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What to do when you can no longer afford your car

What to do when you can no longer afford your car

November 9, 2016
no longer afford your car
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Buying your own car is one of the best feelings ever. In fact, there are few things better than shopping for your dream vehicle, finding it, purchasing it and then getting inside and taking it for a spin for the first time. That’s why people love cars. They give you independence, they give you power. Unfortunately, the best ones tend to cost a lot. So what do you do when you can no longer afford your car?

How do you know if you can’t afford a car? It’s simple. If you can’t afford the monthly payments that will allow you to pay everything off in 36 months, then you can’t afford to buy the vehicle. Unfortunately, many people ignore this golden rule. If bad luck runs over them, they’ll not only lose the car, but also get hit with a bad credit report.

This happens more often than you think. It could also happen to you. Even if your finances are good at the moment, there’s always the possibility of meeting with a demotion, getting fired or other such unfortunate events. So what do you do? Do you just wait for the repo men to come for your car? You shouldn’t! It’s a lot better to take action!

Accepting the problem is the first step towards fixing it. Bad luck happens, and it happened to you now. The faster you decide to do something about it, the better. Because you actually have several options that can help you out.

1. Refinance your car loan

Refinancing your car is just like refinancing your mortgage. You can try to extend the term, or to refinance at a lower rate. In fact, you can do this even if you don’t have to. Sometimes it might just prove very helpful. If you manage to bring down your monthly payments, part of the problem is already solved.

2. Sell your car

You’re not going to like this option, but it’s a lot better than just having the repo men take your car away. By selling it, you can get at least some of the initial investment back. You may be able to pay off the loan, and you might even be left with some extra cash. That will come in handy if you’re going through hard times.

3. Talk to your dealer

If you don’t want to give up your driver status, you can go back to the dealer and ask him for the possibility to trade in your car for a less expensive one. This may not always work, as the value of a new car depreciates very fast.

4. What if I lease the car?

This is a different situation, because you don’t own the car. But you can return it back to the dealer. If you do it, you will still have to pay the remaining balance, you will lose the money paid upfront and also pay a recapture fee. That’s why it’s better, in such a situation, to just find someone willing to take over the balance payments.

Gary Morgan

Gary Morgan is a Britain transplant. Finance background, enjoys tea, politics and soccer (or football for everyone across the pond). Get in touch with him via email

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