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How to sell an upside down car?
November 15, 2006 5:34 PM   Subscribe

I owe more than my car is worth. My monthly auto-expenses are too great. I would be better off with a truck. Advice?

Car: 2006 Toyota Corolla S, 24000 miles, 5 year, 100,000 warranty, Kelley Blue Book says its worth $15000 making me $6000 upside down (See Loan).

Loan: $21000 left to go, $390 per month

Insurance: $350 per month, Progressive, must carry full coverage and $500 deductible. So far Progressive is cheapest. Expect insurance to go up in December (see Record)

Record: 1 speeding ticket, 1 small accident, 1 new speeding ticket will hit in December

Discounts: Will turn 23 in July. Was told this would lower my insurance rate.

Desire: 1 pickup truck in decent shape with decent appearance, to be used for handyman/construction work.

Budget: Paying $800 per month for loan payment and insurance. Would like to be less than $500.

Summary: My car is too expensive, I'm upside down on my loan, I don't need this car, I need a truck. I can't afford the monthly expense for this car. I need something cheaper. I can't sell this car because it is upside down and I need to pay off the loan before I can transfer the title (I assume). I've got one month before this car gets more expensive.

Anyone have a suggestion?
posted by farmersckn to Work & Money (23 answers total)
 
Does your state allow you to go to traffic school instead of getting a point on your record for the speeding ticket? I've gone that route countless times in California and it's saved me a ton on insurance over the years.
posted by buggzzee23 at 5:43 PM on November 15, 2006


I am sure you are aware that if your loan is secured, you will need to have $21000 to give your bank to have your title released, which may involve rolling that amount into a new loan.

I say this because your blue book is probably retail, or private party. Trade in is probably less than $15000 (though I did not check).

You are in a bit of a situation where you need to work with a car dealership. If you could front the $5000 difference on an unsecured loan, or some other way, you are going to get the most $$$ for your car from a private party sale.

You are also going to get the best value on a private party purchase of a vehicle.

From there, you need to think about what you are willing to deal with risk wise. I dont think your insurance will go down wildly with a truck/used car. Check with your insurance co, but the same coverage may be roughly the same cost, or maybe $50-75 cheaper. If you want it to be REALLY cheap you need liability only (which means if you cause the accident, your stuck paying on a truck that might be totalled).

Can you afford to do that? I would say no from the sounds of it, so you will probably still need decent insurance coverage.

From there, I would ask if a truck is going to *make* you any money? Is it really worth it? Why not go with a quality used Toyota/Honda Civic? You could spend $4-6k on a great used car with many miles left. A quality used truck seems to be more in the $6-10k range (for a fullsize).
posted by SirStan at 5:45 PM on November 15, 2006


Believe me, I feel your pain... but - you're better off to stick it out and pay the thing off or at least keep paying it down till you owe less than you can trade it for.

Maybe you could by a REALLY cheap junker truck for now, out of Auto Trader magazine or one of those types of publications?

Or... maybe you can hold out till you find a deal where an auto/truck dealership is holding one of those "We'll pay off your trade no matter how much you owe" specials?

And... if you're set on buying (and presumeably financing) a truck - maybe you can hold off until someone is having a 0% interest sale?

Also - I don't know where you live or what more is in your driving record - but $350 a month for insurance sounds unbelievably expensive, even for someone your age. I pay $120 a month for two cars, and one of those is a convertible sport car. I use State Farm. Shop around - and call an agent, don't just use the websites to get quotes!!

And one more thing... I thought the age when insurance rates went down was 25, not 23 - but check with your insurance company to be sure.
posted by matty at 5:47 PM on November 15, 2006


Does it seem realistic that the car lost roughly $10,000 in value in one year?
posted by smackfu at 5:47 PM on November 15, 2006


Also.. I have Geico, and my rates have not gone up. I have one old speeding ticket pre-geico (~75 in a 50), one while having geico (2 yrs ago, 85 in a 65), and a $5k accident in a Uhaul truck. My rate has not moved at all, though it went up slightly when I purchased a new car, but it still seemed completely reasonable ($125/m for full coverage on a 2002 Maxima, full coverage on a 1992 camry (liability would save me $25/yr) <2 5 year old male). br>
Your rates *might* not go up.
posted by SirStan at 5:48 PM on November 15, 2006


KBB says.. (I may have missed some features, but I put all the features I thought the car had)

... Retail (car dealership) $14,300
... Private Party (private sale) $13,000-$11,000
... Trade in (what a dealers gunna give you) $12,000-$9800

From what I have seen, options on cars demand a small fraction of their original price. Same with extended warranties.
posted by SirStan at 5:52 PM on November 15, 2006


I missed the extended warranty/service contract. Check the contract itself and your state laws to see if it is cancellable. If it can be cancelled, find out how cancellation refunds are calculated (some states may still allow the use of the Rule of 78s to determine your refund) and how much you stand to gain by cancelling.

