By on December 18, 2012

Hi there, I would like some advice on how to sell my new car. I bought a 2011 Subaru Outback Sport a little over one year ago and quickly realized that I made a huge mistake.

It’s not anything to do with the car, in fact, I love the car. It has everything to do with the fact I “traded” an almost new Mazda3 for it and now I am “upside down” and I have found myself in a pickle.

I have come to the realization that I cannot afford the car any longer with gas prices going up and up, the payment itself, and the economy.

So, do you have any advice on how to sell it QUICKLY? I owe more than the car is worth and that is where my confusion comes in to play. How do you sell a car that you owe more than it’s worth?

Steve Says:

That’s easy!

You don’t!

Keep what you have. Have gas prices gone up? Then drive less. Are you upside down? Then honor your commitments and eventually you will find yourself right side up. Want me to pull a Judge Judy or Dr. Phil on you? No thanks. I pass.

The truth is that virtually all of us make a dumb financial decision at one time or another. We buy a car that’s too expensive… or a house… or find ourselves doing business with a douchebag. Life happens.

In your situation I would propose less leisure time and finding more work. Yeah, I know the economy isn’t a well oiled machine at the moment. But it hasn’t been that way since 1999.

Your Subaru should serve you well for a long, long time should you chose to become a long-term keeper instead of a debt ridden trader. I would pursue a long-term investment in a debt free existence.

Good luck!

Sajeev Says:

You wanna know how you sell a car that you owe more than it’s worth, QUICKLY? Do you really wanna know?

By grinning, bending over and taking it…well, you see where this is going.

We haven’t walked a mile in your shoes, so we sure as hell better not be judgmental. So my advice? Sell your new ride and drive an old hooptie. Time to punish yourself: trade it in for a used, $10,000 family sedan from a dealership with a reputation for taking in clean used cars. With any luck, that purchase will negate the thousands in negative equity so you can make a fresh start. An older Camry/Corolla is ideal, both on their quality reputation, fuel economy and fantastic resale value.

Learn to love your Cam-rolla, and fix it on the cheap too. And when you are in the black, no longer in your current circle of debt, don’t make this mistake again. Learn from your mistakes.

We all gotta do it, and we’ve all been there.

Get the latest TTAC e-Newsletter!

31 Comments on “New or Used: Debtors Prison Edition...”


  • avatar
    pdieten

    Sajeev’s advice works. In 1998 I made the mistake of buying a nearly new V8 Dodge Dakota pickup, putting down only $1200. Very expensive and hard on gas. After three months I’d finally had enough. I found a dealer who was willing to take it in trade for a 30K mile ’97 Pontiac Sunfire. Monthly payments were lower, fuel bill was lower, insurance was lower. I drove that stupid little car for NINE years, because it was as reliable as an anvil and I wanted to avoid a car payment for awhile. I was satisfied with my decision.

  • avatar
    Landcrusher

    Without knowing your fuel bill, or the number of miles to work, or how upside down this is making you each month it’s hard to say the best financial move. Also, do the actual math on your fuel bill.

    Dave Ramsay books and classes can help your financial problems. Compare the car story with other experiences. If you do the same process with other big decisions (relationships, jobs, hobbies, whatever) you might try a counsellor, clergy, or wiseman to change that. Do the Ramsay thing though.

  • avatar
    PrincipalDan

    Either you keep what you’ve got and keep paying or you take Mehta’s advice. Accord/Fusion/Malibu/Camry/Altima/Sonata in fact you might want to compare lists of “Cars with the highest depreciation” to True Delta’s reliablity data. Try to find the intersection of value and reliability.

  • avatar
    Dan

    How much are you really going to save when you’re starting from a 2 year old entry level Subaru?

    Trading $15,000 of 2 year old Subaru for $10,000 of 6 year old Fusion isn’t smart money.

  • avatar
    krhodes1

    Sajeev,

    Your advice makes no sense to me – that is just going to make him MORE upside down on the new to him used car. Let’s say he owes $18K on a car that is only worth $15K. He still needs $18K to payoff the note. So how is he going to get the $18K, AND another car, AND reduce his monthly payment? The dealer is going to give him even less than the $15K the car is notionally worth, so then you end up paying $15K for a $10K car, and have a potentially less reliable car, probably at a higher interest rate on a used car loan, and with an only marginally lower payment.

