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Anyone know how to get out of a car loan you no longer want?
January 5, 2006 12:13 PM   Subscribe

How can my mom get rid of her car? It doesn't work, numerous attempts to repair it have been unsuccessful (long story), and she still owes money it. Is there some way to get rid of the car altogether without defaulting on her loan and ruining her credit?

The unnecessary expenses are really killing her; she's paying an amount equivalent to her rent, and she could get along fine on the bus. She's tried taking it into a couple of shops and while they fix what is immediately wrong, on her drive home another issue always crops up. Even if she were to get it fully repaired, I doubt she could get even close to enough for it to pay off her car loan.

I have heard of something called the "lemon law" covering chronically broke-ass cars and will look further into that, but I know she would need a bunch of documentation if it would even qualify and she really doesn't have the energy to sue over it or anything.

Is there a way out for my mom? If she didn't care about her credit, defaulted on the loan, and got the car repossessed, would she be released from the commitment? Is there any other way out?
posted by pikachulolita to Travel & Transportation (30 answers total)
 
Is she in Oregon too? See the Lemon Law.
posted by acoutu at 12:21 PM on January 5, 2006


IANAL and I am in New York State, for starters.

The only way your mom would be released from the commitment by having the car repossessed would be if, when the car is sold at auction, it sells for a price high enough to cover what your mom owes. Otherwise, she would still owe the difference. This rarely happens, from what I have seen.
posted by gnomeloaf at 12:23 PM on January 5, 2006


note: "this rarely happens" refers to a car selling at auction for more than what's owed.
posted by gnomeloaf at 12:24 PM on January 5, 2006


Florida has a lemon law, too. I imagine many/most states do. I'm not sure you need anything more than receipts showing that you've repeatedly attempted to fix the car (though it may need to be repeated attempts to fix the same problem). You mom surely has kept the receipts for major expenses like car repair hasn't she?
posted by oddman at 12:30 PM on January 5, 2006


Contact the Better Business Bureau in your area. They'll know if there's a lemon law in your state, and how to invoke it.
posted by theora55 at 12:40 PM on January 5, 2006


The scenario you're describing sounds kind of extreme. Is this a new car, or a used one she paid too much for or what? Can you give us some details, make, model?
posted by TeamBilly at 12:44 PM on January 5, 2006


Is there some reason she can't just sell this thing? I'm having a hard time understanding how this vehicle has a loan payment as high as her rent (and therefor, presumably, a high value) but she can't unload it.

As far as not getting enough in sale to pay off the loan, she may not be able to. If she can't cover the difference she'll have to arrange some line of credit to cover the gap since the bank won't take it's lien off the title without full payment.

Depending on how early in the loan she is her payoff may be notably smaller than her monthly X the number of months left in her loan - any payoff should not have to cover future interest, though some states may allow for loans with prepayment penalties. She should pick up the phone and call whoever holds the loan and ask them "if I were to pay you off this moment, what would the amount have to be?"

If she wants to do this, sooner is better. You're paying more interest earlier in the loan so it's more money down the drain.
posted by phearlez at 12:49 PM on January 5, 2006


Generally, lemon laws only pertain to new cars. Is this a new car? If so, is it still under warranty?

You can always sell the thing to a parts yard. But she will still be on the hook for whatever she owes. There's no real way for her to duck her obligation.
posted by Thorzdad at 1:19 PM on January 5, 2006


The phrase you're after is "upside down", where you owe more than the car is worth. New cars go upside down against their loans as soon as they're driven off the lot; used ones go upside down a bit later, but come up a bit later too.

When you're upside-down on a car, there's no easy way to get not upside-down. This is why no-one invests in late-model cars.

If she were to default on the loan, they'd repossess the car, but since it's upside down, she'd still owe them money. Maybe paying that off is a better deal than paying off the rest of the loan, but the repossession is not going to get her the same money that just selling the car privately would get her. The only way to get out of a loan like that is bankruptcy, and even that's hardly a guarantee anymore, and seven years is probably longer than it would take her to get the loan paid off from today if she was able to refinance.

But the car's value is dropping daily regardless of what she does about the loan, so if she absolutely does not want the car then getting out earlier will get her keeping more money in the long run than getting out later.

(Also wondering the make, model, and year of the car and a rough idea of what's actually breaking on it.)
posted by mendel at 1:43 PM on January 5, 2006


Okay, the car is a Pontiac Firebird, I'm not sure of the year but I think it's 1998-ish. The problem, according to the guy she took it to, is a very common one with that particular model - the radiator is all messed up in some complicated way because Pontiac screwed up and told people to put some special fluid in the radiator, which subsequently destroys the hoses in there, and then blows out your heater core. This is secondhand from her, so I am probably missing a few details. So she took it to some guy to have him just cut the heater core out of the system somehow and patch the hoses. As she was driving home from this mechanic's, it started losing power sporadically and now won't start at all.

