The Expert Podcast

Can you do a short sale on a vehicle? Well, of course, this is going to happen with people losing their cars. You see the article here with more on car payments at about $11,000 for a typical car and loan terms going six to seven years. Sometimes, you're going to see more people not being able to afford their car payments. When that happens, you're going to have either repossessions or some savvy owners doing what's called a short sale. In a short sale, you contact your lender, put together a package showing the value of your car, showing your income, and they take over your car. This way, you don't have negative equity.

See, that's the biggest problem with car payments. If you owe more money on a car than it's worth, you can't sell it, and you can't get out of it. With real estate, you very rarely have negative equity. If you own a home and you can't afford to live in it, you can always sell it and get your mortgage paid. But as soon as you buy a car and drive it off the lot, unless you put down a 20% or 30% down payment, which most people don't, you're going to owe more on the car than it's worth. So, you can't sell it. But there is a car short sale process you may be able to use with your lender if you put together the right package, the right approach with the lender, certain letters, and certain paperwork.

You can check out the link below. Sometimes, you can get your lender to do a short sale. They would rather do that than a repossession because when they do a repossession, it costs them a lot of money, and it goes on their books in a bad way. If it's a voluntary short sale, a lot of times, you can get them to accept it, and you don’t have any liability after the fact. Sometimes, it doesn't affect your credit as badly because they're not going to show a loss or a deficiency judgment.

Make sure you look into that if you're backed into a corner with your car. Don't just let them come repo it. Try to do a car short sale before you go any further.