Should I voluntarily surrender my car?

[bchris02]

In January 2014, I made possibly the dumbest decision of my life and bought a new car on impulse with a 75-month loan.

I can afford the car, but the payment has me living paycheck to paycheck. I am currently stuck in a city that I absolutely hate living in and want to save to move, but cannot because of this car payment.

The worst part about this is when I traded my old car in, I had nearly $10,000 worth of negative equity on the loan which was rolled into this one. Once the depreciation of my current car I am $15,000 in the hole on this. A friend of mine owns a dealership and he basically told me my only way out is voluntary surrender. I am not going to be able to sell it nor trade it in until that negative equity is gone. It seems extreme, but unless I want my entire life to be handcuffed by this car payment for the next four and a half years, I don't have any other option. I think a vehicle is a poor reason to have to waste four more years of my life and I am not getting any younger.

If I decided to voluntary surrender, how would I go about it and what long term effects would it have on me? How severely would it impact my ability to rent or find employment when I eventually move to a new city?

Would anybody recommend I actually go through with this?

[Fishindude77]

What you are talking about is a very bad idea. It will wreck your credit, plus you made the deal and should feel some sort of moral obligation to re-pay the debt.

You dug yourself into a hole, now need to dig yourself out of it. Best thing to do would be to cut all unnecessary spending, and pick up additional work to boost income, putting everything possible towards paying this debt to the point that you can get out from under it.

[bchris02]

How much is the monthly payment? How many months to go? More information would help.

$400/month. If I pay the loan off my last payment will be May 2020. It's possible I could get to 2019 and no longer have the negative equity but tat that point it wouldn't be worth selling.

[rennigade]

It seems extreme, but unless I want my entire life to be handcuffed by this car payment for the next four and a half years, I don't have any other option.

So you only plan on living for the next couple years? Suck it up and make the payments. Lesson learned. You wont make that mistake again.

[disneysteve]

bought a new car on impulse with a 75-month loan.

I can afford the car

The worst part about this is when I traded my old car in, I had nearly $10,000 worth of negative equity on the loan which was rolled into this one.

Would anybody recommend I actually go through with this?

Just to be crystal clear, you said something above that is false. You said, "I can afford the car." No you can't. If you could afford the car, we wouldn't be having this conversation.

Car payments should not exceed 10% of your monthly income for no more than 36 months. You took a 75-month loan with a monthly payment that is forcing you to live on the edge. That is not the definition of "afford".

What should you do? Work overtime, deliver pizzas, walk dogs, design websites, sell everything that isn't nailed down, and do every other thing possible to earn money to throw at this debt. Also, slash your budget to the bare necessities - food, housing, utilities, insurance. No eating out. No going out with the guys. No video games. No travel. No cable TV. You've put yourself in a mess and need to clean it up, which you can do for sure. Perhaps take a look at Dave Ramsey's system to help reform your situation.

[Nika]

You seem to make one impulsive decision after the other. You impulsed with this car, you impulsed with a previous car (you had negative equity), and you are impulsing with this move. After you decided you want to do something, and you go and do it no matter how unwise it is.

If you "surrender" the car, they will just sell if for whatever they feel like (likely, much less than you would have sold if for) and you will owe the difference. You'd be in an even worse position.

You have to stop looking for the easiest thing in the moment and do things that are good long term. You have to bring your income up and pay the negative equity down, sell the car, buy a reasonable one for your income, save money for the move and line up a position in a place where you are moving too. That will obviously take time, but you won't be getting deeper in the hole.

[bchris02]

So you only plan on living for the next couple years? Suck it up and make the payments. Lesson learned. You wont make that mistake again.

I agree...it just sucks to have what is basically a six-year prison sentence for something that at the end of the day is only a mode of transportation. You can bet I won't make this mistake again.

You seem to make one impulsive decision after the other. You impulsed with this car, you impulsed with a previous car (you had negative equity), and you are impulsing with this move. After you decided you want to do something, and you go and do it no matter how unwise it is.

I definitely agree I impulsed with the car. Looking back I really can't believe I let myself get into this situation. I had a perfectly working car before that was a couple years from being paid off.

In terms of my move, I have wanted to move for the past four years and would have been able to do it in 2016, but because I bought the car, its probably not going to happen until 2021 or 2022. I really wouldn't consider that an impulse decision.

[ua_guy]

I agree...it just sucks to have what is basically a six-year prison sentence for something that at the end of the day is only a mode of transportation. You can bet I won't make this mistake again.



I definitely agree I impulsed with the car. Looking back I really can't believe I let myself get into this situation. I had a perfectly working car before that was a couple years from being paid off.

In terms of my move, I have wanted to move for the past four years and would have been able to do it in 2016, but because I bought the car, its probably not going to happen until 2021 or 2022. I really wouldn't consider that an impulse decision.

Just a couple of comments after reading some of the other posts.