When a service contract is cancelled and a loan is in force, the dealer pays the refund to the bank and the bank has the option of either lowering your monthly payment or shortening the term of the loan. Unfortunately, most banks shorten the term rather than lower the payments, but it still lowers your payoff,
posted by buggzzee23 at 6:12 PM on November 15, 2006


buggzzee23: Thanks for the tip. I actually made a dumb mistake (procrastinated) and missed the deadline by one day.

Smackfu: I rolled a $4000 upside down POS car into this loan when I bought the Toyota. I really needed a vehicle (was driving 4000+ miles per month) and made the mistake of buying new, but it was an easy fix.


SirStan: I think I understand what you are saying... I either need to go to a dealership and work out some sort of trade-in deal where I roll the balance after the trade-in, into a new loan... or I need to come up with the difference by getting a small loan of 5 to 6000? That was kind of what I was thinking I was gonna have to do. My parents think I am crazy but I don't think its out of the question.

Matty: I'm going to take your advice, and start calling around. Maybe Geico can help out, if my experience is anything like SirStan's experience with them.

So, hypothetically, if I could sell my car for $15000, that would leave me with $6000 debt. I could take out an unsecured loan for that, say, from Prosper.com? Then buy myself a cheap truck for $6000? Then my total monthly loan payment would be closer to what? $200? My insurance might go down anywhere from $50 to $100? Putting me at $250 a month optimistically? And a grand total of around $600 a month?

That is where I am leaning right now.
posted by farmersckn at 6:19 PM on November 15, 2006


I would do the following:
- See if you can get a partial refund on the extended warranty (even if not full). They aren't worth much on resale. They may clentch a deal through.
- Goto a toyota dealer, and a couple other dealers, and see what the car is worth trade in (don't mention how much you owe). See what they have available for vehicles. See what this option nets you as a 'worst case'.
- See what options you have with your bank/Prosper.com for a $7000 unsecured loan (Getting $15000 might be a bit optimistic, especially if you need a quick sale).
posted by SirStan at 6:29 PM on November 15, 2006


Discounts: Will turn 23 in July. Was told this would lower my insurance rate.

Are you sure about that? The magic rate-lowering age is 25 according to the insurance policies that my friends have (lots of different insurance companies).
posted by gatorae at 6:29 PM on November 15, 2006


SirStan: Thanks for more good advice. I'll hit the dealerships tomorrow and see about a potential loan to carry the balance. Again, I appreciate the tips.

Gatorae:I just got off the phone with Geico. I asked about the "magic number" and they said its kind of a myth. Who knows... enough ppl seem to think there's a magic number that it just might be.

They gave me a quote that was $9 less than what I'm paying with progressive, they factored in the ticket that hasn't posted to Progressive yet. They also were quoting me with a lot less for coverages (250/500 progressive, 15/30 geico, lol). I don't need the high coverages though, but I have them since they barely affect the price of my insurance.

One option I might have is to trade my dad for his 1997 Toyota T100. Its all paid off. The insurance change to go from full coverage/500 deductibles on my Corolla to no loan payoff, 1000 deductibles for the T100 is a difference of $600, from $1990 to $1290. It might be worth it.
posted by farmersckn at 7:14 PM on November 15, 2006


State Farm won't touch you with that many tickets on your record. Where the heck do you live? I wasn't paying that much on a Civic when I was 23...

It would be a good idea to talk to your parents. Your dad might also have a better solution, like him picking up the underwater part of the loan and you paying him off as well (my parents did this at one point with something else).
posted by SpecialK at 7:22 PM on November 15, 2006


Does it seem realistic that the car lost roughly $10,000 in value in one year?

Not really. Either he paid way to much for it, or he rolled some other debt into this loan. My sister just bought the same car (2007 Corolla S) new for $17k.
posted by knave at 7:23 PM on November 15, 2006


Sounds like you are in a really hard position. I've got advice that you probably don't want to hear:

Is there anyway that you can work with out a vehicle? If you can, see if can re-finance, payout the car loan and pour the money that you can save in insurance into the loan and get square as soon as possible. Pay at least as much as you think that you can afford as often as possible. The goal is to get yourself back to zero as soon as possible.

If you go down this path, as I did, life is going to suck for quite sometime, but it will get you out of this cycle. If you have other consumer credit, pay it out at the same time.

