The Expert Podcast

So, if you have a car loan you're having difficulty making payments on, you're not alone. And whether or not even if you had good credit, you had a very strong income, and you're not a subprime borrower, you're still facing high payments. Many payments on these vehicles were over $1,000, 7800 plus. And we're going to talk about why these payments are so high and what you can do to get out of these loans. Many times, these loans were predatory. They had thousands of dollars of add-ons, maybe more than $10,000 plus worth of add-ons, which increased the loan principal balance. We're going to talk about how to reduce those and more importantly, how to avoid a repossession and even making sure you don't do a voluntary repossession. if you want to voluntarily get out of that car loan, what you can do as opposed to a voluntary repo because that has a lot of hidden cost and hidden financial pitfalls that you may not find out about until years later and get hit with thousands of dollars in fees.

So, first let's take a look at the news report says that consumers with prime credit are starting to slip on their payments. US consumers with the highest credit scores are starting to fall behind on their debt payments. car loans, credit cards, uh, and the like. So, if this is you, even if you're not behind on payments, if your payments are becoming difficult to afford, you're not alone. You're not a an anomaly. This is a very common scenario.

So, one of the things that happens when people have uh trouble with their car payments is they look to see about trading in the vehicle or selling the vehicle. But what you're going to find in most cases is you will have what's called negative equity. You're going to owe more on the car than it's worth. So let's say if you have a vehicle that you have a loan on it for 30,000, you go to trade it in and you find that it's only worth 20,000 on trade in. That means there's a $10,000 gap uh between what you owe and what it's worth. What can you do with that?

Well, you can do a lot of things to get out of that loan. One is a short sale, one is a a cars rule, um declination, and we'll talk about those. The most important thing you don't want to do is a voluntary repo. A lot of people think that they could just give the car back to the bank, call them up, say, "Hey, come get the car. I don't want it anymore." And the bank will do it. They'll come get the car. Or you could bring it to them, hand in the keys. But that's not the end of it.

What's going to happen if you do a volunteer repo? If you look at your contract, and here's some exact wording from a typical loan contract. It says, "What will happen if we take it back? We will sell the vehicle if you do not get it back." So, this is a repossession that is not redeemed. So, if the car is repossessed, whether you give it to them voluntarily or they take it from you, that's considered a repossession. You normally have 15 to 30 days to redeem that repossession, meaning you pay the money to get the car back. But if you don't do that and don't get it back, if you do not redeem, we will sell the vehicle. We will send you a written notice of sale before selling the vehicle.

Here's the important part. Very important. We will apply the money from the sale less allowed expenses. What does that mean? When they sell the vehicle, they're going to have some expenses. They're going to have shipping, transportation, they're going to have auction fees. uh they're going to have broker fees, they're going to have legal fees, they're going to deduct that from what they get from the sale of the vehicle. Then they will apply that to the amount you owe. So if you owed $30,000 and they sell the vehicle for $20,000, maybe they have another $1,000 in expenses. Probably going to be more than that. The last one we saw was 1,700 in expenses.

Allowed expenses are expenses we pay as a direct result of taking the vehicle, holding it, preparing it for sale, and selling it. So, they can charge you for um detailing it, cleaning it up, storing it, storage fees, attorneys fees, and court costs, as the law permits, are also allowed expenses. If any money is left surplus, we will pay it to you. Meaning that if they sell it for more than what you owe, they'll give you the money. But if that was the case, you could have sold it yourself. Here's the key. If money from the sale is not enough to pay the amount you owe, you must pay the rest to us. If you do not pay this amount when we ask, we may charge you interest at a rate not exceeding the highest lawful rate until you pay.

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If you do a voluntary repossession, you are putting the entire future expense and your obligation and your liability in the hands of the lender at their discretion. They can charge you whatever they want for fees. They can charge you an interest rate. So, you do not want to do a voluntary repossession. Even if you are going to just walk away from the vehicle, you want to do it in a way that you control your outcome because this is going to stay with you for years, decades. Even if later on you're on your feet financially and you have money, you might get a phone call. Hey, remember that money you owe? It's been acrewing 20% interest. You now owe us $30,000. Maybe you'll find out when they garnish your paycheck. Maybe you'll find out when you go to write a check from your bank account and it's been depleted because they garnished it. So, you do not want to do a voluntary repossession because now you're just turning over your finances to this bank at their discretion.

So, what can you do? Well, in order to do a short sale, the first thing you want to do is reduce the balance you owe. Even if it ends up being repossessed, if you reduce the balance owed, you'll owe less. How can you do that? Well, there's two things you can do. First of all, your loan probably had many, many add-ons placed on that loan. Service contracts, gap insurance, u maintenance agreements, protection plans, and if you cancel those, those will be applied to your loan, and that's also reflected in the loan contract. So, the first thing you want to do before it goes to repo or before you try to sell it is cancel all those protection plans. Now, remember, if you cancel your extended warranty, you won't have the extended warranty. But, I'm sure at this point that's probably not a big issue. You want to get them canceled and because it may take a month or two to get that cancellation in, get that credit because once the loan is paid off at the higher amount, you can't cancel them anymore. So, you want to get them canceled early.

The next thing you want to do is you want to get actual bids for your vehicle so it locks in a higher amount. For example, if you go to the dealer to do a tradein and they tell you it's worth $20,000. If the bank sells it at auction, they're probably only going to get 19 because the dealer tradein is a little higher amount than the wholesale auction. And the wholesale auction is a bunch of used car dealers bidding on cars at wholesale and then they have to transport it. They have to ship it. So they have costs. So they're going to bid less than the dealer that was offering you tradein. Plus the dealer offering you tradein is is giving you blue book value. That's going to be a tiny bit more than low wholesale or maybe what they call rough book, but not resale value. Now you're not going to get retail value. Retail value is what the end user buys it for. When it cleaned up, put on the dealer lot, that $20,000 car might sell for 24, right? Or 245. The dealer wants to pay 20 so they can make a profit. But if you could find a resale buyer, and there's many brokers and many um networks out there that'll buy it for maybe 22, 23 even.

So let's say you have that $30,000 vehicle. You knock off three or 4 thousand by doing these cancellations that we talked about. Now you have it down to 27. Then you get a resale buyer maybe at 235. Well, now you only have a 4500 or 3500 negative equity. So even if it does get repossessed and they go to charging you the whole amount, either you can come up with it, maybe get a personal loan, maybe you can get unsecured loan, maybe you could borrow it. Now you're not going to have this charge you interest at a rate the highest lawful rate. You see how that goes? So many times you can get the negative equity down to where you could just sell the vehicle and get out of it and don't even worry about a repo. That way it's not on your credit. Even if it does become a repo, voluntary or otherwise, you now have reduced your liability because you locked in a sale amount and you reduce the principal. This may not be a financial benefit to you for a year or two until the collection agency starts knocking out your door, but it could be the difference between, hey, you owe 3500 to you owe 15,000 a year down the road.

So, take advantage of these this knowledge and go through this process. Our website below, carshortsale.com. We'll give you more instructions. We even have the option if you want to do a consultation with a certified title agent to take a look at your loan contract to see where you stand, to see what options you might have. But don't do a voluntary repo.

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