OK here's the situation: my girlfriend really wants a new car (either an xA or a Yaris, as both are almost the same price). However, she's upside down on her current loan. She has a 99 Honda Accord and owes about $8K on it but there's no way a dealer would give her more than $5K on trade.

Is it true that banks will only give you a loan for 115% of the price of the car, meaning she could not roll her negative equity into a new car?

I know it's crazy, especially when you consider that she'd be paying $18K for a xA in that scenario AND her credit sucks so she'd probably get like 12-15% interest...

If anyone has any ideas/suggestions please post them. She's driving me crazy!

 

I dont know about the rules for that but my gf was in the same boat. Unless you really need the new car I wouldnt trade the old one. You end up with a huge payment on a car thats not as nice as what you could normally pay for because you are basically paying for 2 cars.

 

I would definatley tell her to hold off....

 

I have heard that they can't do that type of a loan on a Scion due to the pricing scenerio they have.

 

Never ever sell a car when you still owe money on it, unless you like setting hundred dollar bills on fire. It's a really, really, REALLY bad idea from a finacial perspective.

I imagine a 1999 Accord still runs fine, so unless she's nuts, she should keep what she has.

 

your best bet is selling it privately. depending on the mileage and condition, you could probably get close to $8k for your girl's accord. then you could start out fresh with the xa

as for the 115% loan...the reason for this is banks don't wanna get stuck with a $18k loan on a car worth $14k if/when they repo it....they lose money

 

ummm that accord should be worth a lot more than 5k........

 

KBB shows $6k or less on all '99 accords for trade in value, so he's not wrong about what he'd get. the car is 6 years old, probably has about 80k on it.

 

It's true you can't carry that much negative equity into the Scions for reasons stated above. Therefore, I would work hard as hell to come up with the negative equity amount , $3K lets say and use it as a down. That way you are only financing the original cost of the car ..

Sounds easy I know ..

 

yeah, don't bury one car into another--that cycle can go on & on & on. It happens far too often, especially with the hits domestic cars have taken since the rebate wars after 9/11.
Either save up the difference on her loan or pass for now. If you sell it outright the diff won't be as bad; and with trading a car in with 5k value, you'll only save a few hundred in taxes so not a real big incentive--if you can sell her car for more then say 5300 do it.
There is one option if you must get out of the used car and can't come up with out of pocket monies to cover the loan, that is to find a car with a cheap enough lease and bury into that car. Then after the lease term you start fresh. BUT that does not work for most people ( mileage, credit, etc ), but for some can work.