The Expert Podcast

There's a crisis brewing in the automotive financing industry that has to do with what's called negative equity. Negative equity is a scenario where you have a loan on your car that's much higher than what the value of the vehicle is worth. For example, if you have a vehicle that's worth $20,000, but your loan is for $30,000, you now owe more than the car is actually worth. Now, negative equity has been around for decades, even 40, 50 years ago, but it was always a small amount, $1 or $2,000 maybe. Now, the negative equity amounts are growing dramatically. And this is putting borrowers at risk, the car business at risk, and we'll talk about what the solution is. If you have a car, you owe more money than it's worth, how you can get out from under that car.

But how bad is the problem? Well, according to this article, it's a growing auto loan problem. Negative equity is rising. How much are we talking about? Well, in the section that gets into the numbers, it says nearly a quarter of tradeins have negative equity. How much is it? Um, the average is almost $7,000. That's just the average. One in four is more than $10,000. So, if you have a vehicle that you owe money on, it's likely you have thousands of dollars in extra debt on top of that vehicle.

Which means if you were going to buy a new vehicle, that debt has to be tacked on top of it, if it at all. You may not be able to finance an extra $7,000 on top of the value of a car. So, if you went and you bought a new $40,000 car, you can probably get the bank to finance 42, 43, maybe even 44,000. They'll finance more than the price of the car, but they might not finance 50,000.

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If they have to add on the tax and everything else. So, you might be stuck in your old car, which maybe the payments are too high. Maybe the car doesn't work for you anymore. Maybe it's not um viable, or maybe you just need to get rid of it to get rid of the payment. So, what do you do? You do what's called a car short sale. A car short sale is when the lender is presented with documentation, proving the value of the car, proving your financial condition, going through their process. Lenders have a specific process for how to uh receive this information and you obtain a lean release in exchange for the lower value of the vehicle.

It's a little more complicated than that. You have to remember you're asking the lender to um adjust their expectations on what they're going to get from you. So, if you have a $30,000 loan and you want to sell that car for 20,000, you're going to have to get some allowances from that lender. So, they're going to require you to jump through some hoops. It's a lot of paperwork. When we prepare these packages, usually the the folder has 40 or 50 pages of all the different documents they need of the proof of income, proof of value, proof of condition. Every lender is a little different. U but there's a very serious um collection of records that need to be put together with it.

So, negative equity is no joke. Uh you may have seven 8 $9,000. You may have been to the dealership and they gave you an appraisal that was shocking compared to your loan. But there is a way to extricate yourself from that. There's a way to get out of that loan. Check out the link below to get more information and we'd be glad to help. Thank you for watching.

Remember, you can access live one-on-one personal consultations with a licensed private investigator, a licensed commercial uh insurance broker, licensed certified real estate title examiner, also a certified civil court mediator. So, if you have a need to talk to an expert in any of these fields or even a licensed building general contractor, you can click the link below, actualhum.com, and arrange a live one-on-one undivided attention with a licensed expert where you can ask any questions, get information about your situation, and we'd be glad to