"mkbruin, Atlas VP" (mkbruin)
07/07/2017 at 11:48 • Filed to: None
2
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"mkbruin, Atlas VP" (mkbruin)
07/07/2017 at 11:48 • Filed to: None | 2
| 14 |
I have a friend that is ridiculously upside down on his car and wants to get out. How?
Buddy bought a new $40k Durango in January 2016. It now has about 45k miles. He likes it, but business is slow and they want to cut expenses. Due to FCA being FCA, his truck lost 50% of value and he’s about $12k under.
He was looking at used cars in the $10-13k range, but So far he can’t find anyone willing to lend 200% of purchase price.
So, short of repossession and deficiency what are his options?
Smallbear wants a modern Syclone, local Maple Leafs spammer
> mkbruin, Atlas VP
07/07/2017 at 11:51 |
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Fake a death
XJDano
> mkbruin, Atlas VP
07/07/2017 at 11:52 |
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Does he have a boat?
McMike
> mkbruin, Atlas VP
07/07/2017 at 11:55 |
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Does he have equity in a home to take a bite out of the $12K?
Textured Soy Protein
> mkbruin, Atlas VP
07/07/2017 at 11:57 |
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Only thing I can think of is to take out a personal loan to pay the difference between sale price of the Durango and what he owes, then finance the used car separately. But that probably won’t reduce his monthly costs by much. Ideally if he has some cash reserves he would be able to pay a chunk of the upside down amount out of pocket and only take out that personal loan to cover whatever he’s not able to pay out of pocket.
ttyymmnn
> mkbruin, Atlas VP
07/07/2017 at 11:57 |
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Chariotoflove
> mkbruin, Atlas VP
07/07/2017 at 11:57 |
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Seems to me like the best of bad options is to keep the car. Is is possible to refinance the loan to a longer term for lower monthly payments to ease the budgetary pain?
Tekamul
> mkbruin, Atlas VP
07/07/2017 at 12:00 |
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Wow, that’s a hum-dinger.
He’s going to have to up his budget just enough to find something that will allow him to roll over that much excess debt (Like ~$18k). The FCA dealer is probably the most likely to give him that much wiggle room, because they dislike repos, too. He’s going to still be stuck in the muck, but he’d have a longer timeframe to work towards getting out from under it.
WilliamsSW
> mkbruin, Atlas VP
07/07/2017 at 12:05 |
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Oof, that’s a tough spot to be in. Hopefully his business gets better.
Sounds like he owes ~$32k on a car worth $20k. The depreciation is a sunk cost. If it’s a good truck, I think I’d be inclined to do nothing - though it’s tempting to try to get out. Getting into a $10k car can save some future depreciation, to be sure - but there’s the risk of the unknown (repairs on the new car).
If the business is seasonal and he expects a pickup in the not too distant future, I’d definitely stay put. If he can spare the cash, he ought to be able to save some $ by eating the $12k, and trading it for something cheaper, but it sounds like cash is tight.
A personal loan for the gap is a decent option, if he can get favorable terms.
Now_looking_for_a_cheap_car
> Chariotoflove
07/07/2017 at 12:23 |
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sounds like the plan to go with. the car is in the prime of depreciation at one year in.
Ash78, voting early and often
> mkbruin, Atlas VP
07/07/2017 at 12:35 |
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200% is virtually impossible...even 130% was (and is?) considered the upper limit of risk for most lenders, assuming you have an 800+ credit score, etc. This sounds like a case for shopping around local credit unions — a lot of them will give you “new car” finance rates on anything under 2-3 years old (and as much as I hate to say this, they should be able to get him another 60 months, lowering the payments).
Getting out of the Durango is going to be more expensive than keeping it, I just can’t see any other solution for at least another couple years.
merged-5876237249235911857-hrw8uc
> mkbruin, Atlas VP
07/07/2017 at 13:16 |
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Keep it and hope the business will pick up and that in the meantime he can pay down more of the principle and just try to keep afloat. As someone else said, maybe refinance is an option to stretch the payments.
arl
> mkbruin, Atlas VP
07/07/2017 at 16:12 |
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Get GAP insurance. Take a vacation to Detroit. Take in the sights in the inner city. Park it with the windows down and keys in the ignition while going for BBQ.
Come back from BBQ. Find empty parking spot. Go for more BBQ and start planning next vehicle purchase (which should be a used Honda or Toyota with that won’t lose 1,000,000$ in depreciation the moment it’s driven off the lot).
Jayhawk Jake
> mkbruin, Atlas VP
07/07/2017 at 16:29 |
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Rolling over debt to a new car won’t do that much good honestly. If he turns around and buys a $20k car for $30k he’s still $10k upside down.
At this point I’d suggest looking for refinancing to lower the interest rate, potentially also lower the minimum payment but make sure it’s a loan that has no penalty for early payoff. Then pay whatever extra he can on top of that monthly payment to pay down the principle and reduce the gap between what is owed and what it’s worth.
Being a year in I wouldn’t expect to see the same amount of depreciation over the next year or two. Taking small steps to reduce the interest paid and lessen the remaining principle on the loan now can get him much closer to owing what the truck is worth quickly.
JQJ213- Now With An Extra Cylinder!
> mkbruin, Atlas VP
07/07/2017 at 17:55 |
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Maybe look into leasing? If he puts a bit of a down payment down, they might be able to roll some of it into a 3 year lease. It’ll make the payments suck, but at least after 3 years he will get a clean start