    So the best answer is to do as Steve says and suck it up and keep paying for the Subie. Or find the difference so you can sell it and get out from under it without being upside down on another car. A couple possibilities: the Bank of Mom and Dad (painful, but you gotta do what you gotta do). Borrow against a 401K (risky and a bad idea but better than ruining your credit by defaulting on the car). Another possibility, if you have decent credit maybe you could refinance the car to a longer term to reduce the payments – interest rates are also substantially lower than they were a year or so ago. Credit Unions seem to be big into this – I keep getting 2-3% offers in the mail. Probably more expensive in the long run, but if it gets some breathing room…

    I’ve been there, a decade or so ago I had to sell a car that was not paid for – I was not quite upside down on it, but it needed to be gone for various reasons, and I owed far more on it than I had cash on hand. I went the Bank of Grandfather route, thankfully I have excellent credit with the Old Man. With the title in hand, I was able to sell it for a very good price and paid him off within a couple months. In my case I replaced a $20K VW with a $2.5K Volvo.

    • 0 avatar

      “then you end up paying $15K for a $10K car, and have a potentially less reliable car, probably at a higher interest rate on a used car loan, and with an only marginally lower payment.”

      I admit it: I wanted to give a counterpoint to Steve’s advice.

      I also admit it: My assumption completely hinges on the dealership making a lower payment via the wiggle room on the $10,000 car they got for $8-ish, ideal financing terms and demand of used Subies in this area.

      BUT another point we are forgetting: a Cam-rolla gets better fuel economy, which is what the OP needs. Combine the marginally smaller monthly payment with the likelihood of overall lower monthly expenses (assuming the car has the usual reconditioning at the dealership) and possibly lower insurance premiums, and this could indeed work out.

      Tell me what you think.

  • avatar
    chicagoland

    Gas is now actaully going down, so save some $ there.

    I am in similar stuation, I let a sore back from driving make me sign my life away twice. Finally went to a doctor! But I got a Honda and not a low resale brand.

  • avatar
    burgersandbeer

    I think you have to keep it until you are right side up. Depending on where you live Subarus should have decent resale value. With used car prices where they are, I can’t imagine this taking too long.

    After you can sell it without spending money in the process, I’m thinking more along the lines of a $5,000 car. And I agree with the earlier comment about finding the intersection of reliability and steep depreciation. Ford Escape maybe?

  • avatar
    greaseyknight

    Lets look at some numbers, I’m guessing that the car was about 30k which equals about a 800 dollar a month payment. Those of you who are saying keep the car, the problem is that is guy is in over his head in payments. Adding in gas and insurgence, I’d say he’s looking at 1k a month. Find a 5k or less beater, that gives him about 650 a month in breathing room. To sell the vehicle, take out a personal loan for the balance between the estimated sale value and the balance on the loan, have that money ready for the lienholder when the car is purchased. I’ll echo the recommendation of Dave Ramnsey, he knows his stuff.

  • avatar
    danio3834

    Anytime you make a deal with a dealer, you’re going to lose a chunk. Your best bet to not lose out even more will be to do as Steve says and tote the note!

    The mother of a friend of mine was probably the most terminal trader I’ve ever met. After a divorce she was left with an unpaid few year old Grand Cherokee, then started on a downward sprial of trading down (for the same payment!) until she ended up in a new Aveo, but still paying the notes cumulative of the previous vehicles. She then went bankrupt, so then we all toted the note!

  • avatar
    kvndoom

    He needs to provide how much he owes, how much the dealership offered him, and his payment terms.

    I sold my 2011 Accord to Carmax for 21k when I owed 19.3 so I profited from that to a small extent. I then financed a 2006 TSX for 11k + TTL through my credit union, practically halving my payments for 48 months, versus the 44 I had left on the Accord. My goal is still to pay it off in 2 years or less though, because I’m sick of car payments. It used to not bother me, but the past 12 months has changed my opinion considerably.

    Now I have 4 doors instead of 2, slightly better gas mileage, UNBELIEVABLY better seats, and still get to enjoy a buttery smooth Honda shifter. Sure I miss that V6 torque, but I’ll live.

    • 0 avatar
      28-Cars-Later

      I like your financial jujutsu… those Accord coupes go for stupid money at the auction.

    • 0 avatar
      kvndoom

      Re: payments- I have had to explain this to my fiancee as “giving yourself a raise.”

      Before October this year our combined car payments for the two cars was $700.

