I currently drive a 2021 Ram 1500 Laramie with approx 41k miles on it. I am looking to possibly trade in/ sell depending on what options make the most sense. I have rolled negative equity into a few vehicles ultimately landing me in my current spot. I received a trade in offer for around 35k which would put me about 16k in negative equity to pay off.
I have a 8.9% Apr and am comfortable with my payments. I just would like a new vehicle. I’ve primarily driven sporty vehicles or luxury and just don’t care for the pickup. I’m open to leasing or financing, mainly looking for suggestions on which route is best to go.
I can pay up to 10k to offset the equity a bit. Should I pay that towards the loan prior to going for trade in? How much should I put towards the equity? Would a lease option be wise to get all of the equity cleared in 3 years?
I’m not sure there are any brands that will roll in 16k of Neg Equity these days.
Well at least you know WHY you are in this hole, but getting out? That’s going to be tough. I would stay with the truck and buy a nice 200X sporty car for fun.
Trade offers are not very meaningful since they might be moving money around from the sales price of the new car. Get some purchase only offers to see your real negative equity first.
What’s your end goal? Do you want to finance or lease another vehicle? Are you open to leasing an EV? The 2023 Mercedes EQS has a bunch of incentives. It might help offset some of that negative equity.
That’s quite a bit of NE. I am not here to judge, so take my advice with a grain of salt.
I would have suggested you look into refinancing, but rates are still high on used car loans.
If I were in your shoes, I would use some of that cash to pay down the principal while you are trying to figure out options.
Is this the original loan from 2021 at 8.9%, or did you refinance. If so, that’s ballpark Tier 3 credit.
You need to find something with a lot of incentives that can carry the advance (likely over MSRP), possibly at a higher rate than you are currently paying.
Thanks for the insight! I’m open to financing or leasing. I’m open to keeping the truck longer if needed as well. I’m here for advice I am in no rush to get out just wanted some guidance around how I should attack this.
If you are comfortable with your payments and have a chunk of money you could use towards negative equity, you might be better off just using that money to pay off your loan balance faster.
It’s already been said, but throwing down another vote for pay it down, put in the $10k and then aggressively attack the loan with extra principle. If you can refi to a loaner rate, do that first. I wouldn’t even look at anything new until you get the car down to neutral or positive equity even. A new car comes with higher costs potentially (more insurance, taxes again), unless the goal was to get a cheaper more fuel efficient car to cut costs (I’m not getting that sense unless I missed it here).
Bottom line, don’t exacerbate the problem, get at the root cause first.
As others have stated, refi if you can lower your APR. Keep paying down the principal until you’re at 0 or positive equity. Choose your next car carefully to avoid starting this cycle again.