So the whole situation is tougher still because my mom has been enormously depressed lately, and when I ask her things like "well, what balance do you have left on the loan?" she bursts out into tears and such. So I'm trying to come up with helpful things to tell her but I have no idea what I'm doing, either.

As for the money, the payments are about $350 a month (they're way high because when she bought it, her credit was still tied to her now-ex-husband's, and he hadn't made a mortgage payment in months, etc) and the insurance is $300 because of all the extra coverage she has to have since it's not paid off. Which, put together, would cover an apartment in Portland with no problem.

Really, if she could even just get out of keeping it insured, that would be wonderful. Would a refinance do that for her? Are there other loans she could take out to pay off her existing, insurance-requiring loan and at least stop paying the insurance company for a car she doesn't use?

Thanks for all the help, everyone. I (and my mom) really appreciate it.
posted by pikachulolita at 2:53 PM on January 5, 2006


How long has she had the car? don't lemon laws require a certan timeframe?
posted by delmoi at 3:20 PM on January 5, 2006


You don't have to have insurance on a car if you don't drive.
posted by delmoi at 3:21 PM on January 5, 2006


Generally, lemon laws only pertain to new cars. Is this a new car? If so, is it still under warranty?

I'm pretty sure they apply to used cars purchased from a dealer.
posted by delmoi at 3:22 PM on January 5, 2006


Well, if she's REALLY never going to drive again, she should be able to turn in the plates and cancel the insurance.

The Blue Book says it comes in around $4800, you or she could try to sell it "as is."

Or she could try to get a personal loan to pay off the balance.
posted by Marky at 3:23 PM on January 5, 2006


Are there other loans she could take out to pay off her existing, insurance-requiring loan?

I was gonna say cancel the insurance, too, but that's why she can't.

Seems like she could, depending on her current credit, get another loan with more favorable payments and terms to pay off the old one. Still "upside-down" (thanks for the new word!) but not as rough. Then worry about dumping it.

You said she pays rent, so I assume that rules out a home-equity loan. That's bad because I highly doubt a bank would lend her more on than the car than the car is worth to pay off a loan. Does she own anything else of substantial value she could "mortgage" at a lower rate so she could own the junk car free and clear and be done with the mandatory insurance?

Also, AskMe is not for insurance fraud... but I mean, if someone just stole it, or pushed it off a bridge, you couldn't stop them, right? </sarcasm>
posted by SuperNova at 3:42 PM on January 5, 2006


On a car that old, most banks aren't going to refinance it at a decent rate, and they aren't going to do it for more than about 60-70% of the book value for the car. So...based on what Marky said...$4800 - she owes more than $4800 on the car?
posted by TeamBilly at 4:05 PM on January 5, 2006


You don't have to have insurance on a car if you don't drive.

This isn't necessarily true. Most states require Liability insurance if there is an active tag on the vehicle. If the vehicle isn't being driven and the tags have been turned in (as Marky mentioned above) or deactivated, then insurance is no longer required.
posted by mewithoutyou at 4:06 PM on January 5, 2006


(unless, as also stated, it's required per the terms of her loan, of course.)
posted by mewithoutyou at 4:07 PM on January 5, 2006


the insurance is $300 because of all the extra coverage she has to have since it's not paid off

$300 per month? For a car that is worth $5000? She's being ripped off. (Pure speculation - the same folks that sold her this lemon, probably at an excessive price, and helped finance it at an excessive APR, also told her she was required to get this insurance through a company they recommended.)

As for getting it refinanced, she probably can get a credit union to give her a reasonable rate (say, 9% APR) if she borrows only (say) 75%, which would mean that she has to come up with a couple thousand dollars to finish paying off the loan. That assumes, of course, that she really wants to keep it. (It also assumes that there isn't a prepayment penalty, which there probably is, in keeping with the "ripoff" mentioned above.)

How long has she owned this car? Because if it has been giving her problems since she bought it, she ought to get someone to go to the seller and insist they take it back before they get sued. And, failing that, consider going to a television station or newspaper that does consumer advocacy. Or a lawyer. Or small claims court. It's fraud to sell a car that is known to have problems.

