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Smart Shopper Owe more than it's worth... I'm upside down and I can't get up!
1160 messages, Last post on Oct 22, 2009 at 7:11 PM
You are in the Smart Shopper Forum. Your Hosts are kirstie_h & tidester
| MSRP for the type of Explorer this guy had was about $48,000. Add in the depreciation of a few months old Kia Sportage and voila, instant major upsidedownness. | |
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....... As soon as you say the word "Kia" you have instant negative equity, even if you paid Cash .l.o.l.. Terry. |
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On a 5 year loan you have to pay 30% down [including sales tax] to always be above water. Since most cars depreciate 47-55% [US versions as high as 63%] in the first 3 years. |
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Apples and oranges. The down payment goes against the "street price"; the depreciation is calculated off MSRP. Haggle right, pay 10-15% down on a popular car (Sienna, Outback, Pilot) and you're right-side up from day one and likely to stay there. No 72-month loans, please. I put 8% down on a cheap Sienna a year ago and Mr. Finance didn't even TRY to sell me GAP insurance. Of course, the sales tax money is GONE immediately. All the tales of woe here just illustrate Steiner's Law of Credit: It's expensive to be poor. And it's even more expensive to make bad decisions. -Mathias |
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| By paying Full MSRP plus a street price, meaning the depriciation hit was even harder because the car was worth less than what he paid for it right from the beginning? | |
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| Not sure I follow your reasoning on gap insurance. To give you an example, I bought a car at the beginning of 2003 for cash (100% down, nothing a month for 48 months). Four months later it was written off, I'm really glad I had gap insurance. In your case you stand to lose your downpayment plus suffer early depreciation even though you got a great deal on the vehicle. | |
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| Grand, gap insurance is worthless if you're right-side-up on the car (i.e. owe less than its worth). I interpreted steine's comment to mean that the F&I guy didn't try to sell gap to him because, given the size of his down payment, he was right side up immediately, and hence had no use for gap insurance. | |
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| Gap insurance is not worthless if you are right side up on the car. In my case, if I had not had gap insurance I would have received around $16000 from my insurer. With gap insurance I received a little over $20000 and was able to replace my essentially new (4 months old) car with a brand new car. | |
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I believe you are refering to Waiver of Depreciation insurance rather than GAP insurance. I've learned on these boards that this excellent type of insurance does not seem to be available in the U.S. GAP insurance is only relevant when you owe more to a lender than a vehicle is worth. I've seen this a lot working with leases: Selling price $24,000. Payoff at time of insurance write-off $20,000. Value of vehicle at time of write-off $17,000. GAP insurance will take care of the shortfall from $17,000 to $20,000. Waiver of Depreciation insurance will pay the $4,000 remainder to bring the customer back to what they originally paid. |
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| Thanks for the clarification Landru2. My aplogies to jratcliffe, it looks like we were talking about two different things, sorry. | |
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