Hypothetically, if you made a series of bad choices... what then?

[zCypher]

Hypothetically speaking of course, if you made a series of bad choices in your financial and automotive life, what would you do then?

Let's go over the outline of this hypothetical situation:

- in a failed attempt to rebuild your credit, you agree to a 60 month loan at (gasp) 24.9% to buy a used car with relatively low mileage

- you continue to be a negligent nub and fall far far behind on your payments that are supposed to be rebuilding credit

- you finally get stable employment and start catching up, but your credit is still too poor to get approved for anything anywhere that you'd want

- you still owe over $7000 on your vehicle, but it's only worth maybe $4000

Do you:

- keep the vehicle indefinitely, driving it until it is garbage, in an attempt to balance out the total amount spent?

- Sell the vehicle as soon as you possibly can, even if you end up with no money left over and no car?

- Wait till your credit is fixed enough to get approved for a better car at a better rate giving you a lower payment?

- other? please specify.

Edit: Poll is there now, please vote

 

[MJinZ]

You can't ... always get... what you want.

 

[radioouman]

Make extra payments, pay that car off (while improving your credit at the same time) and drive it for a while.

 

[zCypher]

If keeping the car meant you could not afford to put aside any money, and getting rid of the car meant you could afford to save enough to put a down payment on a place, or to buy a car cash, within two years - would you keep it and pay it off while driving, or sell it and save money?

 

[lastig21]

Pay the car off and drive it until it completely falls apart. Rebuild your credit using tools with less destructive power. Low limit gas/department store cards maybe.

 

[TwinsenTacquito]

Depends on the car. Is it European? Is it a luxury brand? If so, get rid of it ASAP before repair costs start to hit home.

 

[zCypher]

Depends on the car. Is it European? Is it a luxury brand? If so, get rid of it ASAP before repair costs start to hit home.

built in South Korea, with about 56,000 miles on it

 

[TwinsenTacquito]

Don't get rid of it until the engine or tranny goes. Even if you get a better new car, keep the shit one around until it requires money to keep it around. Gotta have a beater! Well... unless you live in a city and you're stuck with one car. By the time the car has 200k miles on it, it's not even going to be worth selling it.

 

[the DRIZZLE]

Hypothetically, if you're so broke, how are you going to come up with the $3000 difference between what you owe and what the car is worth? As far as I know you can't do a short sale on a car.

 

[Arkaign]

OP, my gf is in a similar position, but she's never missed a payment. She did, however, get ripped off by Carmax on an '06 Kia Rio LX. It had 30k miles on it when she bought it in summer of '08 for ~$12k @ 15%/60mo. Yeah, terrrrible. We weren't together yet or I wouldn't have let it happen.

Long story short, she's got 3 years left to pay on it, it's currently worth ~$3,500-$5,500 depending on wholesale/private party/etc, and she still owes nearly ten grand on it.

Now we talked to a Kia dealer locally, and they're willing to take a $3k down payment to take her car and put her in an '10 Forte Koup (that's the way they spell it), and given her massively improved credit, her payments will actually be less. The only downside is the two additional years until it's fully paid off. I'm leaning towards doing this as the month to month expenses will decrease, and she'll start with a fresh warranty and 0 miles, instead of a Rio that scores terribly on crash safety, disappoints on fuel economy, and has almost 70k miles on it now.

Back to you, OP, try to pay good on the thing over at least the next two years, pay it off in full if possible, then see what a bank/credit union might be able to do (if your employment is steady and your old car is just making you miserable). You might be surprised, even if you've missed some payments here and there, so long as you catch up and pay the entire loan off on time or slightly early, you'll look a lot more solid.

 

[Mr. Pedantic]

If you bought a reliable car that probably won't break down once within the next 20 years, keep it. If you bought something stupid like a Dodge, it's your hot potato. Get rid of it.

 

[StageLeft]

OP should keep car assuming he needs a car but as mentioned you cannot short sale a car. I think it's called repo when you do. And nobody will buy it without the title. And to get the lien holder to release title you need to give them the full amount.

Arkaign you should run the numbers in two columns including gas, insurance, maintenance, estimated repairs, etc. to get a grand cost over the next five years. Without running them myself it sounds like of two terrible scenarios the trade-in one might be a little better, TBH; she's severely underwater in either case but it could be worth it trading it in.

 

[smitbret]

Hypothetically speaking of course, if you made a series of bad choices in your financial and automotive life, what would you do then?

Let's go over the outline of this hypothetical situation:

- in a failed attempt to rebuild your credit, you agree to a 60 month loan at (gasp) 24.9% to buy a used car with relatively low mileage

- you continue to be a negligent nub and fall far far behind on your payments that are supposed to be rebuilding credit

- you finally get stable employment and start catching up, but your credit is still too poor to get approved for anything anywhere that you'd want

- you still owe over $7000 on your vehicle, but it's only worth maybe $4000

Do you:

- keep the vehicle indefinitely, driving it until it is garbage, in an attempt to balance out the total amount spent?

