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Zanshiro

Epic negative equity on a car

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So, in my line of work, I often come across customers and try to give a nudge in the right direction towards keeping good credit and how to do so  One such client got all credit cards cleared but one now (Which they're working on) but has a massive hurdle in the form of a car loan from good ol' JD Byrider (A pox upon their name).  They have a 2007 Chevy Impala with over 100,000 miles...and owe about 22,000 on it still, generously speaking worth 2-4k private sale.  Even on a pure electric vehicle lease, I can't eat that negative equity in a payment they can afford, and their credit isn't up to the point yet they can clear the massive back-end of it with a solid loan.  (Hospital negative they're working on where the husband was hit in an accident, the other person's insurance paid all the bills but one, that one is on his reports)  But that's the only negative on his, just very recent, his FICO 08 was a 625 at time of pull..but the LTV prohibits a refinance of the vehicle.

 

Their finance company through JD Byrider (Pox again upon their name) was Regional Acceptance, appears to be a rate of about 26.4%...and the 6 years will come due in a year and a half.  With a $280/mo payment, that obviously wouldn't clear it, and they have no idea where their bill of sale/lending contract is.  I advised them to call the company and see if they can get that...but do any of you know offhead since I don't deal with Regional if they do balloon loans on vehicles for JD and the like?  As I don't see that balance just vanishing at the end of contract.  And what would be their best bet at this piont?  I'm thinking I'd try to have them get a card, and lift some of that debt from car to 0% offers if they can get enough on it ,then a personal loan for the remainder to escape RA's clutches?  Thoughts welcome, because that one is a boggle to me.

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By my rough cipherin' I'm coming up with the same result you are - I wonder if this is some sort of backend loaded subprime "lease" that isn't expected to be paid off, unless the customer comes back to JD.B. and rolls it into another subprim.... no I'm going to call this what it is - predatory loan.

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Okay...so, I got the copy of the buyer's order and lending agreement.  I'll lay out terms here in a bit in all their ugly glory

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Oh, Lord.  That's certainly ugly.  

 

The basic deal is they can either pay the loan. default on the loan, or go bankrupt.

 

What to do depends on whether they are employed and how much they make.  And what their future plans are:  Buying a house?  Pay it.  Do they already have a place to live, and not need good credit for the next 7-10 years?  Maybe dump it or go bankrupt.  

 

If they are reasonably well-employed, it may be best just to keep paying as much as they can and get that ugly POS paid off.  Assuming that turd of a car still runs.  If it does, the last thing they need is a new one.  They'll need to keep driving it until it drops.  

 

I'll follow and watch for the buyer's order and lending agreement...

 

Tough job no matter what, tho. 

 

 

 

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7 hours ago, Zanshiro said:

Okay...so, I got the copy of the buyer's order and lending agreement.  I'll lay out terms here in a bit in all their ugly glory

Auto finance porn...  I'll pull down the blinds.

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Posted (edited)

OK, straight from the RISC:

 

APR 21%, Finance Charges 12,580.12 (Ow), Amt Financed: 16,091 Total: 28671.12

# of payments: 72    Amt of payments: 398.21

(My above going off memory of $280 was incorrect, they are showing monthlies at $400/mo being made, no missed payments on credit report or whatnot, which still doesn't clear the balance by this December even at $400/mo, mileage at 132,520 when I checked today.) 

Vehicle did have added:  Performance extended warranty: 1850, GAP: 800   (F&I got payday)

This is still the original vehicle financing, though, so I'm trying to determine how this will end in December, I don't see anything stated about a balloon payment on the contract, standard RISC.

 

Other than being a horrid deal for the customer (and a great one for the dealership)...this vehicle really would be better off falling off a cliff in their case which I obviously wouldn't advise anyone in any form. -_- 

 

Editing to answer above question:  Their combined is about $55k/yr (34k/yr him, 21k/her).  They rent a place, that's $1700/mo. and were looking to buy a house.  After discussions, they're looking to move in with their kids a bit, save the difference in rent (After paying things off) and then look into home buying.  Getting their CCs paid off has been the first priority I gave them, with this stinker next on the list, partly because I needed time to even think how this is best handled and ask for other eyes on it.

 

I think by that point in time, they should be in the 720+ club to make it a bit less painful, and can refi their other vehicle ('17 Focus @9.9%) to a lower rate, as they are NFCU members.  That may be possible even before this collection vanishes.  I ponder if a 0% card would work, but with the limited limits on their current cards, isn't likely it would make much a dent in it, but some @0% while paying down the main one is better than nothing, I suppose.  (Current limits are a $500 C1, $2000 USBank)

Edited by Zanshiro
Answering above questions

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2 hours ago, Zanshiro said:

this vehicle really would be better off falling off a cliff

Not really. The insurance would pay only retail value of the car which on a 12 year old Chevrolet is whatever the weight of it is in scrap metal. So the owner needs to .....

 

oh wait .... there's GAP insurance. Never mind.

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Sadly, the only way that loan is likely going away is to figure out how to do a personal note for the balance at a more-reasonable rate.  Still not the ideal resolution, but it clears the lunacy of 21%.  Even if the note would ordinarily clear at the end of this year, if they could cut the APR to a more manageable personal loan rate under 10%, they would STILL be money ahead...especially since they could still be paying more than the minimum due. 

 

And hopefully, in the interim, they have ALSO learned why one does not ever want to be rolling vehicle balances into newly acquired vehicle loans.  Sadly, too many people seem to have to have a new car every few years and never pay attention to the actual math that leaves them one financial disaster from fiscal ruin...

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Sadly, there was no trade involved in this transaction that I could say that lesson was learned... -_-  They're getting pretty excited about things being at better rates and whatnot, so hopefully it's lesson learning, and not dooming.  If they get the last card down, they could probably pull a swapsies and 0% part of that balance, personal loan the rest, and make it far more manageable with far less interest.

 

Bright side as we were tinkering over it last night:  Looks like they were not all updated, so between texting back and forth with her and getting her to show me parts of it, it's actually about 16,500 total due, which, while yay for $5000 under, would still leave 10,000+ to deal with at end of year.  Bad part, even $5000 @ 0% for 12 months is more than their car payment now, so I'll work with them on something creative where possible. :)  Thanks for all the second sets of eyes, and I'll post back if I can figure out how a loan for a $16,000 car (not including finance charges) ends the 6 year period at... $16,000. O_o

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It may be worth them looking into Lending Club. I have gotten a personal loan through them in the past for about $24k. I think my credit score was mid-600s at the time, but I had a reported income of $105k. The rate was about 17%, but that's still a lot better than what they have going on. It's worth a shot, IMO. Companies who lend to subprime borrowers like JD Byrider can be the most aggressive with collection activities (read up on what Credit Acceptance Corp is doing in Detroit), so getting away from them even in a lateral-ish move makes a lot of sense to me.

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Something is not right... IF they made all payments on time, there should be a just under $8,000 in principle left, based upon what you have said. 

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