Rolling Negative Equity into a Lease

Hi all,

I think this is a two part question.

  1. Could finding a lease deal where there is a steep discount of MSRP help to offset negative equity on a currently financed (to own) vehicle?

  2. Can you account for a trade-in with negative equity on the leasing calculators? If so, how?

As for my specific situation: I would love to lower my payment by up to $100 per month, but without adding term to the loan which would be almost unavoidable if I traded it in on a purchase. My thought it is that trading it in to a lease would lessen the term; but could it also lower my payment?

Thank you for any insight!

You can roll it in, but sounds like you need a cheaper car that is way less than your current car.

Have you tried Carmax to see what its worth compared to your payoff?

Agreed, this would most likely not result in an upgrade; I would be driving something less fun. That will determine if it is worth it vs sticking it out.

Not Carmax specifically, but they have gotten good reviews from folks on here so that is on my list. I estimate that I am 8-10k in the negative. Certainly not helped by Dieselgate :sleepy:

What is the vehicle, miles, year, buyout?

It’s completely possible to roll negative equity into a lease (there may be some limit as to how much however), but if you are really 8-10k negative…well, ouch.

I’ve actually rolled negative equity of leased vehicles into a new lease, and in my last case (traded in Spark EV for another Spark EV lease), it actually lowered the monthly payment without any extra money OOP!

You would need to get a REALLY good lease deal and also a REALLY good trade-in price to accomplish what you are thinking, however.

Just to do some quick math, even if you traded in your current vehicle and were only $8k underwater, that is $222/month on a 36 month lease JUST for the negative equity payments. So to actually lease a car and lower the monthly and make it worth the time, you’d probably have to find a new lease that is less than $200/month, $0 down. You’re looking at a Corolla/Cruze-type car in this case…or possibly a Volt if you live in CA or a state that has the bonus leash cash available.

2015 VW GTI
27000 miles
$27k loan payoff

Id say see what a dealer/private sell can net you. Not like your underwater in an undesired car like a base Jeep Compass.

Oh, as for accounting for the negative equity in the calculator, just input the incentives, then subtract the negative equity and input the resulting negative number!

Take a look at different trade-in value calculators to try and narrow down a small range of how much your vehicle is worth. When you find what seems to be an accurate number, for dealer trade-in, that is the number you need to stick with. I traded in my 10 year old Touareg for $7k by sticking to my number. Any time a dealer would offer me less, I’d tell them I’m in no rush and can sell it myself for $9k.

KBB has a value tracker that will keep track of it and email you every week with what your vehicle is currently worth. That could help you to decide to wait it out if it’s not depreciating very quickly.

It might be possible to get a similarly priced car for less if there are a ton of incentives on it.

If you still like the car but want to lower the payment why not just refinance?
at some point in the car’s life it’s value does stay above what’s left on the loan.
In your case it would be longer than normal.
But now there are banks and credit unions that offer refi loans on used car for as long as 72 months.
I’ve see rate 3.61% for a 72 months refi. That 27k would have $420 monthly payment then.

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Yeah, what’s the interest rate on your loan, OP?

Actually refinancing has been the original plan. I plan on having my local credit union do so for me in the next couple of weeks-- they apparently are having a “special” in September.
If/when I do so, I will want it to not add to the term, and so the savings should come out to 50-70 bucks a month.

4.99 if I’m not mistaken!

Not an ad but also check also PenFed. They seems to have very lax approach to car values comparing to KBB and others. And on top of that they can refi upto 110% of their value of the car.
I just did it for one of my cars for exact same reason - to lower the payment. It was a super easy process done online in about 30 min or so. Just need to do some paperwork and I should be all set.
They didn’t charge any fees, btw.

Awesome, I will definitely check them out. Thank you!

That sounds like your best plan then. Who knows, maybe in a few months your GTI will be involved in another VW scandal, and VW will have to buy it back. :joy:

LOL I still maintain the whole thing is overblown, but I am biased. I am very happy with car, it’s a blast to drive.

I got in on the TSX lease deal ($250, $500 drive-off), and the GTI is still the more fun car to drive in any situation outside of bumper to bumper traffic!

The motivation is to reduce the rate by refinancing, and thus the payment. OR, get out of the negative equity through a 2-3 year lease. However, I don’t think I would do so with just any leased vehicle. I want some fun out of my drive :smile:

Thank you all for the responses! Great info here for anyone upside down on a car loan.

If you are in CA or another “CARB” state and want something fun to drive, a '17 Volt lease might be something to look into. If you went with the base LT trim with a couple options, you could probably swing a $0 down lease deal a little over $200 a month. Combined with the negative equity, you’d be looking at around a $450/month payment.

But seems like the best thing to do from a pure $$$ perspective is to refi.