Edmunds Answers


Edmunds.com Staff Answers


  • MrShift@Edmunds 09/29/08 1:02 pm PST

    If I read you correctly, you want to trade in two cars where you are upside down on the loans for a new car, and blend what you owe into the new loan?

    If that's what you are proposing, you are, as Suze Orman says, DENIED!

    This is a very reckless plan IMO. How did she get so buried in the '01 Audi?

    I have no idea how a dealer would react but that's irrelevant. You shouldn't be doing anything like this.

    Looks like the only reasonable plan is to sell the Malibu and use what you save in insurance to pay off the loan. Looks like you're only short maybe $3,000 on that one.

    At $16K you are hopelessly mired in the Audi for life, so you might as well just squeeze every last drop out of that car, and after the Malibu is paid off, start doubling up on that one until you are even up on the loan. You are down at least $7000 on the Audi, just a rough calculation, sad to say.

    I don't think you can afford a new car right now, or anytime in the immediate future.

  • graphicguy 09/29/08 1:06 pm PST

    Keep what you've got. Pay them down (or better, pay them off).

    By going the negative equity route, you're just exascerbating an already bad financial situation. In reality, you'll still be paying for cars that you no longer own.

    There's really no reason to think the Malibu doesn't have at least another 50,000 miles in it. I'll assume you've got a 5 year (hopefully less) loan on it. That means, in two years it's paid off.

    Don't know your details on the Audi nor the Supra (you don't have a loan on it, do you?). But, the same thought process applies.

  • micosilver 09/29/08 1:10 pm PST

    It is not how much the dealer will take, but how much the bank will allow. Usually a bank will not finance more the 120% of MSRP of the car.
    Let's say you want to buy a 2008 Audi A4. MSRP is $36,000, you negotiate the sale price to $33,000, your total out the door is $36,000. On approved credit - a bank will finance up to $34,200 total, you have to cover the rest.

  • boomchek 09/29/08 1:30 pm PST

    The amount of money that a dealer (bank) will lend on a car loan depends mainly on your credit, income, debt service ratio etc...

    The amount of negative equity you can add to a new loan depends on your credit, and on the new vehicle you're buying, as well as the rebates on it.

    For example, if your credit is decent and you qualify for a new car, a bank might lend up to 140% of MSRP on a new vehicle. Meaning iuf you're buying a $20k car, you can get a loan for $28000, leaving you some room to add your negative equity.

    However if that $20000 car has a $4000 rebate, then you'd be still financing the $28000, but you'd be able to "bury" $12000 in negative equity, because the car would really cost $16000.

    The bad thing is you'd be owing $28000 on a $16000 car, in which you'd be buried basically until the last day you pay it off (60, 72, 84, maybe even in 96 months?). It all depends on the loan, and the terms. That's why as others have pointed out it's not really worth it.

    In the short run you might be paying less monthly, and drive a newer car, but in the long run you'll end up paying more cause you're paying interest for your other 2 cars.

    So will a dealer do it? If you get a good approval, and there is a vehicle out there with enough rebates to cover your negative equity, then yeah, it's doable. Not all manufacturers or dealers will do it as they each have their own finance rules, requirements etc... so you'll have to call around. The question is is it worth it for you to actually do it?

    And keep in mind unless you both have perfect credit or a ton of money down, you might as well forget about "your" picks such as hot sellers, because chances are they won't fit the bill. You might only be able to to the swap on slow sellers with huge rebates.

    Good luck

  • madmanmoo 09/29/08 2:06 pm PST

    The negative equity may very well kill the deal. How much of it can be rolled in? There are several factors that play into this.

    Your credit, what car you are buying, how much money you intend on putting down, term, and how much negative equity there is.

    The banks will only loan a certain amount of money for a vehicle. If you want to buy a vehicle that is $25k, then the bank may only loan you up to 110% of the MSRP. How much they loan you depends on your credit. So you could pay sticker and roll in $2,500 worth of negative equity. What would help to make sure you can get the loan bought is money out of your pocket, big rebates and a nice discount on the car.

    Let's say that your Malibu is $3k negative and the Audi is $4k. That is a total of $7k. The Rogue that you are looking at is $25k and they have $750 rebate. Total markup on the car is about $1,800. Let's say that the dealership reduces the price by $1,250 and gives you the rebate. They have a total discount showing of $2,000. That leaves you with $5k negative equity to roll into the deal. The bank says your credit qualifies you for the 110% loan and you would need $2,500 additional to get the deal done, effectively covering or rolling all the negative equity.

    Make sense? We would need more information to best help you out, but this should give you a headstart.

    Get real values on your trades from CarMax and the dealership and then you need to run the numbers with the F&I guy to see if it makes sense for your budget.

    Good luck!

    Source: My Massive Brain of Limitless Knowledge

  • fadetoblackii 09/29/08 4:30 pm PST

    There's been quite a few very good answers here, but I just wanted to add a couple things.

    First, I read your question to be wondering if you should hold on to your cars or get out of them as soon as possible. If that's really your basic question, then the answer is simple. Unless you want to screw your chances of buying another car (any car) in the next 5-7 years, you should not buy one now. Buying a car now (even assuming you can get all that negative equity rolled into a deal somewhere) would utterly bury you in negative equity next time. This is especially true if you buy a new car which will depreciate 20-30% the second you drive it off the lot.