(Can you get hold of the purchase and insurance papers, to see exactly what she signed, rather than asking her?)
posted by WestCoaster at 4:44 PM on January 5, 2006


I love you guys. I had no idea what I was talking about and you were still all able to be helpful despite my lack of detail/knowledge! Thank you!

I think my plan of action is to first call her lender and find out exactly what their insurance requirements are and what the payoff cost would be right now. Then I am going to march her down to a credit union with her sob story and hope that someone will give her a nicer loan. She is, indeed, getting ripped off, as I ought to have suspected when she told me a story about breaking down into tears at the dealership, coming back the next day, and the salesman magically finding her financing with huge payments on a shitty car.

You have all been invaluable in pointing me in the right direction. I'm going to go home and talk to her and get some phone numbers- if I find out any other helpful details I'll post 'em here.

And again - Thanks!
posted by pikachulolita at 5:09 PM on January 5, 2006


$300 per month? For a car that is worth $5000? She's being ripped off.

Indeed. To give you an idea, assuming she spent as much as $7500, and had a loan term as short as 36 months, the $350 payment mentioned would represent an interest rate of over 35%.

On the other hand, if the loan term is in fact that short (and my understanding is that with vehicles over 5 years old, they often are), even cutting the interest rate drastically isn't going to save more than $75-$150 per month. Nothing to sneeze at when you're struggling, but not as good as getting out.

So this:

Then I am going to march her down to a credit union with her sob story and hope that someone will give her a nicer loan.

Might not get her as much financial mileage as this:

How long has she owned this car? Because if it has been giving her problems since she bought it, she ought to get someone to go to the seller and insist they take it back before they get sued.

Although the later plan will also take its toll in terms of time and money if she follows it.

Also consider talking to a few insurance companies. I don't know what prices are supposed to be like in Portland, but that seems high.
posted by weston at 6:06 PM on January 5, 2006


I don't know much at all about loans. But I do know that in many states, "predatory lending" (payday loans, with high interest rates) are illegal. Seems like there might be laws against high rates on car loans too. Maybe someone here -- or a lawyer with a free consultation, which you might ought to take advantage of anyway "just to see" -- can shed some light on that.
posted by SuperNova at 6:27 PM on January 5, 2006


So, she's basically getting reamed, just like I did several years ago. My payments were $300/mo, and my insurance was just about $350. Why? I was a white male, under 25. I had a perfect driving record, but I didn't get my license until I was 18. The insurance company told me my car (A Chevy Beretta that I absolutely loved) was classified as a "sports car" so my rates would be higher.

My only choice was to trade it in for something cheaper, and I ended up way *further* in debt. But my insurance was $100/mo cheaper. Ended up getting the car reposessed anyway after a layoff.

Now, back to the subject at hand.
* Try to refinance. You might get lucky. WaMu told me that the minimum was $5,000.
* For pete's sake, find another insurance company. Does she have vehicular manslaughter on her record or something? Yikes. Although, I do know that some lenders will require you to carry full coverage on the car. That can be a bummer. Check with someone like 21st Century Insurance - I have insurance through them, and it's the cheapest & best coverage I've ever had.
* What are *you* doing? Are you in any position to help her pay off the car? Pay it off and change the insurance policy.
* Call the lender and see if they'll negotiate on the interest. Might bring things down a bit. Or, see if they'll stretch it out for another year to lower the payments. You'd be surprised, lenders actually do try to work with people... some of the time. It never hurts to ask.
posted by drstein at 6:30 PM on January 5, 2006


There is also the possibility that she's taking it to some crackhead of a mechanic, and there are many. Find a good mechanic, get the car running reasonably well, and sell it for what it's worth. Get a personal loan (higher interest, but no liens or insurance to worry about) to cover the difference.
posted by knave at 8:20 PM on January 5, 2006


If she didn't care about her credit, defaulted on the loan, and got the car repossessed, would she be released from the commitment?

What others have said. Your mom got ripped off royally, and is now over the barrel that, if it isn't clear to you yet, the dealer absolutely intended for her to be reamed on.

When I worked for a third party contractor inside what seemed, outwardly, to be one of the nicest, most straightforward dealers in all of Chicagoland, I found out that "putting someone in a car" was the #1 priority, even if they had bad credit, even if they knew they would not be able to afford it. They fully expected to "get a car back" in some circumstances. Either they'd make money with the outrageous financing, or they'd make money selling the car twice. The House Always Wins.

How to get out? First, returning to your question. Your mom has already taken a bath, and let me make this perfectly clear, may have to accept a greater loss, but absolutely must get rid of this car now. I guarantee you that losing money on the car is less expensive than having a repossession on her credit record -- which by law can remain there for seven years.

