Ask The Money Coach

Q: I Would Like to Trade In My Car Because I am Upside Down on the Car and it Has 123,000 Miles on It. I Have a Previous Voluntary Repossession and a Bankruptcy on My Credit Report. An Attorney Recommended That I Let This Car Go and Get Another One Before it Showed Up on My Credit Report. Should I?

A: Based on all the circumstances you described, it seems you are going to be stuck with your existing car for the near term. For starters, you stated that no dealers were willing to finance you for a new vehicle without you putting down $3,000 to $5,000. I assume you don’t have that kind of cash sitting around. Moreover, you are already upside down on your car loan, meaning you owe more than the vehicle is worth. So no auto lender is going to want to touch that and a trade isn’t financially feasible. Even more damaging, at least potentially, is your poor credit history. The fact that you have a bankruptcy and car repossession already listed in your credit files may be the nail in the coffin.

If you let your current car go, and do yet another voluntary repossession, it is likely that it would take a month or two before that showed up on your credit reports. But there are already simply too many circumstances working against you for you to be able to convince a car dealer or finance company to finance or lease a new car to you. Even if you did find a rare auto finance company willing to do business with you, your loan would definitely carry sky-high double-digit interest rates, making your monthly payments extremely costly and probably totally unaffordable.

My suggestion is to tough it out with this existing car, which you said has $13,000 still owed on it. I know it also has a lot of miles on it. But with some TLC and proper maintenance, you may be able to keep it in decent running condition – at least until you can pay it off.

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