Saturday, March 28, 2009

When your upside down on your car do you have to get a brand new car?

Every time we look at new cars and try to trade our car in they say that we have to get a brand new car to cover the money that we are over in our current car. Is this true? Do you really have to buy a more expensive car to cover the negative equity? We are probably about 4,000 in the negative.
When your upside down on your car do you have to get a brand new car?
you are a rebel ! :)
When your upside down on your car do you have to get a brand new car?
no, but it helps because the APRs are higher on used cars
Reply:not true..they could trade you any car on their lot but want to sell new ones..[more profit for them]...it really doesnt matter new/used as long as new loan covers vehical and the 4K...
Reply:I feel for you I am in the same boat. I want a new car though I just know I have to get a great deal. I would call the people you have your loan through and ask them about it they will be less likely to screw you over in their answer. The car dealers want to get as much money as possible out of you.
Reply:wow, someone flunked out of their personal finance class.





You already owe $4,000 more than your car is worth, and you%26#039;re thinking about taking on thousands more in debt on a car that will depreciate even faster? That is one of the worst financial decisions you can make.





Stay with the car you have, make extra payments on it until its paid off, then save some money and buy a car with cash. Why pay interest on something when what you have is good enough?





If you absolutely can%26#039;t stay with the car you have, then take a personal loan to cover the $4000 difference, sell the car private party and pay off the original car loan. Get the cheapest used car that meets your needs that you can find and pay cash. Then pay off the personal loan, save some money, and upgrade.





If you insist on having what you cannot afford, before you can afford it, you will never be able to afford it. There%26#039;s no shame in driving an old used car while you save up some money. But there is plenty of shame in being so far in debt that you can%26#039;t pay people the money you rightfully owe them, which is where you are headed if you keep financing everything before you can actually afford it.
Reply:They are probably saying that because it would be very difficult for them to find a lender that would cover the loan for a used car + being upside down.





Lenders typically only cover a maximum of 20-30% over the value of the car you are purchasing to account for negative equity (upside down).


The more a car costs, the more leeway the dealer and the lender has.





For example, if you are $4,000 upside down and want to buy a $10,000 car, you will have to finance $14,000 for a $10,000 car. That is 40%, which is over the risk level most lenders will permit.





However, if you are $4,000 upside down and want to buy a $20,000 car, you will finance $24, 000. This is 20%, which is sometimes an acceptable risk.





I would advise trading at all if you have negative equity, but if you do, make sure you look into GAP insurance if it is available.
Reply:Lets cover some basics to help you out. It does not have to be brand new, but if you get a pre owned vehicle you do want to get something on the newer side. I.e. 2-3 years old at the most. Any financial institution you use will have a formula to calculate your negative equity and how much car you need to move 4k over. My experience has been that you need to be in about a $14-$15k vehicle to move 4K negative. Otherwise it can be either used or new.
Reply:I won%26#039;t make any personal slams about your past financial decisions. You can buy used or new. It makes no difference. The only problem you will encounter is adding the negative equity to a used vehicle will put it at a level that most banks won%26#039;t touch. The best thing you can do is reduce the negative equity situation. You could pay down the loan and sell the car yourself. That way you would be in much better shape. I would also recommend not buying new, but finding a late model used car. There are a lot on the market right now and many can be really good deals. Good luck in whatever your decision is.
Reply:The absolute worst thing to do when you are upside down on a car loan is to roll that amount over into another new car and get further upside down. Eventually you wind up paying for all the cars you rolled over and ruin your credit rating.





So, stop looking at new cars. Pay off what you already have instead. Once you get all caught up, if you really want something new every few years, look into leasing instead.
Reply:You don%26#039;t have to buy a new car, but it does require a big loan to bury that. It works, if you%26#039;re an idiot. If you were $50,000 dollars in debt, then the $4000 wouldn%26#039;t worry you as much.





If you%26#039;re not an idiot, you%26#039;d realize that it doesn%26#039;t make any sense to do this, period. You can%26#039;t get out of debt by borrowing a whole lot more money. This is like curing a headache by give yourself 3rd degree burns, so that the headache is not as noticable. It%26#039;s dumb.





Pay the car off, then drive it another 10 years without making a car payment. That%26#039;s what smart people do.
Reply:One of my daughters has done this dumb trick for the last 10 years.


Listen to SmartAss and Firebird!!!!!


Pay it off, then fix it and drive it some more. Why do you think so many people are losing their homes in the US???? Same thing. If you%26#039;re in the negative, you will NEVER get on the positive side by continuing to trade in and buy another vehicle. Ever heard of Dave Ramsey?? He%26#039;s a great financial advisor. Check him out on the radio or internet.

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