    Second, I don't understand why you can't just sell one of your cars (since you're only planning to buy one car anyway) and just drive whichever one you keep for a few years till it's paid off. For the sake of argument, lets say you eat some negative equity on the Audi and sell it to a private party paying off the difference yourself. You may think that you'll then drive the Malibu for a couple years, and when you're ready to trade it in, it won't be worth as much. While this is technically true, lets look at value to you. If you only have to eat a couple thousand dollars on the Audi right now, and then in a couple years your Malibu is paid off when you go to trade it in, it will be essentially a down payment on whatever you're going to buy. So instead of having to eat a double helping of negative equity in two cars, you're eating slightly less negative equity on the Audi (because you sold it PP) and you're actually MAKING money on the Malibu. The Malibu should run for a few more years, and although its not as nice as some of the cars you're looking at and you may be tired of looking at it, it will be much more beneficial to you to keep it for now and then let it be a downpayment when you are finally in a position where it makes good financial sense to buy a new car.

    I hope this was helpful, sorry it was so long. Good luck!

  • irishdeath 09/29/08 4:54 pm PST

    I just had to throw in some more information before many more answers came down.

    1. We absolutely HATE the Maliboo. It's by far the worst car I've ever owned.
    2. The Maliboo has a (what I would consider) high interest rate, 16.99
    3. My Credit has gone up over 100+ points since purchasing the Maliboo.
    4. I have no faith in the car lasting another 50000 miles. I have a feeling that as it gets close to the 90000 mark it will start to have problems that I do not want to deal with.
    5. The Audi is in impeccable shape, has low miles and is an awesome car financed at 9.44(premium gas + worse gas mileage of the 2)...problem is we don't drive it, and selling it to a PP would not yield us enough to pay it off.
    6. We owe between to 2 cars roughly $30000, if we can get into another car + the negative equity at a lower rate then my 16.99 it will be better financially in the long run.
    7. We are trying to find the perfect car, one we are happy with, and will be happy with that will make a good Daily Driver + have the utility ability of the Maxx
    8. Yes the Supra is paid off, in fact, only paid $500 for the shell and $125 for the motor, put it all together and its a perfectly good car...its a project car that is reliable...

  • graphicguy 09/30/08 7:01 am PST

    OK...so you're underwater by about $10K on both the Audi and the Malibu. Malibu, with probably the least amount of negative equity (I just made that sound pallatable, but it's still a bad situation), maybe "tradeable" to a dealer (I stress MAYBE). Actually, as much as you may dislike it, are there any symptoms that makes you think it is going to have some future problems?

    Like most have said, you're probabl stuck with the Audi until you pay it off in full.

    The only way I can see dumping both cars, as others have said, is to find something with a huge rebate on it. The only vehicles I'm aware of with enough rebates and incentives to cover the shortfall would be some of the big trucks and SUVs from GM, Ford or Chryco.

    But, credit is very tight right now. 650 beacon may very well be a 100 pts higher than what you've had in the past. It might not be enough to get you a loan, though. If you do get the loan (with negative equity rolled in, which will make it even harder), you may not get a favorable interest rate to go with it @ that 650 score.

    Try not to digest the whole debacle at once. As badly as you may dislike the Malibu, pay it off first. I can almost guarantee that whatever repairs you may or may not have to make to it, it won't equal what your car payments are. Take whatever you used to pay for the Malibu, add it to the payment on the Audi until it's paid off.

    That way, you'll have two cars to sell, that you own free and clear. Your options open up at that point. And, your credit situation should be even better by then, too.

  • smartascii 10/23/08 4:25 am PST

    Another thought to add to the mix...

    Have you looked into the possibility of refinancing the Malibu? Several finance companies will refinance high interest loans once your credit has improved, and while it won't get you out of the cars and into something you like better, it will at least reduce your monthly vehicle expenses. Assuming you could get a loan for the new car AND the $10,000 worth of negative equity (and I virtually guarantee that you can't), your payments would still be pretty high. Take the A3 as an example. If you can find a no-option stickshift for $26,920, add the TT&L at roughly 10%, and THEN add the $10,000, you'd need a loan for $39,612. Again, no one will give you that loan, but IF you could get bought at 9%, your payments would still be $822. Add another 200/mo for insurance for two drivers on a european car, and you're not far from where you started.

    Source: Audi USA and Excel

  • zoomzoomdlr 11/03/08 3:54 pm PST

    As a dealer, my record negative rollover is 14,500.

  • researchqueen 11/06/08 2:04 pm PST

    I suggest you read Refinancing Your Car Loan and Being Upside Down for more help on this situation. And good luck!

    Source: Edmunds.com

  • greanpea68 11/10/08 8:51 pm PST

    Your best bet is to stay in those vehicles! I would guess you are about $12,000 and up which is about $250-$300 per month. With out coming up with any money I don't see it working for you with any bank. I guess it is worth a try but tell dealer up front what situation you are in.
    Now lets say you buy the Nissan Rogue.... a base one. You paying around $20,000 for the car add taxes and fees and your negative equity.... you are around $700 per month. plus insurance.

    Stay in your vehicle for another 2 years .... wish you the best of luck.



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