Negative Equity in cars? Answer if you've had a simular situation?

Question

I have a 2004 Ford Explorer with 74,000. miles. I still owe $13,000 on this vehicle. The warranty just ran out on it and I have been debating on whether or not it'd be in my best intrest to trade it and deal with the negative equity to have something with a warranty agian..or stick it out and pay this one off (it's in the shop as of Saturday with transmission trouble) Has anyone been through this kind of thing? and could tell me what you did and how it affected you? I can't really afford a $500 a month car loan, which most new cars are.

Answer 1

Most cars are not $500 per month. If you trade it in now, you will continue to have high payments and continue the negative equity situation. If the Explorer is still servicable, keep driving it.

Answer 2

You're putting 18,000-25,000 miles a year on your vehicle, which is a lot of driving, even at the lower figure; the average amount is 12,000. If you're driving that much you need to accelerate your service schedule, changing oil every 2500 miles (probably every 6 weeks), servicing the transmission twice a year, and you likely need to flush the cooling system every 6 months.

An Explorer is probably not a good choice for driving so much, from a fuel economy point of view.

Nevertheless, you're "upside down" on your debt, and regardless what you do, that debt will follow you. It's best, and in the long run cheapest, to fix the car you have and pay it off. You're going to pay for that transmission whatever you do, it's best to get it over with and learn something from this- like maintaining your vehicle properly and driving less aggressively.

Take another look at the amount you drive- is it really necessary to drive so much? Can you carpool, combine errands, do more mail order and/or online shopping to reduce driving? Do you shop around by phone before you drive? Have you thought about getting a motor scooter or smaller second car for commuting? Can you reduce driving by walking or bicycling?

Answer 3

A lot of people these days are in that upside down loan on their cars. That means that they owe more than the car is worth. It isn't a good position to be in. If anything happens to the vehicle like a total wreck you still owe the balance of the payments and have nothing to show for it. Usually you are better off keeping your current vehicle at least until it is paid for. The cost of upkeep and repairs will almost always be less than the cost of a new vehicle. Of course you have to balance the difference it the old one is really a junker. Good luck.

Answer 4

ya my car is under 300 a month payment. i paid double for the first year..so i paid 600 a month. it is worth 13 thousand now, and I only owe about 5000 on it. if you cant afford something comfortably, then get something cheaper. Your best bet would be to shop around for a cheaper car. Find out the trade in value on your ford. then subtract from what you owe. that is what will be added on to the price of your new vehicle. and from their figure out the payment. or you can just keep putting money into your car and pay it down more. Most expensive cars are 500. you may just have to suck it up, and admit you cant afford pricey cars and purchase a less expensive one. and find one with a longer warranty.

Answer 5

Can you lease a car? leasing is good if you can stick within the given miles or afford to buy more miles at the end of the lease and if your pretty easy on cars and take good care of them. Then you will always have a warranty and get a new car every couple of years and will never have neg. equity. I have an 06 Fusion that I regretably purchased instead of leased and I pay 506.89/month and owe $22,000 and have had it for almost 2 years now (org. financed $28,500+) Yes i'm in the same boat as you. Check into leasing. Or selling it outright.

Answer 6

OK, you have to look at it this way. If you can not afford a new car, then you need to fix this one. If the transmission will not cost you the price of a new car, then have it repaired, maintain it as you will have to do even with a new car and keep paying it off.

Answer 7

i was that way once on loan,and decided to get out and take a loss,most new cars wont cost you 500 a month,but on the one you have the only way out is to sell it you can actually get most of your money back on it right now,but if you trade it owing what you owe you,ll be even worse off,id try selling it,then buying a lower cost vehicle,i got in that shape once and didn't even realize i was in that deep,but i sold it and got out of it,the next one i bought i paid for in cash,that being in debt isn't good especially on a vehicle,think about it for a while,but done trade it right now,you,ll only get worse off,unless the dealer agrees to pay yours off,and you start out clean with another vehicle,good luck with it.

Answer 8

That's what you get when you buy "too much car" for what you can afford, finance too much, pay too little, and choose a model that depreciates quickly.
You probably should keep this truck and pay it off before you think about buying another.