years ago and couldn't get a better interest rate because my credit score was not good. I am in a better situation now. I went to refiniance my car loan and I couldn't because I owe $7000 ($315 a month - two years left onit) on it and it is worth $4500. Is it worth it to buy a new car at a decent price, let's say $12,000, get $4500 for trade in, and then adding the $2500 difference to the 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 get something that doesn't suck my wallet dry on gas. Barry because then I would be stuck paying $2500 after the car was totaled because insurance covers what the car is worth not what you owe on it...silly THANKS EVERYONE!

Public Comments

hey if you can get a great rate now then probably yes it's well worth it - listen don't buy AMERICAN or this will happen again.. It was not a wise investment to buy that car over a honda or a toyota American cars lose value very very fast I don't know why I got thumbs down :-( I am 100% correct about American cars just tryin to help out- I don't make the statistics - I just study the facts
Dude why don't you just flip the car over? Why insure an upside down car??
honestly your best bet is stick wit it for the next two years.. why would you want to get yourself in a four or five year commitment on a newer car... makes no sense.. try getting a part-time job to help pay for things for the next two years.
Right now you owe 7000 on a car that's worth 4500. How is adding the 2500 difference to a new car put you in a better position? The dealer will tell you to buy a car. Not smart. pay off your car. Add some money to every car payment towards the principal to decrease what you pay in interest and time on the loan. You toOK a hit on this car and that's ok but don't go into a worse hole by trading it in. You will only be upside down again on your next car.
hmmm ... you don't say what rate you are currently paying on the upside down car loan, or what rate you would get if you did the trade in and put the $2500 on the new car loan. Odds are that lenders will balk at adding $2500 to a new car loan without seriously jacking up the interest rate on that new car loan due to 'risk' inherent in the new loan because you will then be upside down with the new loan too. You need to get a firm quote on what the interest rate, payments and full terms of a new loan would be on a new vehicle. Then factor in gas savings and insurance and all, sit down and do the math. Numbers don't lie. You'll be able to calculate what the better deal is. .
It doesn't make sense to go further into debt and wind up even more upside down just to get lower monthly payments. If anything you need to pay over the $315 each month. Every penny you pay over the minimum will go directly on the principal amount.
If you keep making payments you'll pay out $7,560. Lets say your gas bill is $300 a month so that's $9600 over the same 24 months, or a total of $17,160 You buy a new 2009 Corolla for $15,800+TTL = $16,500 Payments are $250 a month for 7 years. Over two years you will pay $6000 in car payments. You're gas mileage will double so your gas cost is cut in half to $4,800. So over the same period of time you only spent $10,800 for a savings of $6,360 less the $2,500 out of your pocket, you still saved $3860. And we know gas is only going to go higher. So yes, sounds like a good idea to invest $2500 to for a return $3860 given the current saving rates of 3% on $2500. Plus your insurance will go down as well as your licensing fees.
the only good solution to this dilemma is to just stick with it and pay off your original car.sometimes we just have to live with our mess-ups in order to better ourselves in the future. I know it doesn't sound like a solution, but it is the best way to get out of the mess. Buying another car and adding the old debt on will just cost you much more in the long run..because your be paying even more interest (for a longer time period) on the amount you owe now. Good luck.
You're way too upside down to trade this in...you won't get anywhere $4500 for it..it's an 8 year-old Mountaineer, and it's a gas-guzzler. Most dealer aren't really looking for that kind of vehicle. Realistically it's probably worth $2000 - $2500 as a trade-in. Adding $5000 to a new car loan is not very smart...just keep it and pay extra on the principle every month and get rid of as much negative equity as you can.
yeah gas guzzlers suck, you know they are predicting gas will go up to 7.00 a gallon !! anyway, yes you have a good idea in mind. if you want to refinance and keep it, rates r dwn right now so yo will be able to lower ur pmts. I would suggest to go through a crdit union if you can. but better yet, trade it in and go for a 4 cyln. car like a honda civic. if your focus is to pay off your school, do that, dont splurge on a car right now. you can do that after your done w/school and have a good salary without that extra debt of school. try to get a car thats no more that 10 or 11 k, so that your pmts will be very low. alot of people are looking into hybrids, but they are pricey.,,, good luck chuck you're gonna need it. Ps. dont go for they first offer, always negotiate dwn the price. I knocked off two thousand of the car i just got 4 wks ago. everyone is hungry for biz right now. dont seem eager or desperate.
Find out from the company holding your loan exactly what your pay-off is. It might be lower than the $7K. It sounds like you got stuck in a buy here pay here deal. Not a good thing. I won't even ask which company but I could guess.
I have answered this one in here numerous times. Your best bet is to tighten the belt and pay this thing off. When you roll the negative from one car to another, you end up more screwed than when you started. Here is an answer I gave to a lady in a similar situation. The numbers will not match you exactly, but the math is the same. I am just too lazy to change them - lol --------- Here is how bank loans work, when dealing with 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 the car being purchased. Typical over-advances run in the 125% range. SO, if you are on a 20,000 car and have a 125% advance, they will loan $25,000 (20k * 1.25) You are going to run into a big problem trying o trade down. Overadvances do not hide negative equity when you are going down in price. On a cheap car, the amount of hte advance is not sufficient to hide the negative. In your situation, this is how it would look. You think you are only $5500 upside down, 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 of 135%. That means that they will loan $13,500 on that car. You need to hide $5500 PLUS taxes and fees. So you come up $2k short, plus fees. Taxes, DMV etc is usually about 10% of the sale price, so $1350. You are $3350 short of making the deal. You need to pay that in cash in order to make it happen. The only way to hide $5500 in negative, on an average over-advance is to step into a $23,000 car. (23,000 *.25 = $6250) So your loan would be close to $30,000 + taxes and fees. Roughly $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 upside down. When your tail lights cross the curb, you will be $14-15000 upside down. So - As much as you may not like to hear this, I will tell you. Its not going to work. You can't roll back to a $7000 car, and hide $5000 in negative plus fees. That would be an advance over 200% and no bank is going to do that. Your best bet is to tighten the belt, an dmake those payments. Even if you do 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 6 years. And there will be absolutely no way to get out of it. Any dealer who would do this would be doing you a huge disservice in the long run. Good Luck