upside down car loan

[rapidanian]

I got a new car in 2004 and they "paid off" my old one and interest rate is like 17% ! This manuever (stupid in hindsight) created an upside down loan. I have gap insurance, but now I am afraid that the gap insurance is not enough to cover the difference which is 12000 value on 19000 loan. Also, does anyone know what the max upside downness is allowed for a refi? I don't think this would work for me unless I can come up with about 4-5K.
TIA for any input on this subject.

[carsaleslady]

I'm sorry I am not able to provide you with hope in your situation. I work in the automotive sales industry and have a few observations.

You cannot wrap negative equity into a new car purchase and hope to ever get ahead. You have begun pushing a snowball that will eventually bury you. You cannot finance a car over 48 months without a large downpayment and expect to ever have equity allowing you to trade before it is paid off. Automobiles are depreciating assets and should NEVER be finance over 48 months. If you cannot afford the 48 month payment, then lease. If you cannot afford the lease, then you cannot afford the car. Simple.

If you are in a high interest loan, sell stuff on e-bay, skip lunch, do what you can and knock down your principal debt. Pay more than the minimum and get ahead of the game. Wear the tires off of your car a few times and only buy a new (and by new I mean a two year old used car that someone else already took the depreciation hit on) car when it comes to that, or walk.

I sell high line cars 45,000 - 100k+. I have two types of customers that come in: those who are smart with their money; and those who will leverage anything to look like they have money. I have come to find out the rich get richer for a reason... they don't make dumb financial decisions.

[anchorbob]

Originally Posted by carsaleslady

I'm sorry I am not able to provide you with hope in your situation. I work in the automotive sales industry and have a few observations.

You cannot wrap negative equity into a new car purchase and hope to ever get ahead. You have begun pushing a snowball that will eventually bury you. You cannot finance a car over 48 months without a large downpayment and expect to ever have equity allowing you to trade before it is paid off. Automobiles are depreciating assets and should NEVER be finance over 48 months. If you cannot afford the 48 month payment, then lease. If you cannot afford the lease, then you cannot afford the car. Simple.

If you are in a high interest loan, sell stuff on e-bay, skip lunch, do what you can and knock down your principal debt. Pay more than the minimum and get ahead of the game. Wear the tires off of your car a few times and only buy a new (and by new I mean a two year old used car that someone else already took the depreciation hit on) car when it comes to that, or walk.

I sell high line cars 45,000 - 100k+. I have two types of customers that come in: those who are smart with their money; and those who will leverage anything to look like they have money. I have come to find out the rich get richer for a reason... they don't make dumb financial decisions.

Excellent post. Negative equity sucks in a car.

[joelr710]

its not an issue of how many dollars you role over. its all percentage based. lenders use a term called advance. it means value of the car X a percentage. used cars they use nada trade and new cars they use dealer invoice. so for example if you go by a big old truck (new) with several thousand in rebates then advance is ok. example 30,000 invoice sticker 33500 after rebates of a few grand you would be at a number close to invoice. so it may work. the problem with that is that if their are any credit or income problems you cant make this happen.
if your buying a used car with for example a 10,000 trade value and rolling over 4 or 5k they your trying to borrow 150% of the car....never going to happen.