How to Get Rid of a Car with Negative Equity in Vegas?

cars

If the market value of your car is worth less than your debt, it means that your vehicle has negative equity. If you are in negative equity with your car, it can be the worst-case scenario for you. 

Let’s take a simple example. Say you owe $30,000 for the car or you received a title loan in Las Vegas for that amount. You’ll get the market price of your vehicle after you do some research and let’s assume it’s $25,000. That means you’re in negative equity of $5,000. 

What to Do About Negative Equity in Your Car

There are two options to get out of car equity that is negative. Number one is paying the equity as well as the loan amount for the car until you’re out of negative equity. Or number two, which is to sell your vehicle and take the loss. 

However, we’re going to tell you about a few more options which you can choose in this situation. The best decision will be based on your loan amount, credit score, and the time frame for which you’ll be paying the loan. 

How You Get Rid of a Car with Negative Equity 

Calculate the negative equity of your car

First of all, start calculating the negative equity. You need to make sure how deep you are in terms of the gap between the market price and the debt. 

Before that, you need to determine what your car is worth. It can be done by using different tools available on the various online platforms. 

You cannot rely on a single source when it comes to car evaluation. We suggest that you should use multiple sources, as it will give you an accurate price estimate. 

Let’s consider the same example taken above in which you are $5,000 underwater. 

So, before you consider reselling your car or refinancing, you need to take into account all the possible conditions that can arise.

Ask yourself if you’re in a position financially to pay the remaining amount, which is $5,000 in this case. If you’re able to pay this amount by any means, then this is your best option for getting out of negative equity in the car.

Discuss with your lender

Even if you are not in a position to pay the amount of the negative equity, there are several different ways that can help you get rid of your car.

The very first step would be giving a call to your lender. Explain the situation and then ask him for solutions that might help you with this problem. Even if there are no options available, there’s no harm in asking.

One of the options can be paying some extra amount of debt every month. It can help you get out of negative equity earlier. You might still have an obligation to pay the loan. But paying it will become more comfortable, and you can make the best out of a bad situation.

You might have to cut down on some of your expenses, but at least it will give you zero or positive equity when you shop for a new car at a later stage.

Consider taking a new loan

If your lender cannot do anything to help you, you’ll need to consider taking a new loan. If you have a good credit score, refinancing at a low-interest rate can be a good deal.

When you are refinancing a loan with negative equity, you need to be very careful about the terms that the lender is putting up in front of you. 

The lender might tempt you with low EMI or monthly payments. But make sure that you read all of the agreement carefully. Lower monthly payments can extend a loan from a year to many more.

The major problem with cars is that they lose their value very quickly. They go down by nearly 10% in the first year and then by 50% in five years. So, the quicker you repay your loan, the faster you’re getting rid of negative equity in your car.

Consider selling your car

We would always suggest you keep your old car and try to pay off as much negative equity as you can. However, if you’re through with all the options given above and none of them are working for you; you need to consider the last option.

If you reach the final decision that you want to sell your car, focus on getting the highest price possible. Try covering as much of the negative equity as you can. 

If your car is maintained correctly and is in excellent condition, you can get the right amount for it. Basic design retouches here and there, and some mechanical repairs can also boost the cost of the car.

However, if your budget is low, at least give it a good wash and wax. After you sell the car, do remember that you need to pay your loan amount. The balance amount might get included in the loan amount of the new vehicle. 

If you don’t want to sell your car, you can lease it. Although leasing is one of the options which we don’t recommend fondly, it is still an option. 

Keep in mind that no matter what option you pick, you need to pay the initial loan.

The bottom line

Getting rid of a car with negative equity can be stressful. 

You need to think very clearly. While trading your old car might get you a new one, it won’t nullify your debt. Rather than searching for an option which will cost you the most, try searching for an opportunity which will be less of a hassle and give you the best results.

It can be calling your lender and asking him for the best option for repaying your debt or paying off your negative equity amount. 

Whatever the option you might choose, knowing a little bit better about how to get rid of a car with negative equity will give you a broader vision on the topic and help you find the best deal.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.