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What You Should Do if You're Upside Down on a Car Loan - Car Dealership Negotiating Tips - YouTube
Channel: Melissa Blevins
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Hey guys!
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Melissa Blevins with MelissaBlevins.com, your
personal finance coach for the free-spirited
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nerd.
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So today we're gonna be talking about negative
equity and how to get out of an upside-down
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car.
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I know you clicked the link because you're
thinking about it and because you may have
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looked online and seen "Oh Crap...my car is
not worth what I owe on it!".
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That's what it means to be upside down.
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It's under water.
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It's Broke.
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It's not fun.
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My husband and I purchased a brand new vehicle
(stupidly) years ago and decided that, after
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financing $48,000 and $733 minimum monthly
payment, that we were done.
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We were done basically paying a house payment
for a car.
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So we walked into our bank...or our credit
union.
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We sat down with our banker, and we explained
our situation.
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I asked them...I said, "Will you please pull
the NADA value of my vehicle?"
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And so they did.
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Being a former banker, I know that NADA is
how the banks and credit unions loan money
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on vehicles.
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They actually don't even use Kelley Blue Book.
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Kelley Blue Book, or KBB, is garbage, in my
opinion.
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It's not an accurate valuation of a vehicle.
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If banks and credit unions are using KBB,
then...I've worked at a few different banks,
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and none of them use KBB.
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So if they used it, I might feel differently
about it.
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But car dealers tend to use KBB to their advantage
when they're offering trade values for your
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vehicle.
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So let's say you walk into your bank.
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You talk to your banker.
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You say, "Ok...I'm upside down $5000."
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They told you the value of your vehicle, and
you're upside down $5000.
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If you've been looking at vehicles, and you
have an idea of what you're looking for, talk
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to them about it at that time.
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Say you found a 2009 Buick Enclave, and it's
$12,000, and it has 90,000 miles.
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They can plug that into NADA Retail or NADAguides.com
and give you a retail value on that as well.
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And sometimes the bank or credit union will
loan 125% of the retail value.
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So that's good to know going forward because
if you are upside down, sometimes you can
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get a little bit of that negative equity squeezed
in there.
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But I would always recommend gap insurance
in that instance...always.
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So...you should also know....Side note....that
your insurance company likely offers gap insurance
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for significantly cheaper than the car dealer.
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Do not purchase gap insurance from the car
dealership.
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Purchase gap insurance through your insurance
company.
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And you will save hundreds of dollars.
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So that was a little side note.
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A little rant.
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So you're gonna talk to your bank.
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You're gonna get some options.
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The next place that I would go after having
talked to your bank, and you kind-of have
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an idea of how much money you're gonna have
to come out of pocket, I would take my vehicle
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to Carmax and have them give me a valuation
offer for it.
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So Carmax will offer to purchase your vehicle
at a set amount.
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It's no b.s.
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It's no haggle.
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You go in.
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It takes about 45 minutes for them to value
your car, and you can leave there with a sheet
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of paper that says they will buy your car
for X amount of dollars within 7 days.
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So you wanna make sure you're at the end of
your decision-making process before you do
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that.
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But take that piece of paper...fold it up,
put it in your purse, and now you're gonna
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drive to the car dealership where you were
looking at a vehicle.
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And you want to not give away too much information
about what you are looking to do.
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Walk in there and just say, "I wanna test
drive this vehicle."
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And they will ask you, "Oh do you have a trade?"
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Don't tell them that you have a trade yet.
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Don't lie to them, but say, "You know?
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I'm not sure what we're gonna do yet."
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So go in, test drive the vehicle.See how you
like it.
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And make sure you've got your preapproval
from your bank as well.
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Then you can sit down with them and explain
to them that you want to negotiate a price
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for that vehicle.
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Try to negotiate a price for the purchase
of the vehicle without your trade included
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at first.
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Car dealers are gonna hate on me for this,
but that's what...you know...it's what we
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have to do.
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We have to protect ourselves as consumers.
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So see if they'll negotiate a price for you
and then if they are really persistent about
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if you are going to be trading your vehicle
or if you feel weird about not telling them
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then just let them know.
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Also let them know that you did get a valuation
at Carmax, but you're waiting to see what
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their offer is going to be.
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Don't share the offer from Carmax just yet.
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So do that.
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You're going to get an offer.
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They're gonna write down some numbers, and
they're gonna want you to sign something committing
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to purchasing.
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Don't do that.
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Ask if you can take test drive the vehicle
overnight.
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Take the car.
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Go to a competing dealership with the car
and...with the other dealership's vehicle,
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and tell them that you're looking at this
car, but do they have anything similar?
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And sit down and do the exact same process
with that other dealer.
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If you have to do this at several different
dealers that day, do it and then take the
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car back and go back and forth between the
dealers.
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I know it sounds like a lot of work, but I
can promise you that you will get a better
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deal.
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They will compete for your business if they're
good at their job.
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And you will get more money for your trade
than what you would have.
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I actually was able to get $500 more than
what Carmax had offered me, but, strangely
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enough, the Honda dealership that I purchased
my vehicle from (brand new) was offering me
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$2000 less than Carmax, and they said, "Oh!
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We want your vehicle!"
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Because we bought it brand new at that dealership.
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It was 2 years old.
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And it had been serviced faithfully, so they
could put it as a certified pre-owned vehicle
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on their lot for about $4000 or $5000 more
than what they were offering me.
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So I walked away from that dealership.
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We'll never do business with them again.
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But I hope that these tips have helped you
a little bit to understand the process of
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getting out of a vehicle with negative equity.
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Obviously you gotta have some cash.
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I would never recommend using credit cards
to offset negative equity...not even the 0%
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credit cards because ...it's just not a good
idea.
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Unsecured loans are really hard to get unless
you have AA+ credit, and the interest rate
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is usually very high on unsecured loans.
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So talk to your bank about your options.
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Go to a Carmax.
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Get your valuation.
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Hide your valuation!
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Tuck it in your pocket.
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Keep it.
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Save it up.
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And just keep that nugget of knowledge for
you as fuel with the other dealers so that
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you can get the best deal when you're trading
out of a more expensive vehicle.
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So I hope you liked this video.
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Please take a moment to subscribe if you found
it helpful.
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And thanks for watching!
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