How to Sell an Upside Down Car (Dealing with Negative Equity)

How to Sell an Upside Down Car (Dealing with Negative Equity)


Hey guys! Melissa Blevins with MelissaBlevins.com, your
personal finance coach for the free-spirited nerd. So today we’re gonna be talking about negative
equity and how to get out of an upside-down car. I know you clicked the link because you’re
thinking about it and because you may have looked online and seen “Oh Crap…my car is
not worth what I owe on it!”. That’s what it means to be upside down. It’s under water. It’s Broke. It’s not fun. My husband and I purchased a brand new vehicle
(stupidly) years ago and decided that, after financing $48,000 and $733 minimum monthly
payment, that we were done. We were done basically paying a house payment
for a car. So we walked into our bank…or our credit
union. We sat down with our banker, and we explained
our situation. I asked them…I said, “Will you please pull
the NADA value of my vehicle?” And so they did. Being a former banker, I know that NADA is
how the banks and credit unions loan money on vehicles. They actually don’t even use Kelley Blue Book. Kelley Blue Book, or KBB, is garbage, in my
opinion. It’s not an accurate valuation of a vehicle. If banks and credit unions are using KBB,
then…I’ve worked at a few different banks, and none of them use KBB. So if they used it, I might feel differently
about it. But car dealers tend to use KBB to their advantage
when they’re offering trade values for your vehicle. So let’s say you walk into your bank. You talk to your banker. You say, “Ok…I’m upside down $5000.” They told you the value of your vehicle, and
you’re upside down $5000. If you’ve been looking at vehicles, and you
have an idea of what you’re looking for, talk to them about it at that time. Say you found a 2009 Buick Enclave, and it’s
$12,000, and it has 90,000 miles. They can plug that into NADA Retail or NADAguides.com
and give you a retail value on that as well. And sometimes the bank or credit union will
loan 125% of the retail value. So that’s good to know going forward because
if you are upside down, sometimes you can get a little bit of that negative equity squeezed
in there. But I would always recommend gap insurance
in that instance…always. So…you should also know….Side note….that
your insurance company likely offers gap insurance for significantly cheaper than the car dealer. Do not purchase gap insurance from the car
dealership. Purchase gap insurance through your insurance
company. And you will save hundreds of dollars. So that was a little side note. A little rant. So you’re gonna talk to your bank. You’re gonna get some options. The next place that I would go after having
talked to your bank, and you kind-of have an idea of how much money you’re gonna have
to come out of pocket, I would take my vehicle to Carmax and have them give me a valuation
offer for it. So Carmax will offer to purchase your vehicle
at a set amount. It’s no b.s. It’s no haggle. You go in. It takes about 45 minutes for them to value
your car, and you can leave there with a sheet of paper that says they will buy your car
for X amount of dollars within 7 days. So you wanna make sure you’re at the end of
your decision-making process before you do that. But take that piece of paper…fold it up,
put it in your purse, and now you’re gonna drive to the car dealership where you were
looking at a vehicle. And you want to not give away too much information
about what you are looking to do. Walk in there and just say, “I wanna test
drive this vehicle.” And they will ask you, “Oh do you have a trade?” Don’t tell them that you have a trade yet. Don’t lie to them, but say, “You know? I’m not sure what we’re gonna do yet.” So go in, test drive the vehicle.See how you
like it. And make sure you’ve got your preapproval
from your bank as well. Then you can sit down with them and explain
to them that you want to negotiate a price for that vehicle. Try to negotiate a price for the purchase
of the vehicle without your trade included at first. Car dealers are gonna hate on me for this,
but that’s what…you know…it’s what we have to do. We have to protect ourselves as consumers. So see if they’ll negotiate a price for you
and then if they are really persistent about if you are going to be trading your vehicle
or if you feel weird about not telling them then just let them know. Also let them know that you did get a valuation
at Carmax, but you’re waiting to see what their offer is going to be. Don’t share the offer from Carmax just yet. So do that. You’re going to get an offer. They’re gonna write down some numbers, and
they’re gonna want you to sign something committing to purchasing. Don’t do that. Ask if you can take test drive the vehicle
overnight. Take the car. Go to a competing dealership with the car
and…with the other dealership’s vehicle, and tell them that you’re looking at this
car, but do they have anything similar? And sit down and do the exact same process
with that other dealer. If you have to do this at several different
dealers that day, do it and then take the car back and go back and forth between the
dealers. I know it sounds like a lot of work, but I
can promise you that you will get a better deal. They will compete for your business if they’re
good at their job. And you will get more money for your trade
than what you would have. I actually was able to get $500 more than
what Carmax had offered me, but, strangely enough, the Honda dealership that I purchased
my vehicle from (brand new) was offering me $2000 less than Carmax, and they said, “Oh! We want your vehicle!” Because we bought it brand new at that dealership. It was 2 years old. And it had been serviced faithfully, so they
could put it as a certified pre-owned vehicle on their lot for about $4000 or $5000 more
than what they were offering me. So I walked away from that dealership. We’ll never do business with them again. But I hope that these tips have helped you
a little bit to understand the process of getting out of a vehicle with negative equity. Obviously you gotta have some cash. I would never recommend using credit cards
to offset negative equity…not even the 0% credit cards because …it’s just not a good
idea. Unsecured loans are really hard to get unless
you have AA+ credit, and the interest rate is usually very high on unsecured loans. So talk to your bank about your options. Go to a Carmax. Get your valuation. Hide your valuation! Tuck it in your pocket. Keep it. Save it up. And just keep that nugget of knowledge for
you as fuel with the other dealers so that you can get the best deal when you’re trading
out of a more expensive vehicle. So I hope you liked this video. Please take a moment to subscribe if you found
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