Ok that was what I was thinking. So where does the deal die in that scenario? In a traditional auto loan the loan to value is obvious, the more money the banks lend you over the value of the car, the more risk they potentially assume because of the unsecured amount.
With a lease the loan to value seems to me to be only secured by the duration. So is it just less willing to assume risk from the banks?
I get that paying 400 more a month for the same item sucks, but thats where I got the notion I could lease a car, bury my inequity in it, and clean the slate faster, while reducing my current monthly payments since they are so high
Correct…you’d have to find a captive willing to take the risk on 13k in negative equity. Some of that would be eaten up by incentives, so the loss wouldn’t be as “high” to the bank, provided you find a car with high incentives/rebates. With that said, if you were in the captive’s shoes, you’d have to think about the possibility you could go belly up sometime in the next 3 years (not saying you will/would).
OTOH, by you refinancing your current car, driving it another 4 years, you could theoretically NOT have 13k in negative equity, therefore you wouldn’t have to bury anything. Granted, I have no clue what your current scenario is on your current note.
What do you guys think about maybe an S 90 t6 lease. If he can get Aplan through Sams Club He would have 9750 of incentives. This would still make it negative. I get that low payments aren’t his biggest objective with him paying 1,000 per month. He might be 900 per month and get it paid off in 3 years. Again, assuming that the bank is willing to roll over all the negative equity.
True, I just thought it would be better to take the loss now, and reducing my personal outstanding debt to free up room in our debt to income ratio for a future home purchase. I also realize I should have been leasing from the beginning due to my habit of swapping cars every couple of years anyway.
I have heard multiple people say leasing is the wizard to clean the negative equity slate quickly, I thought it was time to look into it more.
myabe @RVguy can make a suggestion, he knows a lot about the financing side of leasing/purchasing cars
Please, figure a way to refinance and don’t roll the negative equity again. It could become a vicious cycle.
Check with local banks and credit unions for home equity rates, especially if you have a decent amount of equity in the home. If not, there’s still some credit unions that will offer much better than 9% on LTV greater than 80%.
Exactly, you don’t buy another new car to get out of your current situation. Just deal with it for a year and you will be fine. Raptor has crazy resale value, try to sell it privately. THat’s probably antoehr $5K right there.
It doesn’t sound like you will qualify for T1 anyway, so no point in doing another loan. I would check with a credit union to refi
I doubt leasing would have helped your situation. You kept wanting out of a contract early and rolling negative equity into new deals. Unless you actually fulfill the contractual lease terms, you’d be in the same situation.
Anyway you put it you’re underwater. Rolling into a new lease or loan just kicks the can down the road and you pay more interest. I like the idea of refi or refi into a home equity… Or just buy a Crown Vic.
Wow, this is quite a thread and it is only 6 hours in!
I agree with several other people that have already chimed in that this is not the time to get a new car and keep rolling your snowball of negative equity further.
The Credit Unions I work with that do auto lending below 700 FICO range have a much lower LTV cap. 100% or maybe 110% is possible but more than likely they won’t touch you in your current situation on a lease or another new car loan.
The captives are a bit more lenient on LTVs and letting exceptions through as long as you have a decent payment history. Since you’re currently with Ford Credit, they might be your only hope.
The real good advice is to try and refi this debt somehow at a lower rate.
Equity line of credit and own the cars outright.
Sorry man - 13k negative in an $80k truck with limited cash flow and you are trying to flip it into a BMW?
Just re-fi to get a lower interest rate and move on.
That’s a ton of financial mistakes for someone who was in charge of an investment firm.
Based on the reading, I would focus on obtaining a better rate on the loans you have. If your financial situation is more stable and your business have a track record, you should be able to get a better rate at your local credit union or maybe try PenFed. PenFed has great rates on used car financing (or at least they used to).
Forget flipping into a new lease. Fix your rate and your situation will start to clear up.
@HobbesMo Agreed, and also I would never, as some suggest, pledge the roof over my head as security against car or consumer debt. You’re in a big mess, and if there seems to be an easy way out of it, as a HELOC would appear to be, there is likely danger lurking nearby. The only right way out of this is to take your medicine over a period of time, and then never do that again.
If him losing his job is an actual problem then he’s better off just turning the car in and declaring bankruptcy. Otherwise I don’t agree that he has to “take his medicine” and waste thousands of dollars in interest payments when there are better options available. HELoCs are simply one form of secured loan he could take, but doing so is recommended by credit counselors quite often to people trying to free themselves from high interest rate debt.
Without knowing his full financial situation (and none of us do), that’s a leap to suggest that.
Have you heard of TURO ? Ever considered it ? Some people can pay real good for a day or 2 of a car that they want to try out. Maybe my idea doesnt sound right but hey, if you price it right, you could easily extract your monthly payment. Im not sure about your finances but you can always get a beater sedan for under $3k while you TURO your truck. OR maybe just use ur wifes explorer while your truck is out on rent.
I’m aware, it was in response to the previous reply of “if there seems to be an easy way out of it, as a HELOC would appear to be, there is likely danger lurking nearby”. I’m not sure what kind of danger would prevent a person from paying down the line of credit other than unemployment.
There is some awesome advice on this thread from our experts…I get asked similar questions all the time and the guidance here is really useful. Except the declaring bankruptcy part - that seems less than helpful for this particular situation.