help getting out of a bad car loan

[NSXCELERATE]

trying to help a friend out, ive never had a car loan so I am asking for advice here.

Intrest is very high and car only books for 14 and 18 is owed, what is the best option.

Thanks in advance

 

[djskyy]

try refinancing it and if he owns a home, pull out some equity...other than that, it really comes down to his credit scores/etc...

 

[satan_srv]

The best legal option?

If you have bad credit you won't be able to get a loan for a lower rate. The best solution if you can't get a lower rate is to sell the car and eat the difference. How the person got a loan for more than the car was worth is their fault.

 

[whealy]

In conventional financing (as opposed to leasing), it is normal to be upside-down (owing more on the loan than the vehicle is worth) from inception until you are about 70% - 80% or the way through the loan.

 

[flaminio]

Not enough information. What sort of resources does our hapless friend have? Obviously, the cleanest way out of a bad loan is to pay it off (hopefully without a prepayment penalty). If he has $18K in the bank, just give it to the lender and be done with it.

Does he have any wealthy relatives to borrow from? Borrowing from relatives is often problematic, but if you make sure to get everything in writing, it can usually be accomplished with minimal heartache.

Refinancing is an obvious and good plan. Check a local credit union and see what they can do for you.

 

[satan_srv]

In conventional financing (as opposed to leasing), it is normal to be upside-down (owing more on the loan than the vehicle is worth) from inception until you are about 70% - 80% or the way through the loan.

Yeah I was going to add that as well...since a car depreciates X% right off the lot it takes a fair bit of time to start building equity in the asset, as the car value drops at the same time to a leveling off point.

 

[Dave Hardy]

In conventional financing (as opposed to leasing), it is normal to be upside-down (owing more on the loan than the vehicle is worth) from inception until you are about 70% - 80% or the way through the loan.

Not necessarily true. It applies if you get one of todays very popular, obscenely long term loans. A good old fashioned 3 year loan will keep pace nicely with depriciation. For this reason, a good rule of thumb is that if you can't afford payments on a 3 year loan, then you can't afford the car. This doesn't really apply to fully depreciated cars like an early NSX, but for the most part it's true.

As for what your friend can do, it all depends on credit. I'm gonna assume it sucks since he's stuck with a crappy loan in the first place. If that is the case, the best thing you can do is keep paying until it is paid off and drive it till the wheels fall off.

 

[whealy]

Not necessarily true. It applies if you get one of todays very popular, obscenely long term loans. A good old fashioned 3 year loan will keep pace nicely with depriciation. For this reason, a good rule of thumb is that if you can't afford payments on a 3 year loan, then you can't afford the car. This doesn't really apply to fully depreciated cars like an early NSX, but for the most part it's true.

As for what your friend can do, it all depends on credit. I'm gonna assume it sucks since he's stuck with a crappy loan in the first place. If that is the case, the best thing you can do is keep paying until it is paid off and drive it till the wheels fall off.

Not exactly...

I put together a spreadsheet using residual values to determine car value leveraging sum of years depreciation comparing it to the amortization of the loan. Yes, you can say I have too much free time.

What I found was that the "American make residual rates" put the amortization at right side up close to the 60% - 70% completion mark.

When I used "Acura residual rates", the amortization at right side up close to the 45% - 55% completion mark.

So yes, better residual rate can make a difference, but you still will get half way though the loan even with the best of numbers before you are no longer upside down. But your comments are closer in this residual range than mine.

 

[Ko-nsx]

drive it till the doors fall off. At least get your moneys worth.

 

[NSXCELERATE]

she has decided to try and get rid of it and buy my extra civic from me which would lower her payments by 300$ a month so she can take care of other bills, but doesnt look like theres any easy way out of her loan, she would have to eat 4k and she doesnt have that