So sell the car. Take a ding for the radiator problem -- it's less expensive than paying for it to be fixed yourself and still having to sell the car for less than it's really worth. The sooner you get your mom out of this situation the better.

Now that this is decided, you have more options. You can, in fact, get a new car loan -- at a credit union or other reputable institution, presuming adequate credit -- that will be just a tiny bit higher to accomodate the remaining payoff on the Pontiac loan. It won't be necessary for your mom to switch to the bus.
posted by dhartung at 12:08 AM on January 6, 2006


If she needs monthly on the insurance, AAA will give a good price and provide autoclub services as well.

Meanwhile on the radiator thing, and bluntly: Find another mechanic.

It sounds like the coolant has been mixed from the old to the new. You're needing somewhere between a coolant flush and parts replacement ($80 to $1,000, inclusive). A heater core can be, in a pinch, bypassed for a short period of time. Some churches even have Saturdays where they fix up people's cars who don't have the wherewithall to do it themselves.

A Firebird's a pretty cheap car to operate overall, because there's parts for them everywhere and most people know how to work on them. No sense panicing, just break this down into digestable chunks.

From the tears thing, however, it sounds like we've got some issues with depression. Mom needs to seek out some qualified counseling - check with public health if money's an issue. With her head screwed on straight she'll find tihs all much easier to deal with and reconcile. Waiting for her to "snap out of it" may be impossible, or at least take a long time.
posted by Elvis at 9:48 AM on January 6, 2006


The phrase you're after is "upside down", where you owe more than the car is worth. New cars go upside down against their loans as soon as they're driven off the lot; used ones go upside down a bit later, but come up a bit later too.

When you're upside-down on a car, there's no easy way to get not upside-down. This is why no-one invests in late-model cars.


Just to be persnickety - no loan HAS to go upside-down, this is only a result of excessive financing. Additionally, nobody invests in cars, period. Cars are not investments, they are expenditures - 99.9999% of the car purchases in the history of time have been money losers.

Okay, the car is a Pontiac Firebird, I'm not sure of the year but I think it's 1998-ish. ... the radiator is all messed up in some complicated way

Looking on RockAuto.com, the most expensive Pontiac Firebird radiator is under $200 and a straight replacement is usually a pretty simple job. Heater cores can be easy or nightmarish, based on position. I'd assume a Firebird would be closer to nightmarish based on where it would have to be under the dash. As Elvis says, it can likely just be bypassed though I see no reason why it couldn't be permanent (if it's not too cold to live without)

I am, however, concerned about the statement that it lost power and now will not start. I don't see how a simple cooling issue is going to cause that.

I'd say first and foremost you should park the thing and contact a few insurance agents with the question "what's the dead cheapest option I have while still complying with my legal requirements to the state and my car loan.

And as I type it, I wonder - is it possible this insurance is through the bank because she didn't provide them with another proof of insurance? That's a rate I'd expect from bank-purchased insurance on a car with a loan.
posted by phearlez at 12:08 PM on January 6, 2006


my mother finally got rid of her firebird because there was always radiator problems, as well as others. I'm not sure if it's because firebirds are prone to those problems, or if it was a lemon or what. Anyhoo, she was able to trade it in at a new dealership and get a mustang, which leads me to my next point. My mother has ATROCIOUS credit. She had a hard time finding a place to finance her without several thousand dollars down, and the only place that would is charging her roughly $450 a month for a now 4 year old mustang.

As for the church recommendation, I asked my mother about it and she confirmed that she's done the church thing here. They looked at the car to see what was wrong with it, gave her a voucher to go pick up part for them and they installed it. She had to listen to a little sermon while they tried to get her to come to their church, but that was it. No cost at all.
posted by damnjezebel at 7:54 PM on January 6, 2006


Additionally, nobody invests in cars, period.

No, no-one invests in late-model cars, just like I wrote. Lots of people invest in classics. I didn't type "late-model" accidentally.
posted by mendel at 9:22 PM on January 6, 2006


Coming in on the (seriously late) tail end of this to mention that your car insurance payments have nothing to do with the amount of your car loan or the interest rate. Your insurance premiums are made up of a number of factors including your driving record, age, credit rating, and how you use your vehicle.

The premiums for your Comprehensive and Collision coverages (which are generally the coverages required when your vehicle is financed) can be slightly elevated according to the type of vehicle that you're driving (some vehicles have a higher physical damage symbol than others, which means that it might cost more to repair or replace the vehicle) however.
posted by mewithoutyou at 11:45 AM on January 9, 2006


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