Auto loan: what would YOU do?

1

You don't WANT to make the payments or you CAN'T AFFORD to make the payments. These are two completely different situations.

Just because you are tired of meeting your financial obligations doesn't means you can just walk away from them. You're looking at losing $9000 in cash if you try to sell or trade that car. And a refi will NOT reduce your debt, all a refi does is change the payment arrangements you have in place to repay the debt.

Keep the car for at least one more year, until your negative equity is reduced or eliminated. THEN consider selling the car without having such a huge financial loss.

If you can no longer afford to make the payments. If your financial situation has gotten to the point where you can no longer pay your financial obligation then give the car back. Do a voluntary repo, work with your lender on a re-payment plan and get this debt behind you. It will hurt, it will cost you, but in the long run it won't be as bad as losing $9000 selling the car for a lose.

First, you can't refinance car that has an upside down loan with $9000 in negative equity. Won't happen.

Second, in your haste to get out of this loan and into another car, you'll have to spend $9000 of your $16,000 savings to get out now. Why don't you use some of the $16,000 each month to pay extra on the loan and exit the loan earlier, and not lose anything. In fact, you'll end up with a car that has some decent sale or trade value that you can use as a down payment on another car. But if you are in a hurry ...................

Ahh,, common problem it seems.

You got suckered by the "look how low the payments are, never mind they are for the next 7 years." pitch.

Personally I would refinance, using $15,000 of your savings to reduce the new loan value to only $11,000. DO NOT take the minimum payment option. If you are able to save, then you can afford $400+ a month payments, on the new lower balance, and have it paid off in a couple of of years. Then you own the car, it's still a decent car, and you can drive around for a few more years with no car payments.

While you can do that, save up so you have a good deposit on the eventual replacement car.

There is no point having money in a savings account, earning almost no interest, when you are paying high interest on

The good news is that your financial situation isn't actually too bad. You are "solvent" in that you have more assets than you have liabilities. Car + cash = $33,000. Debts = $26,000. So your aren't "broke" and in a hole like a lot of the askers here are.

I wouldn't sell the car and buy a cheap one, as you give up your nice new car, and have to buy a possibly suspect used car, and your savings are still gone.

Don't sell the car until the car is paid off, people don't like buying Lien Titles. You would want to put the max amount you could down initially to get cheaper monthly rates/interest fees.

$479 a month is either bad credit or a luxury car. If you're not a car person, buy point A to point B next time. Car payments suck.

I would have never signed up for the loan to begin with.

You should probably pay down the loan and see if you can refinance if the payments both you so much.

Option 3 - keep the car and stop digging with that much negative equity. $9000 / $479 per month is 19 car payments.