- Sell the vehicle as soon as you possibly can, even if you end up with no money left over and no car?

- Wait till your credit is fixed enough to get approved for a better car at a better rate giving you a lower payment?

- other? please specify.

Edit: Poll is there now, please vote

As a Sales Manager at a Honda dealership........

The cheapest way out of this is to have someone else with great credit and a huge sense of charity (mom/dad/grandpa, etc.) buy the car from you for what you owe and then sell it back to you on a payment plan at a greatly reduced interest rate.

If that can't be done. Just drive the thing and make your payments. Since you bought a Kia or Hyundai, you'll still have a full coverage warranty until the car is 5 years old or hits 60,000 miles. When that runs out, talk to your insurance company and see if you can add an MBI (basically a warranty), it'll add 7 or 8 bucks a month to your insurance premium. Then drive it till it's paid off + a year or so. During that last year, save the money you would normally allocate as a monthly payment and be prepared with a large ($4000 or $5000) down payment. If your credit is as shot as you say it is, you'll need it to get financed again, plus it will help you get a slightly better rate. In the meantime, get in bed with a local credit union or community bank (avoid a national bank). Make frequent deposits and withdrawals at the same branch for a year or two. Make sure you are always smiling and friendly and get to know everyone there by name. One of these people will review your next loan application. If they like you, trust you and can see that you have a huge down payment, your odds of getting approved are much, much, much greater. Your rate will be much, much lower, too. Good luck.

 

[smitbret]

OP, my gf is in a similar position, but she's never missed a payment. She did, however, get ripped off by Carmax on an '06 Kia Rio LX. It had 30k miles on it when she bought it in summer of '08 for ~$12k @ 15%/60mo. Yeah, terrrrible. We weren't together yet or I wouldn't have let it happen.

Long story short, she's got 3 years left to pay on it, it's currently worth ~$3,500-$5,500 depending on wholesale/private party/etc, and she still owes nearly ten grand on it.

Now we talked to a Kia dealer locally, and they're willing to take a $3k down payment to take her car and put her in an '10 Forte Koup (that's the way they spell it), and given her massively improved credit, her payments will actually be less. The only downside is the two additional years until it's fully paid off. I'm leaning towards doing this as the month to month expenses will decrease, and she'll start with a fresh warranty and 0 miles, instead of a Rio that scores terribly on crash safety, disappoints on fuel economy, and has almost 70k miles on it now.

Be careful, trading in the Kia for an '10 Forte Koup won't just massively improve her credit. What WILL improve her credit is making steady, on-time payments for a long period of time. That being said, if getting a new car with a lower payment increases the likelihood of her being able to accomplish, this then by all means go for it. DO NOT get stuck in a contract that is longer than 72 months to do this..... trust me. In fact, if you can do it on a contract that is less than 72 months you'll be ridiculously better off. Get GAP insurance.

 

[Arkaign]

Be careful, trading in the Kia for an '10 Forte Koup won't just massively improve her credit. What WILL improve her credit is making steady, on-time payments for a long period of time. That being said, if getting a new car with a lower payment increases the likelihood of her being able to accomplish, this then by all means go for it. DO NOT get stuck in a contract that is longer than 72 months to do this..... trust me. In fact, if you can do it on a contract that is less than 72 months you'll be ridiculously better off. Get GAP insurance.

Thank you for your response

We are not considering this to improve her credit, it has already massively improved due to her making her payments on time for two years (usually about 7-10 days early, with a few extra bucks to 20 bucks on each payment). We've gotten approval for financing in the ~4% range, and when compared to paying the 15% on her current car for 3 more years, it seems it might be worth jumping to the new car.

The pluses :

Less $ out of pocket each month (payments are about $25/mo cheaper)
Newer/Safer/Nicer car model (she's not in love with the Rio at all)
New warranty with 100k drivetrain coverage
Current car is closing on 70k miles
Insurance only goes up $6/mo (we haven't shopped other companies yet, might actually get this number to below her current cost)

The minuses :

$3,000 cash down
2 additional years of paying on a car
Still a Kia, though their quality and image are steadily improving
The model that she wants might take some time to arrive (she wants the 2.0 with 5-speed and a particular color combo)

 

[amdhunter]

Trade it in at a loss. Invest in a more fun expensive car.

You only live once. Do you really want to finish your life saying I drove a piece of shit that I hated making payments for?

It's only money.

 

[StageLeft]

Trade it in at a loss. Invest in a more fun expensive car.

You only live once. Do you really want to finish your life saying I drove a piece of shit that I hated making payments for?

It's only money.

The hypothetical individual spoken about in the first post doesn't sound like one who's able to "invest in a more fun expensive car"!