Happy super bowl Sunday,
I have got a bit of a issue that involves car debt. Here is some backstory as to how my GF got into debt as a 20 year old. When we first met, she had a 2002 Kia Optima that crapped out and overheated. She ended up getting a new car, (and after steering her away from BMW and Mercedes), she decided on a 2020 Toyota Corolla for $18,000. As a 20 year old, with a part time job, and going to college part time, she has been literally stuck financially since she bought this car. The new car is great, but it still sucks money out of her wallet. She still owes $14,000.
What are her options? How do we talk with the bank about potentially giving the car back? As her BF, I still am searching for used cars to help her afford something, but the market is still catching up with the times here in Washington state.
I appreciate all the advice you all may have. Thanks
How do we talk with the bank about potentially giving the car back?
The bank isn't in the business of buying cars. They would want you to sell it yourself and give them the money.
what a loan transfer would look like?
You sell car. You pay off loan with car money. The buyer's finances are none of your business.
Assuming the car is in good condition she should be able to sell it for more than she owes on it. (Kelley Blue Book pegs it at about $18,000 sold at private sale, $16,000 traded in.)
Ok, that is a good thing to know. Any advice on selling private? Have you any experience with what a loan transfer would look like?
Afraid I'm not familiar with dealing with car loans, I always buy inexpensive cars for cash and fix them up myself. I'd think there would be a way to transfer the loan to another party plus get some up-front cash since apparently there's some equity in the car over and above the loan amount but I don't know the details.
So here's the thing with selling private party; you have a loan on the car which means you do not have the title and you can't expect someone to pay you that much money without having a title in hand. What you can do is find out your loan payoff amount and borrow that much from a family member for a week, pay the loan off and get the title then contact the buyer with the title in hand. This way you get your money and the buyer doesn't have to worry about the title. It's not the easiest route but personally if I were in the buyer's shoes this is what I would have been comfortable with and I know is a common request too.
There are a couple of other options too which the link below might help:
https://www.nerdwallet.com/article/loans/auto-loans/how-to-sell-your-car-when-you-still-have-a-loan
When I bought my 4Runner about 12 years ago, the guy still owed money on it. So I met him, checked the car out, then we headed to his bank where he had the loan.
The bank handled the transfer. I paid, the bank did their stuff, and marked the Lien as complete or whatever, and I got a clean title. The owner got whatever he was owed from the bank at the same time.
Than you very much for sharing that. I will discuss all of these options with my GF in the near future.
As a 20 year old, with a part time job, and going to college part time, she has been literally stuck financially
In other words, she bought a great car - but a car she can not afford.
It's a bit sad as she got a good price, but again, although it's a good price, all that matters its that you can't afford it.
2020 Toyota Corolla (...) She still owes $14,000
Now, she's NOT in negative equity - she owes less than the car is worth!
At least a solid $16k, maybe more if it's lower millage and in beautiful shape.
How do we talk with the bank about potentially giving the car back?
No, to me it sounds like a very bad idea.
What are her options?
Sell the car, get back >$16k, pay off the debt.
Go, find a car you can afford - like a Pontiac Vibe, maybe an older Corolla.
(Just please try to approach purchasing cars from a utilitarian, rational position! That's what I have learned from buying and selling cars, It doesn't have to be shiny or new - it has to have a low total cost of ownership which is directly affected by purchase price, anticipated longevity, loan terms, and expected maintenance and repair costs.)
Yes, it does really suck for her, It was all before I knew any better and before I found Scotty's channel. So now we are both more rational and focus on functional and affordable decisions. Thank you for your responses.