Good advice but I’d add:
- First, don’t panic. A hasty decision could leave you in worse shape than you are now.
- Put together a simple budget to figure out worst case how long you’ve got.
- Sit down with your bank and explore your options. They can be your best friend.
But that being said, a Beemer isn’t an asset, it’s an expense that’s rarely compatible with buying a first house, kids, kids college, etc. so the sooner you’re out from under this rock the better. Trust me, you’re going to feel and sleep a lot better driving a paid off “slush bucket” than you would a “look at me” car, especially if it’s got your kid’s college sticker on it.
to sum it up, that is exactly why we are considering trading in both the bmw and the mazda. it will hurt, but it should cover what we owe. thankfully, our credit is great and we have been able to make payments up to this point but not for long. we are now on one income and carrying our first mortgage so it’s cut back time.
Assuming you have a month or two before you’re out of cash: here’s what I would recommend. It makes no sense to trade a paid off car in to pay the loan on another car. You’ll be stuck with an even older, less reliable car.
First, go talk to your bank and see about a personal loan. If you still have one income and reasonable credit scores, you should be able to get a loan to cover the difference between the sale of the BMW and what remains on the loan. At worst, you’ll be able to get a “used car” loan on the mazda.
Second, sell the BMW via private party. You’ll get a better price over what the dealer will offer. Use the loan from the bank to make up the difference. Paying off $5-6k over 3 years should be much more affordable than $40k over 5 years.
Third, for the future, always put down enough on a car that your loan is never underwater.
Let’s see…you have a house, two new cars (one a luxury car), and–until recently–two wage-earning adults. Reading between the lines, you never mentioned the financial burden of raising children, so I’m assuming you were (until recently) DINKs–double income, no kids.
So, do you have any 401(k) assets or the like to borrow against? Many plans allow you to “loan yourself” the money–without early w/d penalty, so long as you maintain payments. I mean, you felt yourself to be on solid enough fiscal ground to buy twin new cars, and assume a mortgage, during a period of economic recession, so I’m assuming you first dealt with essentials like retirement savings.
This is going to be a touchy issue due to personal financial problems; much of which is unknown to us. To be honest, it’s a bit lowbrow to ask for or even hint at it.
The addition of info about loss of job, new home, etc. puts a new wrinkle on things and I’m starting to have doubts that selling the BMW will solve the problem or even come close to it.
If there are other financial issues (credit cards, dip in home value, etc) there’s always the possibility that something like this could lead to bankruptcy court.
While no one wants to wind up in BR court, if things get hot, suits are filed, cars are repoed/surrendered, and garnishments start against checking accounts and paychecks then it may be the only option.
This could be made even dicier if the financing on the BMW was done by the dealer through some faceless corporation on the other side of the country at a high interest rate instead of a local banker whom you can sit down at the desk with.
Very tough deal here to be going through.
Can you possibly get a $5,000 loan, maybe added to the mortgage or something? Then, you are even on the BMW, and can sell it (you either meet up at the bank and they write the $30K to the mortgage company instead of you, or you do an escrow arrangement where the loan is transferred to them.) Your monthly payment on $5,000 will be much less than $35,000.
I can tell you want to do the tradein route, but you are going to get the shaft doing this.