Carmax made a $10,000 profit on you the last time. The will want another profit on you for another deal. They don’t buy cars at retail and interest rates are higher now. You can’t borrow you way to prosperity unless you are the federal government because you don’t have the power to devalue everyone else’s money.
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I understand what you are saying, but the $25,700 he still owes is the principal on the loan
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OK, that is what I was wondering… I missed that somewhere…
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Why didn’t you just have your old car fixed? For 35k you could have likely fixed your old car several times over, even at overpriced OEM parts and dealer labor charges.
You couldn’t afford the repairs on your old car, but $35,000 on another car, no problem at all?
down payment was probably less than the repair bill.
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Carmax probably does not hold the note on the car. They probably only acted as an intermediary for a third party financial institution (and probably received a fee for writing the loan…). The only money they received directly was a down payment, it any… Any trade-in is computed separately and does not necessarily mean any real payment to Carmax. If the trade-in was junk, they probably gave the OP $1,000 minimum and was less flexible on any negotiation on the “new” car. And some folk have such horrible negotiation skills that they just pay “window sticker” price…
He does not own Carmax a penny. He owes the “bank” that amount. That “amount” might be today’s pay-off figure or it could be the amount he would ultimately pay by the end of the loan.
Whether he takes the car to Carmax and turns it over to them, it would be little different from him selling it himself to a private buyer or if he trades it in for another car. What he gets for it would be applied to the loan.
If he sells it privately and this is exceedingly difficult since he does not “own” the car and the bank loan has to be satisfied before they will release the title to the new buyer…
If he trades it in, whatever that dealer gives him for a trade-in value would only serve as a down payment on the replacement car and the difference would be added to the new loan on the new car.
Even if he tries something nefarious and the car is stolen or catches fire and the insurance covers it, the insurance will probably not pay off the loan and he will still owe the difference and probably due on demand.
Other than keeping the car and paying it off, the loan must be paid off, or he declares bankruptcy and hope his state and the courts allow that loan to be included in the deleted debts…
And we can hope he learns from this, and hope this serves as an example to others…
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Gap Ins… (If he got it)
Besides ruining his credit rating and having Carmax/the loan originator go after him for the remainder, plus costs?
BAD idea.
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Yes, you are absolutely right, Gap Insurance probably would have been the smartest thing he could have bought when he bought this car. I’m guessing that when the OP bought this car, he probably owed something on his trade-in and that was piled onto this loan.
But Gap Insurance can be exceedingly expensive when bought with the car from the dealer and many times that amount ($500 to $700, or even more…) will also be inserted into the loan and they would also be paying interest on this for the duration of the loan.
The cheapest Gap Insurance would be acquired from your insurance agent ($20 to $40 a year) when you insure your car. There is also standalone Gap Insurance, but that costs somewhere in the middle of the previous two options…
But let’s be honest, a lot of folk do not ask what the interest is on the loan, nor care how long the loan is for, their primary concern is the monthly payment…
I have a lot of experience with this during my 30-plus Air Force Career with many of my young airmen falling victim to unscrupulous car dealers.
The catch line was, “If the payment is too high, we’ll just add a year to the loan… And don’t worry, you about that, you will probably trade it in for a new model in a couple of years…”
But the young buyer does not realize that that future trade-in would not necessarily satisfy the loan…
But gap insurance would only come into play if the OP planned to commit fraud, right? Another bad idea.
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Sometimes people lose perspective. I can’t tell you how many times people have said to me something like “$1400 to fix the air conditioning on a 12 year old car? It would be better to trade it in!”
I would then remind them that $1400 won’t even cover the sales tax on a new car. So which is the better choice?
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I was referring to if involved in an accident not driving it off into the lake or BBQing it… lol
I think by now most Ins company’s have seen it all and can tell if you are committing fraud or not…
My Sister-n-law does auto claims for a living, she is the one that if needed goes to count and says what they will pay and the court almost always rules in her favor… you want her on your side… lol
No, that is not what I meant, if the vehicle is involved in an accident and it is total, which is so common today, then the Gap Insurance would be added onto what ever insurance settlement was agreed upon. Today, without Gap Insurance, and assuming that the OP only has Collision insurance and he wrecks his car or he is involved in an accident and the other person’s insurance pays a settlement, the OP would only receive the “blue book” value of the car, not what is actually owed on the loan…
I believe that anyone who over-finances a car should have Gap Insurance… Remember, half of all accidents are caused by the “other guy…”
Why the posts about Gap Insurance ? That has nothing to do with the person’s payment and loan balance problem.
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Just some general comments. People who finance for six years or even longer, then get cold feet only a couple years into it are heading down the road to financial oblivion. At some point you have to take a stand and get out of debt or at least get on the road to more reasonable loans.
We don’t know what the fabulous interest rate is? My last loan was 3% and 2% before that. So no point in paying that off if you have other compensating funds. I don’t buy that the premium ws $10,000 for the Acura. I don’t think it could have been bought anywhere for $22,000 and suspect it was still under factory warranty. I don’t know but I just suspect.
It’s easy to reduce payments. Just stretch the loan out more. Ten years? Yeah that will be smart on a depreciating piece of equipment. The op never said they couldn’t afford it, just tired of paying it. Like said though, I don’t think the deal was as bad as said, but even so, if you make a bad deal, you have to just suck it up and deal with it. No easy way out.
I have disagreed with Dave Ramsey on buying a cheap beater to get rid of a car loan. I also have disagreed with the great Bruce Williams from time to time. Sometimes you just need to use a big hammer. So taking on a part time extra job could have the whole thing over and done with in two years.
That would be the best thing that could happen to him.
He isn’t just underwater by $5000 to $8000, he is still driving a depreciating $17000 car when he could be driving a depreciating $4000 car, which makes the situation up to $13,000 worse.
More nonsense again . Ruining your credit score is a bad thing to happen . It takes a long time to repair it . It also can effect your insurance , a job change if the person wants or needs to do that . Just try and get a loan if a new refrigerator, washer or dryer is needed .
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Yep, make any further car purchases impossible. GREAT idea! And increase your insurance costs while you’re at it.
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Excellent
Less than paying hundreds of dollars per month extra for things you can’t afford.
Even better. He won’t be back talking about the $5000 refrigerator that broke down after 4 years that he still owes $2200 on.
Of course you assume all car purchases must be on credit. It won’t stop him from getting a $2000 beater with cash. This is exactly what he needs!
Apparently having good credit hasn’t work out so well for him. He paid $8,000 extra on a $32,000 car that should have been 24k because it was on credit and the effects would be spread out month to month.