About trading with negative equity. agian...

[w1ngzer0]

I sware i made another thread about this. But anyway. I am paying nearly 550 including insurance a month for just this damn scoobie. So, if i sell my car and dump 5,000 into a personal loan then buy a 1-2k car.

Would i be in a better position? I would most likely be paying 300 a month vs 550..... 300... for

105-120 insurance100-150 car payment100 debt

Opinons and advise is wanted

[Repo Man]

Well, if you're selling your car outright you aren't trading and are not in a negative equity position as it relates to a trade. To really assess your situation we need to have specifics. How much exactly do you owe on the car? What kind of Suby is it? We need to know if the fair market value of the car is going to cover your payoff and if you can get FMV for the car. If you can, then problem solved.

I don't really understand the breakdown you gave here:

105-120 insurance100-150 car payment100 debt

What is the 100 debt? Keep in mind too that if you buy a 2k car, you may have to spend additional funds to keep it running and how much value do you place on the inconvenience of the car being down and having to spend time working on it just to keep it running? What will you do for wheels if the car is laid up for a few days?

Are you under warranty now?

[w1ngzer0]

nah the pay off isn't going to cover it. Just sometimes this car seems like such a downer.

The trade is worth 17 which i would still be 3k short.

break down is how much i would be paying a month. 100 debt would be in personal loan. Every article i've read about negative equity said "keeping your car is a better idea then adding it to another car."

[Repo Man]

One way to eliminate neg equity is to put it into a lease. This may not be the solution for you, but we have taken ten grand in negative equity and put it into a lease. Three years later the customer is out of the lease and has no liability. Often this is on a higher-dollar car and buying GMS.

Example:

MSRP 40,000leases at 35,000 capitalized cost (roughly, I don't have a calculator handy) and can go up to 125% MSRP and with rebates in the range of 3-4k as well as supported rates and residuals has a reasonable payment on a new car and eliminates the negative equity.

This is the type of thing that could be a solution for you, but I would have to have specifics to be able to tell you if it would work or not. Follow me?

[w1ngzer0]

yah kind of. But how does leasing work exactly. I would imagine the car has to be under so many miles per year and does the money i put down on the lease go toward my payment?

[Repo Man]

yah kind of. But how does leasing work exactly. I would imagine the car has to be under so many miles per year and does the money i put down on the lease go toward my payment?

Almost all leases have a mileage restriction. It is important that you know how many miles per year you drive on the average so you set up the lease to match. Money that is used as cap cost reduction reduces your payment, anywhere from 20-50 dollars per month per $1k you put down.

One advantage to leasing is that you are only paying on the part of the car that you are going to use. This part is called depreciation and the value of the car at the end of the lease is called the residual value. The residual is set at the beginning of the lease and the higher the residual is, the lower your payment will be.

Example: 2006 Nissan 350Z lease, residual at 57%, lease rate at 5.90%, 36 month term with an MSRP and selling price at 30,500 (say, an enthusiast model) will run you $535 per month without any money down. If the residual value were set at 50%, you would be paying $591 per month simply due to a lower residual value. Keep in mind that these are not actual numbers, but an example of how residual affects a lease payment.

For comparison purposes that same car on 36 month finance term at the same 5.90 rate (which would be an excellent rate right now) would run you $987 per month. Taxes are included and figured at the Indiana sales tax rate of 6% in both the lease and finance quotes.

Is it more apparent now why leasing would be advantageous? In addition to that, with a GMAC lease, you have no liability at lease end as long as there is no excessive wear and/or miles on the car when you turn it in. You can simply turn the car in and sign up on a new car without having to deal with negative equity. Again, just be sure to get enough miles allotted so that you don't have a huge overage at the end of the lease.

So now you see that a lease payment is usually lower than a finance payment given the same figures on the same car. With most cars you can negotiate a discount off of MSRP, lump in your negative equity and spread it out over the lease term, take a little higher payment than you would have had if you had no neg equity and still be lower than a finance payment. And at the end of the lease, voila, no more negative equity.

Does any of that help?

[w1ngzer0]

yah thanks.

[Stick]

Hey Repo man i also have a question on this topic im in the same problem but reply and will explain

[audtatious]

Hey Repo man i also have a question on this topic im in the same problem but reply and will explain

Just post it up and you will get a reply.

[Stick]

ok here we go, back in 2005 i bought a 2005 chevy cobolt when i bought it i had like 2,000 neg from the car before it so that rolled over to the cobolt no biggie right, sooo now being 2006 im trying to trade out of it and they tell me im now 9,000 dollers neg. 3 months after i had bought it they came out wit the GM employee priceing sale, but now they tell me the ONLY way to get out of it is to LEASE a 2007 toyota camery BUT i would have to stay in the lease atleast 3 yrs to get rid of some of that neg. being the 9,000, is that really the truth? does that really work and being a car like that being that they hold there price really well? and i dont know much at all about leaseing atleast that part of it Thanks

[Repo Man]

Well I'm sorry to be the bearer of bad news but that sounds pretty accurate. You might try a few different dealers and work the deals against one another, which is what I would do, but your best bet may just be to ride it out.