Once you are back on your feet with a positive balance, buy the cheapest vehicle that you can get away with. Pay cash, if possible, and never forget how hard you worked to get square.
posted by dantodd at 7:24 PM on November 15, 2006


Expect insurance to go up in December (see Record)

I have Progressive. They don't check your record very often, in my experience. I got a few tickets and my rates didn't go up until like 2 years later. Also, 25 is the magic age for insurance, not 23.
posted by knave at 7:24 PM on November 15, 2006


I don't mean to be a jerk here, but let's look at the situation.

1. You had some crappy car that you were upside down on, so you rolled the upside down-ness of that car into this one.
2. Because of 1, you are now even more upside down.
3. You want to buy a different car, rolling the upside down-ness of this car into the loan for that.

At some point you're going to have to suck it up for a while and get right side up, so to speak. If you just keep rolling over and buying new cars, you're going to end up in this situation all the time.

I'm not sure exactly what I would do, but if I was to buy another car, I would buy something used that's cheap to buy and cheap to own. Either way, I would pay off my current debt before taking out any more loans.

Debt cannot be erased with more debt!
posted by !Jim at 8:34 PM on November 15, 2006


If I had to pay $800 a month total to have a car, I wouldn't have a car. I can afford it, it's just an absurd amount to be paying. Do you have anything like FlexCar where you live, where you can rent a car by the hour? That's what I'd be doing.
posted by kindall at 11:02 PM on November 15, 2006


When you say you can trade with your dad, what does that mean? Just let your dad take over the loan on your car? If he's willing to do it, I would take him up on the offer. That sounds *way* better than "take out a loan, and be out 5 grand AND have no car."

And for those of you saying how crazy his insurance is? At age 23, with a perfect driving record with no tickets or accidents on it, I was paying $250+ (Canadian) a month on a 2002 Neon (new, at the time) in Toronto. And that was the cheapest rate I could find, with 500 deductibles (I couldn't afford any higher deductibles). Hell, even now, I'm paying like $170 a month, on the same car, at age 28, in Mississauga, which is WAY cheaper than in Toronto. WITH an alumni discount! Insurance prices be crazy these days, I tell ya!
posted by antifuse at 2:23 AM on November 16, 2006


Were you reimbursed for the 4000 miles/month you were driving for work? If not, you might want to look into claiming those miles as a business expense this year, or filing an amended return for the year in which you drove that much.

At the IRS reimbursement rate:

4000 miles x .445 cents/mile = $1780 in deductible expenses
posted by electroboy at 6:55 AM on November 16, 2006


*Danger: Possible Illegal Suggestion* -- I was in your position once - paid way too much for a car, took the extended warranty, ended up upside-down, the whole bit. Granted, it was a used car, and my monthly installments were nowhere near yours, but I was in school, and had a hard time dealing with the payments and high insurance for an early 20s driver. So, against common sense, I dropped my insurance down to just liability, the state minimum requirement, from one of those fly-by-night places (Titan). They didn't ask about lienholders (as Progressive, Geico, or any other reputable agency might). I was taking a big, stupid chance, in that, if I were to get in an accident, my insurance would only have covered the other guy, so I'd be paying on a wrecked vehicle. But it was much, much cheaper, to the cops I was legal, the financier never noticed that I'd switched my insurance from full coverage to min liability, and I became a much better driver because of it.

As everyone else has suggested, your other options are pretty slim.
posted by M.C. Lo-Carb! at 7:49 AM on November 16, 2006


I just recently turned 25 and my insurance (by Progressive) went from $135/mo. to $67/mo. So the 'magic number' is real, for me at least.
posted by owenkun at 7:56 AM on November 16, 2006


$67 a month! Oh jesus, do I need to get the hell out of Massachusetts.

To the original poster... You were already upside down once and carrying that on your current loan, don't do it again. Seriously. I know it's difficult financially, but if you keep dragging these upside down balances on and on to other car payments, you're not going to improve the situation for yourself down the road. Any way to get a P/T job, even on the weekends?
posted by jerseygirl at 8:27 AM on November 16, 2006


The "magic number" of 25 is partly a myth. I turned 25 and my insurance didn't go down at all. When I asked why, I was told that it was because I didn't get my license until I was 18 and as a result didn't have those extra 2 years of "driving experience." They also calculate the years that you had continual insurance coverage.

So, those years of being eco-friendly and taking public transit to work ended up screwing me. I didn't see a decent drop in insurance rates until I was 29. This is also with a completely clean driving record.
posted by drstein at 9:39 AM on November 16, 2006


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