repossession Tag

06 Jun How Bankruptcy Can Solve Your “Too Expensive Car” Problem

Next to home mortgages, motor vehicle loans are often your most expensive purchase. According to USA Today, the average transaction cost of a new car or truck sold in the U.S. was around $33,500. Lenders are now extending vehicle purchase loans to 6 years or longer, and when interest rates are factored in, you can easily find yourself responsible for $40,000, $50,000 or more. Unlike real estate purchases, motor vehicles are depreciating assets. If you finance your car or truck over 4 to 6 years, there is a good chance that you will owe more on your vehicle until year 3 or 4 of your contract. This means that in the event of a financial crises such as an illness or job layoff, you won’t be able to eliminate your financial obligations by selling your vehicle. If you “roll over” your loan into a new loan for a less expensive car, you’ll just delay your day of reckoning because you will end up owing far more on the less expensive car than it will ever be worth. Further, your installment payment is not your only vehicle expense. Insurance costs can rise quickly and unexpectedly if you or a family member has an accident. Routine maintenance and service such as new tires and brakes can add to your cost of ownership.
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18 Jun I Am Thinking About Turning In My Car …

Turning in a car to get out from under high car payments may backfire. Many people think that a "voluntary" repossession won't come back to haunt them, but any surrender or repossession of a car that does not pay off the loan in full can lead to big debt problems for the borrower. When you buy a car and borrow money to do so, you are taking money from a lender and promising to pay it back in full. That debt obligation has some additional "security" or "collateral" to make it less risky for the lender but whatever the sale of the car doesn't cover remains the obligation of the borrower. In addition to affecting your credit score, lenders will typically sell the car at public auction for much less than the retail (book) value, and then come after the borrower for the difference between the sales price and the loan balance. I often see a "deficiency balance" on car loans for $6,000 - $8,000, or more. When you are trying to get away from monthly payments that you can't afford, these balances can be nearly impossible to pay off, especially when the lender often asks for payment of the balance in full.
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