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Selling a Car with Negative Equity

August 28th, 2011 at 07:26 pm

hi Folks -- I am on a mission to get out of debt. My latest plan of attack is to sell a call that I owe more than it is worth. Here are the details:

I owe $28K
I have an offer from someone to buy it for $22K
KBB says private party value is $24K

I have the money ($6K) to cover the spread but I don't know if it is stupid to pay that much to get rid of this debt?

I haven't really done this before and I've made mistakes so I am not really sure if I know what I am doing...?

Any advice from anyone on whether to take the deal or hope for someone else to come along and make a slightly better offer (and maybe save me $1k-$2k)?

Getting rid of this debt would bring me down to roughly $45K left to pay off by next summer/fall timeframe.

Any good thoughts?

5 Responses to “Selling a Car with Negative Equity”

  1. mamasita Says:

    If you sell your car and use cash to cover the difference, do you have another source of transportation?

  2. Big Saver! Says:

    we do have another car but i would need to replace the one I am selling soon. ideally the replacement would be a very inexpensive car, like less than $5K. if I can hold out on getting a replacement for a while, I could possibly pay cash for it but it may be necessary for me to get one sooner and take a small loan. we both work and have 2 kids so schedules can get a little crazy....making a 2nd car necessary in the long run.

  3. LittleMsMom Says:

    I guess I would need to know more details before offering advice.

    What is the year on the car you are selling. What is the value of car #2? Is car #2 paid-in-full?

    It is suggested that your vehicle value not exceed 50% of annual household income, do your vehicles exceed this?

    If your car debt/value is less than 50% I would keep the car and just plan to drive it into the ground (200K/20yr) unless you have another reason to want to sell it and just focus on paying extra on the loan. Between selling this car at a loss of 6K then buying another replacement car you are looking at 11K in debt and possibly a much less relible car.

    Just be sure to tell us what you deside to do about the car.

  4. Big Saver! Says:

    hi-- thanks for the note. the debt we have right now is from CARS!! my husband & I keep going back & forth on do we whether we should keep them or sell 1? Now that we have an offer, we are not sure what to do LOL!

    the debt we have is for 3 cars - the one in question, my husband's car and then a car we bought for my daughter as a gift (before we realized how stupid having all this car debt is). I guess we thought since we could afford the payments & the interest rates are 0%, we went ahead & did it.

    All the car debt together is currently $28K, $30K and $15K = a staggering $73K. So YES, this is a little bit over the "50% of income" ratio by about $8K-$10K. We are on track to have the smaller $15K paid off by end of this year.

    So if we took this offer now, we would only have the one $30K car to pay off next year (after the new year) and we could probably do it in 10 months or so.

    If we keep this one, it would probably add another 10 months to the total payoff timeframe but we would have very reliable cars to drive for many years. Not so sure this is a 'good thing' considering how expensive the cars are. I know you could get reliable cars for less.

    One bit of good news I got this morning is that I will probably be getting back about $2K after I cancel the extended warranty on the car. I did not represent that as part of the car deal so I could cancel that & get a refund in a couple weeks.

  5. Jerry Says:

    That is certainly a load of car debt, so I can see why you want to lead yourselves out from under it. At one level, it would be nice not to have the insurance not to worry about the payments every month, but 6 grand at once is a good chunk of cash, as well. Let us know what you decide!
    Jerry

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