Debt is not a moral obligation. It's a contractual obligation. If you are unable to uphold your end of the contract, there are provisions (usually not in your favor) to get out of the contract. This is also why you are charged interest. Because there is risk for the lender that you might not be able to uphold your end of the contract.

That said, I wouldn't recommend voluntarily surrendering the car. You have other goals, like moving, where having bad credit or garnished wages could really cause problems for you moving forward.

Remember, when you voluntarily surrender the car, they'll sell it at auction. The car will sell for whatever it sells for (not much) and you'll still owe the difference between what they got at auction, and what you owe, and they'll likely pursue you for the remaining balance (and you'll have no car!).

Impulses aside, the car is something you wanted.

No, it's not on the greatest financing terms, and there's a lot of learning to be done from this mistake, but for that $400/month payment you're undoing the debt and you have a brand new vehicle. It's not the end of the world.

Rather, I would focus on a plan to make more money, and move, if that's what you want to do. Like Steve suggested, look at different jobs, or maybe keeping a second job to save up some money on the side (or help pay down the car quicker). My only other recommendation is to do it in moderation. You shouldn't make yourself miserable just to pay for the car. Try to find a balance.

Beyond that, impulse buying is a serious issue. You don't sound particularly happy right now (hate living where you do, etc) and that can be a root cause of these kinds of actions. I'd suggest talking to a mental health provider if you yourself think you might benefit from talking through this with someone!

Good luck and keep us updated on your plan to pay down the car!

What kind of car is it, by the way? Lots of car guys here on the board

[Weird Tolkienish Figure]

Another suggestion I have seen: sell the car, roll up the negative equity into the cheapest lease you can possibly find?

I've heard this offered from time to time, have no idea how viable it is.

[Jluke]

I didn't see any mention of your budget on here.

Can you give a quick run down of your monthly income and monthly expenses?

As DisneySteve mentioned, I imagine there could be other areas where you can spend less money or eliminate entirely and that money can be put towards the car payment to pay it off quicker. (i.e. how much is your cell phone bill, cable/internet, dining out, Netflix, etc? those are the things you need to cut). You need to accept the reality of your financial situation.

If you surrender/trade the car you're just perpetuating the same mistake you made with the previous car.

Right now you have a little over 4 years left on the loan. Sadly, $400/month is a typical car payment. Pay it off and hold on to it for as long as it runs. Maybe then you'll feel it was a good use of your money.

[Nika]

Debt is not a moral obligation. It's a contractual obligation. If you are unable to uphold your end of the contract, there are provisions (usually not in your favor) to get out of the contract. This is also why you are charged interest. Because there is risk for the lender that you might not be able to uphold your end of the contract.

Debt was historically a moral obligation. It became contractual to some people in this day and age, more so in this country. It is still a moral obligation in many other societies.

You charge interest to have profit and compensate you for the opportunity you may have had to do something else with your money. The rate of interest is related to risk, but surely, if you had a guaranteed 0% return, you would not be landing money out, even if you were guaranteed repayment.

Not that this has any baring on the OPs situation, I just don't like how in our society we move to more and more self serving attitude every year, and think of morality only when we are the beneficiary of viewing something that way.

[Fishindude77]

I just don't like how in our society we move to more and more self serving attitude every year, and think of morality only when we are the beneficiary of viewing something that way.


AMEN ! I'm with you on that statement Nika.

When you take out a loan and sign those documents, you made a promise and gave your word to pay it back per the terms. If you break those terms, refuse to pay, default, etc. you are basically "a liar" and a person that can't be trusted to keep their word or hold up their end of a deal.

[tripods68]

Surrendering does not help you at all.


You must sell your car privately and get as much money. Apply a private loan from your bank to pay the negative equity + $3K beater car for now. This is temporary until you can get yourself out of the mess. As Dave Ramsey would say "consider this as your stupid mistake" and learn from it.

[Weird Tolkienish Figure]

I just don't like how in our society we move to more and more self serving attitude every year, and think of morality only when we are the beneficiary of viewing something that way.

For certain scenarios yes, but certainly giant corporations see debt, lending, and finance as a purely business transaction. Nothing wrong with the average Joe doing the same thing every now and again.

Now if your aunt Sally lends you money, or a community bank or credit union, I would agree.

That being said, I don't think strategic default (aka "voluntary repo") is the best option in this case.

Might be best suited for a ethics/morality discussion.

If you truly want to be ethical, call the lender and see what they suggest? Might be willing to refinance or extend the loan?

If their answer is "F U" then that will be your answer too.

[Fishindude77]

Thing is, this "average Joe" who started the thread has been able to make those car payments since January of 2014, per original thread. Sounds like the new car fun has worn off and it's gotten to be unpleasant and no fun anymore.

That's certainly no grounds to throw morals and ethics out the window and screw over a lender. They deserve to be paid back same as Aunt Sally.