      Once I got the TSX, that dropped to $500 (I pay a little extra on all loans). I told her, “we just gave ourselves a $2400 yearly tax free raise ”

      Next spring we are going to combine our tax returns to pay off the last $5k of her Focus. That will be another $200 per month, effectively a $4800 tax free raise

      In 2014 I plan to double up + use tax refund to pay off the Acura. Once that’s done, that will be 700 less per month than in September 2012. Voila, $8400 tax free money per year! You know how long it would take to get that kind of raise from a job? Screw it- pay off the damn cars and give yourself that raise!

      Not to mention the trickle down… With more cash every month, we will not need to finance other shit. Need a new dining room? Save for 2 or 3 months and pay with cash. Appliances? Same thing. Save now and buy it later, instead of buy now and pay later. We are hell-bent on getting out of Debt Prison.

      • 0 avatar
        28-Cars-Later

        I like I like. The most impressive thing I ever did along those lines was buy my new(er) car at the auction in 2010, I floated a higher interest (15%) 10K note for the bulk of the $12,900ish out-the-door costs. I paid this down to 5ish in about a year, and I then took one of those 0%/12 month credit card offers from *their* CC for about 90% of this cost, and paid the remainder in cash to close out the note. It was nice sitting back paying 0% on my car this past year until two weeks ago when I finally paid it down.

        The only gotcha with such a maneuver as I found out your credit will drop 75-100 points when/if you max out a card because the banking industry doesn’t see/care what you did with the money, they see it as a maxed out account.

  • avatar
    28-Cars-Later

    In these parts, used Subbies are pricy, and while I am no expert on them, I am aware they require a fair bit of maint to be tip top, at least on the 08 and earlier crowd.

    My mechanic picked up a stripper 05 Forester/70Kish last year at some indie auction for right around 9K plus fees, to which my jaw dropped. This one turned out to be the pick of the litter as he found dealer documentation in the glovebox of a timing belt and some kind of differential repair (seals?) within the last 10,000 or so miles. Had a very hard time selling it as it was too old for some banks to finance but too expensive for most people (around here) to buy with cash. I think he took a slight loss on it to get rid of it.

    • 0 avatar
      duffman13

      I had the same problem selling my last car, an 04 RSX-S for a little bit more mileage but roughly the same price last spring.

      And I’m in the greater DC metro area where people still have jobs and money.

      Two buyers fell through because their banks wouldn’t finance a car that old. Thankfully i was in a position to sit on it for a while if need be, and it only took me 3 months to offload.

      • 0 avatar
        28-Cars-Later

        The perils of cars which retain an inordinate amount of their value. I’m surprised you had such difficulty with a popular small car, but I suppose though at the right ‘bargain’ price your high value used cars move quicker than say a less appealing car for similar money.

        When I read Steve Lang’s auction posts these days I shudder at the 200K beat Camcords doing 5s and 8s, its just insane.

      • 0 avatar
        duffman13

        Around 10k is a rough price point. It’s high enough that most people who are not making near-6 figures don’t have that amount laying around and will need to secure financing. Most people looking at $10k cars that pay cash are also shopping for their kids, and are thereby much more picky, especially when said car is sport or fast looking.

        The latter was my real problem, I live in a wealthy enough suburb I had countless high school kids interested in the car. The parents balked at (in this order) the power, the manual transmission, and the price. Knowing what most kids with powerful cars in my high school did though, I’d be inclined to agree that it might have been too fast for most.

      • 0 avatar
        28-Cars-Later

        I’m not up on my Acuras but I am aware of what the “S” designation is but I hadn’t even thought of it as more difficult to sell the ‘tuner’ version to parents as opposed to the base RSX w/auto.

  • avatar
    duffman13

    I tend to be in agreement with the camp that says keep the car.

    Any trade-down is still going to leave you with a roughly similar payment, and a much less reliable car.

    Maybe sell some posessions you no longer need on the list of craig, or try to find some odd-jobs you can do to make ends meet.

    Another Alternative is to sell privately and buy a $5k 7-10 year old Accord I4 with an unknown maintenance history with the cash. However, then you are at the mercy of the bank to reduce your payments by giving them a large lump sum, and If my last car loan was any indication, I still owed the same amount every month regardless of any extra I paid, I just got done paying sooner.

  • avatar
    corntrollio

    If you’re really going to sell it (and take the big hit on an underwater vehicle, rather than riding it out), then I would think an even cheaper than $10K car. Maybe a $5-6K Civic, although many dealerships would probably list it $1000 higher, so you should try to deal.

    It’s really hard to say whether you’re better off taking the hit or not without knowing some numbers, but it’s rare that you’d be better off by serial trading. Part of the reason the car is underwater is because an almost new car had its depreciation rolled into this loan.

