Im in a struggle situation financially. I gave the below breakdown to a friend of mine who works in finance, and they told me I should absolutely surrender my car as it will only hurt me in the short term given the additional details. I'd like some opinions before I pull the trigger.
I make $75,000/year before taxes. I take home around $4,200 a month after taxes. My provides a company car where I pay 0 expenses, no gas insurance or maintenance, so I don't need my own car.
my personal car payment is $864 and insurance is $140, so roughly $1,000 a month total expense. I know it's stupid let's move past that.
I have a combination of student loans and collections that total roughly $1000 a month.
My living expenses, including rent and utilities, food, and healthcare/pet total around $2,300 a month.
As you can see, I'm slightly negative in cash flow. My credit score is 550, so abysmal already. Each collection balance total is around $1,000-$1,800. My friend states that by surrending the car, I free up 1k a month to aggressively get rid of all the other debt aside from student loans, which specifically are about $433 a month and currently on time. he said it will probably take 6-8 months before I'm charged a deficiency, which I estimate to be around $15,000, at which I can let go to collection and settle for less, after having put away money over the preceding months. he said in 2-3 years I should be recovered significantly given I have a good job, and will likely be promoted shortly. he said this temporary hit is much easier to handle than trying to suffer through this with 0 cash flow and collections sitting.
please give me your thoughts.
I was told voluntarily surrendering is my best option.
byu/Royale_w_Cheeeze inpersonalfinance
Posted by Royale_w_Cheeeze
19 Comments
Despite what they call it, a voluntary surrender is a repossession.
Your friend is giving you solid advice honestly. That $1k freed up monthly is huge when you’re already negative cash flow – you could knock out those smaller collections pretty quickly and actually start building some breathing room
The deficiency balance sucks but if your credit is already trashed at 550, the additional hit from a voluntary surrender isn’t gonna destroy you much more than you already are. Plus having that company car means you’re not gonna be stranded
Keep in mind there is a high chance that they sue soon after you surrender the car.
Can you sell the car?
If you give back the car you lose control of the terms it’s sold on and they can sell it for whatever and come after you for the difference. They don’t have to settle they can take you to court and get a legal judgment. I would be looking to sell that car if possible to secure it’s actually value when sold.
Surrendering your car doesn’t absolve you of the debt. If you owe more than what it’s worth, or more accurately, owe more than what they can sell it at auction for, you’re still on the hook for the difference. There is no guarantee you can settle for less, and your numbers don’t suggest that you *couldn’t* pay the full amount.
First step should be taking a hard look at your budget and figuring out what exactly is *necessary*. You still have $900 in your budget unaccounted for.
You need to get rid of your car and lower your cost of living. You can’t spend more money than you make, credit isn’t magic. Sunk cost fallacy re the car.
I don’t suppose there is anything else you can do make extra income? That would be greatly beneficial.
The plan sounds reasonable. I think it will let you dig out of the hole quicker. Remember you can negotiate with everyone in collections once you have some cash. You can often get them to settle for less than the balance. Another tool you have is to ask for a forbearance on your student loans, they will accrue but you can clear other debts quicker sometimes.
You could sell the car privately, you still will have negative equity you need to clean up on the balance of the loan but it would be less than the cost of the re-possession. When they take it, they will sell it for lower than retail at auction and you will eat that difference.
Maybe your plan works, but I think going legit might be a better outcome rather than building more collections against you.
What happens if you get laid off in 3 months and lose the free company car? Are you able to take advantage of public transit nearby for commuting to a new job?
dont do it that way. borrow 15k from somewhere and sell the car properly.
It’s a good plan, you should do it immediately. No need to hesitate on this one.
Wouldn’t you lose all of the equity you’ve built from your payments? Instead of surrendering couldn’t you consider selling?
If you are underwater on your car, and you already have a free car option, your friend would be right.
You cannot get rid of (outright ditch) student loans and collections, that’s out of the equation. I take it you may have some emotional attachment to the car? If so, don’t. Expensive Cars, homes, gambling, yolo stock picks chosen out of greed, all earthly bound things and the work of the devil.
I am not a financial advisor. I do believe that would be the best choice unless by some miracle someone is able to give you $50k+ to bail you out.
Regardless, it will feel tough, but know this:
Matthew 6:19-21, “Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal. But lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.”
Philippians 4:19, “And my God will meet all your needs according to the riches of his glory in Christ Jesus.”
That car payment is way too high.. my household makes 250k a year but you’ll see me in a 5k beater.
As others mentioned, look up people’s experiences with said company. If you must have a car you can free up at least 500 by getting something cheaper.
The thing is sometimes you need a car to get to your JOB. It’s an investment in itself, as long as you live within your means.
What’s the car worth, and what do you owe? Some online companies will like carmax or carvana will take on an underwater car, and you pay them off the difference. It’s a shit deal, but you may be able to drop that payment down to get some wiggle room in your monthly budget.
Can you rent out the car on Turo and do gig work or a side hustle to hold you over until you can dig out of the negative equity?
Are the student loans private? We need a more detailed breakdown on the debt to know if this is really the best option.
Find a temp job you can work in your off hours to try to make enough to make up the difference?
It also doesn’t hurt to ask your car loan holder if you can defer payments.