The Expert Podcast

• According to Kelley Blue Book, car loans on used vehicles now average 125% of the car’s value.
• Example: A $10,000 car could have a $12,500 loan.
• Common price points of $20,000-$25,000 for used cars often result in loans that far exceed the vehicle's worth.

• Negative equity happens when you owe more on your car loan than the car's current value.
• Many car owners with loans are "upside-down," meaning their vehicles are worth less than the loan balance.

• Financing taxes (7-8%), warranties, and dealer add-ons.
• Rolling over negative equity from previous car loans.
• Overpricing by dealerships.

• Cars lose value quickly after leaving the dealership, worsening the negative equity situation.

• Consider a vehicle short sale:
  • Similar to the 2008 housing short sales.
  • Many banks offer this as an official process.
• Required steps for a short sale:
  • Obtain a vehicle condition report.
  • Provide proof of income and financial hardship.
  • Present the car’s current value and title status.
  • Submit a complete package to the bank for review.

• Repossession is costly, requiring transport, auctioning, and reconditioning fees.
• A short sale can save the bank money while allowing you to resolve the debt.

• Be cautious when financing taxes and dealer add-ons.
• Avoid rolling over negative equity into new loans.
• Stay informed about the value of the vehicle before purchasing or refinancing.

• Negative equity can strain your personal finances, affecting your ability to cover essentials like rent, food, and insurance.
• Plan carefully to avoid overburdening yourself with high car payments.