Edmunds Answers



  • karjunkie 05/14/10 8:57 am PST

    Great solution and a very responsible one at that, with only one problem. No one is going to finance the negative equity. If you have $4,000 cash in hand it is the right thing to do, but no one is going to lend you $12K on an $8K car. If you don't have the cash, I would start paying down more of the principal each month to the best of your ability until the amount owed is equal to the value of the car, then sell and buy the $8K car with an $8K loan.

  • tbone_rare 05/14/10 10:08 am PST

    I had a customer in your very same situation come into my show room earlier this month. He was $4000 upside down. He did have a $1000 down payment. General Motors is doing away with the Cobalt at the end of this model year. As a result, they are using HUGE rebate money to help move the ones we have on our lots. Right now, there is $4000 in total rebate money on the Cobalts. We used that rebate money to eat up my customer's negative equity. He got a brand new car....and he is not in negative equity now. I don't know if this is something you want to consider, but it's at least an option.

  • knowledgepower 05/14/10 12:44 pm PST

    The bank or finance company wants to be in a positive situation when financing your loan. As the guys posted and stated you need to be in a vehicle that has a rebate to offset your negative equity which could be your best option since you sound open minded about the suggestion. Buying that Cobalt is a good idea, even though it's being discontinued you can still have it serviced with no problem. The parts are available at least seven more years at the dealership. Consider the Cobalt and any other vehicle with a big rebate in this season of closeouts, do this now while selections are best on remaining 2010 vehicles.

  • morin2 05/14/10 2:34 pm PST

    All excellent posts. Using the rebates seems to be the only way out because no lender will lend for greater than the loan value. But also understand how you got into this situation. Cars depreciate far more steeply than your loan is paid down when you have a long term loan. It is a huge mistake to finance a depreciating asset with a long term loan. An excessively long term is the one thing all negative equity situations have in common. I strongly recommend a 3 year loan. If you can't afford the payments on a 3 year loan, then reduce your sights & shop for a less expensive car. For cars that exhibit low rates of depreciation, like Hondas, Subarus and Toyotas, a 4 year term might be acceptable. Korean cars depreciate so steeply that any loan will soon be upside down.

  • cjlittell2003 05/14/10 6:35 pm PST

    Thank you to all 4 that responded so quickly to my question/situation...I really do appreciate the advice & suggestions. I'll definitely take them in and see how I can put them to use. While I know sticking with what I have and just paying more on the principal is the ideal way to go, that's just my situation though as I need to reduce the size of my monthly payment because I can barely make it anymore, so adding more to it isn't really an option for me at this time.

    The rebate thing sounds interesting, but I'm always hesitant when I hear all the commercials with crazy, amazing rebates and wonder if they're for real. And to be honest I've never really understood how the whole rebate thing works...is it really like (in your Cobalt example) that I'd be given, or have to put towards the car, $4000 if I bought the car? I think I did see somewhere on this site an area that discussed rebates, but are there websites out there with general information on current rebates that can be used? Thanks again.

  • tbone_rare 05/15/10 2:09 pm PST

    In the Cobalt case, you can go to chevrolet.com and you can find rebates for your specific area. Rebates are in effect for your home zip code....not the location of a particular dealer. The website will give you all the incentives in effect and usually the expiration dates.

    Some of the commercials you hear cannot be believed. Some are borderline crazy. Let's take the Cobalt as an example. Let's use a selling price of $16000. You need to pay tax,title, and license on top of that. After all the fees have been added, you subtract $3000 from that total amount. That is the base rebate on the Cobalt. There is an additional $1000 you can deduct if you finance through GMAC.

    At my dealership you would have a total amount to finance off these numbers of $13279.38. There is nothing secretive about the incentives. You can go to almost any website that deals in car prices and find out what is available. Any reputable dealer will inform you what is out there too. These incentives help us sell cars. That is what we do for a living. If there is extra money out there, we're gonna make damn sure they're figured into the equation! I hope this helps explain how rebates work.

  • qlman 05/18/10 4:16 pm PST

    You can do all of those things but.... if what you want to do is lower your payment, try YOUR bank. See if they will simply take the money you owe and put it into a longer car loan for your same vehicle. Don't purchase. Don't rebate. DOn't do anything but reduce your payment. And IF you have really good credit your bank will probably help you out. OR... go to a very small home town bank, on branch, tiny town USA and see if you can establish a new banking relationship with someone who WANTS your business and will treat you as an individual.


Top Car Financing Experts View More

Rank Leader Points
1. MrShift@Edmunds 1010
2. Stever@Edmunds 985
3. morin2 775
4. knowledgepower 705
5. karjunkie 320
6. isellhondas 295
7. boomchek 280