  • avatar
    gslippy

    Here’s my story on this subject:

    My 05 Odyssey was a lemon (won a lawsuit and received a small check), but I was still paying $535/month for it while hating that car every day. Moreover, I really couldn’t afford the payment at the time.

    So in 2007 I traded it for a 98 Grand Caravan with 99k miles on it. The dealer offered me $500 less than I owed on the Odyssey, so I paid him $500 MORE than he was asking for the Caravan just to get out from under the Honda. I left with a paid-off car.

    I kept that old Caravan for 3 years until it finally died, and never regretted making that deal.

  • avatar
    mnm4ever

    I looked at a Subaru Outback Sport in 2010, brand new the sticker was like $22k, this is not an ultra expensive mistake here. Even the new ones are cheap. And it doesn’t even get horrible gas mileage, there are not that many cars available used that will do significantly better and still cost less. And he will end up even more upside down on an older used car, there is a good chance no matter what he buys his payment will end up around the same anyways, effectively eliminating any gain.

    The Subie is a great car, it does almost everything well, its reliable, will last a long time and will hold good resale value as it ages. Cutting out lattes or cable tv will save you more money than trying to trade out of an upside down car. If he has already cut every other expense in his life down to the bone, then working 10 hrs a week at a part time job will cover the entire car payment. Suck it up and keep it, and keep it very well maintained mechanically and cosmetically so it lasts you a decade or more and you get your money’s worth for all the effort.

  • avatar
    gearhead77

    Been in this situation before and was able to get out from under the cars, but just barely. In hindsight, I should have just kept the cars. Sold a 95 Cougar V8 with 70k in 99 after having it for two years and wound up with an 88 Acura Legend 5 spd with 110k. The Legend was cheaper all around by a bit and a much more enjoyable car really.I bought it with a 6/6k month warranty.

    Which was good, because not one of it’s previous 6 owners (found out when trying to get rid of later, this was before Car Fax) decided to change its timing belt, which broke at 115k almost exactly. Had it fixed (twice because the first shop effed it up bad) under that warranty, easily $1000 it could have cost me, nearly negating any “savings” I had made.

    My younger brother has never beaten this addiction to trading cars and upside-down. He’s currently driving a 2007 Accord V6 EX-L now with over 100k on it after he bought it with 50k , after he traded a 2007 EX V6 Accord with about 70k in on it. Both were used and he paid about 2 years on the one before trading it for the other. I couldn’t believe it. He can’t get out from under it because he took a 6 year plan on it, even with Honda resale. He’s kind of shopping for a V6 Mustang now. He says’s he can’t trade and he knows it. That has never stopped him before…

    “Negative Equity” sucks, but the best thing is probably to hold on to it. You know what you have in this car, trading it on an older, higher mileage car could be a gamble in terms of reliability,etc.

    Maybe your situation could allow for an alternative way to save money? Mass transit, a bike? A small scooter for those short trips? A place near me has a 2010 Aprilia Scarabeo SR50 with only 25 miles on it for half the price of a new one and I’ve been really tempted to get it. But I have a sign and drive Altima lease that has way under the allotted miles on it, so I’d save nothing in reality.

  • avatar
    rpn453

    I’d post it privately for the amount you owe, firm. If someone wants it for that, sell it. If not, keep making the payments and cut back on other expenses and/or get another part-time job. Continually update the price to reflect the declining debt amount until it’s either sold or you get your head above water.

  • avatar
    wstarvingteacher

    Seems that most of the alternatives to keeping it and getting another job to help pay for it have some sort of bad impact on your credit or try your patience miserably. I never have the patience to do a good job selling, but: I think that selling to an individual is the second best answer. The best one is to ride it out and then to drive it till the wheels fall off.

    I say that but seem to be unable to do it very well. I traded a 2007 Saturn Vue with the Honda v6 for a six speed manual demo Nissan cube in 2010. Payments got lower and fuel economy increased. it isn’t as fancy but it’s a great car. I probably wouldn’t have done that but I had just had enough of saturn vues when my first one threw a timing chain with no warning and I had just found the 2007 had a $1200 timing chain coming up (according to Honda). We should have still been driving the excellent SL’s that Saturn first camme out with. I guess being P_ss_d off can be a stimulus to doing things. I now have lower payments by a bunch and happy with the new car. Now at 68kmiles and no problems whatsoever.

    Look around. If you cannot stay with the subie there is probably a salesman somewhere willing to sell you something plain for less.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India