Before we get any deeper, what is it you are ultimately trying to accomplish? A lower payment? Hate the car and want something else? Goofy for Toyota?

[Stick]

Well one thing is, my wifes daughter works for that car lot and has been there for sometime and i think they might not give us to hard of a time and we are getting a discount for the car. also GM doesnt seem to hold there own anymoreas im sure u already know, but payment goes up if i make this trade but being a 2005 cobalt o a 2007 camery is almost night and day. but u think that leaseing Will or WILL NOT get rid of this problem? but then since i bought the car ive had it in the shop 5 times for different matters im just fed up Thanks

[Repo Man]

I see now the nature of your problem. Yes, leasing will cure the negative equity problem by absorbing it into the lease payment. With a closed-end lease, that is one where the residual value is predetermined, once you make all the lease payments you're done. As long as there is no excessive wear and tear or excess miles on the car, you just walk away and start fresh. Of course be sure to read all of the terms of the lease before you sign.

The biggest mistake people make with leasing is not doing an honest assessment of miles driven per year. DO NOT sign up for a lease that allows twelve thousand miles per year when you know you drive eighteen for example. It's biting the bullet, but it is a sure way to cure a negative equity situation. Obviously make sure you can handle the payment as well.

Does that answer your question?

[Stick]

But one more thing i guess my main question is.Will leaseing a car get rid of the Neg? they say id have to atleast go 3 yrs to get at that though

[Stick]

Yes it does THANK YOU VERY MUCH, u have no idea how hard it is to find info on this on the web but ur site was VERY HELPFUL, if i have any other question ill let you know Thanks again

[Stick]

One other thing, from what i hear people talking about is do not lease, i hear that alot and even more so not to do a 5 yr lease but then to get rid of that neg. i would almost have to stay in it atleast 4 yrs but then by that time if i didnt go over anything would the car still have enough in it to get something else.

[Repo Man]

Well, I would try to lease for 36 or 39 months. Going past that most of the time will put you out of factory warranty, will have to buy tires and other maintenance items, and most people are sick of the car by then. Don't ever lease a car for five years. Four at the max.

The people that rant against leasing either; a) don't understand it or b) have had a bad experience that stemmed from driving way more miles than the lease had built in, couldn't/wouldn't maintain their car, or signed up for an open-end lease. An open end lease is one where you set the residual value, which can make for a very low payment, but you are responsible for the residual payment. This is NOT a good deal ultimately and the source of anger toward leasing.

Let me know if there is anything else I can do to help.

repo

[Stick]

Thanks for ur help man, if u lease for 5 yrs can u turn it in early and maybe have something left in it to trade into another car not being a another lease generaly? or would ya have to follow that contract to the end because i do know me being 9,000 neg i can have all that paid off in 4 yrs if ya add it up But like i say there is night and day from a 2005 chevy cobalt Vs a 2007 toyota camery ...lol

[Repo Man]

Chances of getting out of a lease early are pretty slim. That's why I say to go for the shorter term as long as you can handle the payment. Good luck and let us know how you come out.

[Stick]

Well the bad news is that my payment would be about 550. for the camery but the paymant on the cobalt is 450, that would have to be for a 5 yr lease but then my Girlfriend of 7 yrs daughter works there and its a well known car lot. on another note that does include Gap insurance as well as 15000 miles per yr ....

[Repo Man]

Holy sh*t! What does the Camry list for?

[Stick]

like 21,000 ...but then alot of that has to to do with my neg, its a 2007 camery LE 4 banger ....ya still think in some ways id be better with the Camery?....lol
Modified by Stick at 7:13 PM 7/12/2006

[Repo Man]

Even with your negative equity, that still seems WAY too high for a 550 payment. Rates and residuals must suck. If you can get all the numbers I could probably figure the lease for you and see how it stacks up.

[Stick]

what all info ya need?

[Repo Man]

Selling priceTrade allowancePayoffResidualRateAnd any fees should get us pretty close.

[Stick]

ok give me a bit and i will get all that togeather

[jennydowen]

What if you don't want to get rid of negative equity with a lease? What are the other options?

[Repo Man]

What if you don't want to get rid of negative equity with a lease? What are the other options?

Well, then you just have to roll that negative equity into your new contract if you are able to finance that much and/or can handle the payment. Turning around and financing another car for 60 or 72 months typically just makes the problem worse because now you have the negative equity from the car you just traded in on top of the depreciation from the car you're buying, so it's a double whammy. With the lease, you get the negative paid for over the lease term and then just walk away from the car when you turn it in at lease maturity and start over.

[jennydowen]

I have been told that I couldn't get a lease because of the negative equity? Is there an amount they won't roll into a lease? Or have I been had? Sounds like the last car I got the double whammy!!! I think I am a car saleperson's dream!!!

[Repo Man]

What happened specifically?