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Hanna’s expensive 2024 Toyota Camry XSE payment became a financial trap when she tried to trade it in for a cheaper car. It’s a story that’s all too common.
I came across Hanna’s story on TikTok the other day, which I knew I had to talk about. The young woman posted a video explaining the frustrating and overwhelming situation she’s in with her car payment.
Many can relate, so here are some specific steps to break free and take back control of your finances. It’s a dilemma that Hannah and many other car owners find themselves in.
Hannah (@hannahhhhhhd) on her TikTok video clip says,
“I went to the Toyota dealership to see if I could get out of my expensive car payment, which I love my 2024 Toyota Camry XSE, but the payment is just a lot.”
“Something I didn’t realize was that if you have negative equity in your car, you can’t just switch to a cheaper, more affordable car and think your car payment will be lower, and that they are just going to let you do that when you have a newer car and a high car payment.”
“So, I had this whole plan in my head that I would get this cute like a Jetta or something and call it a day.”
“I would be happy with that, and I could pay it off faster. So the moral of the story is don’t be like me and get yourself into a high car payment that becomes overwhelming.”
“Because I can’t get out of this expensive car payment, I just need to work on my credit for now, then refinance.”
She’s got a 2024 Toyota Camry XSE—a great car—but the payment is just “a lot.” She had what she thought was a simple plan: trade it in for a “cute Jetta or something” to get out of her expensive car payment. In her mind, she’d be happy, the payment would be lower, and she could pay it off faster.
However, as she learned at the Toyota dealership, it’s not that simple when you have negative equity in your car. This is a situation that millions of Americans find themselves in, and it’s a topic that needs to be addressed with clear, honest, and actionable advice.
Hannah’s TikTok is a perfect illustration of a common and often misunderstood financial trap.
What she’s experiencing is negative equity, also known as being “upside down” on her car loan. This happens when the balance you owe on your loan is greater than the current market value of the car.
It’s an issue that’s particularly prevalent with newer cars and high car payments, as new vehicles depreciate the moment they’re driven off the lot. The value drops faster than you can pay down the loan in the initial months and years, leaving a significant gap between what you owe and what the vehicle is actually worth.
Here’s the thing that surprised Hannah: a dealership is a business, not a charity. Their primary goal is to make a profit. When you attempt to trade in a vehicle with negative equity, you’re not just swapping one car for another; you’re effectively asking the dealership to absorb your financial loss.
They won’t do that.
Instead, they’ll offer to roll that negative balance into your new car loan. Let’s say you owe $35,000 on your Camry, but it’s only worth $30,000 on the trade-in market. You have a $5,000 deficit. The dealership will add that $5,000 to the price of the Jetta you want to buy, which might be a $25,000 car. Your new loan will be for $30,000, not $25,000.
The result?
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Your payment might not be as low as you hoped, and you’re still upside down on a brand new loan for a different car. This is the brutal reality of trying to switch to a cheaper, more affordable vehicle without addressing the underlying negative equity.
But don’t despair.
Hannah said, “I can’t get out of this expensive car payment. I just need to work on my credit for now, then refinance.” While refinancing is a good idea, it’s only one part of the solution. Let’s break down a complete strategy with practical, actionable recommendations to help you—and Hannah—get out of this mess.
The first step is to know your numbers. This is the most critical takeaway. You can’t solve a problem you haven’t fully measured. Go to a site like Kelley Blue Book or Edmunds to get an estimated trade-in and private-party value for your car. Then, contact your lender to get your exact loan payoff amount. Subtract the car’s value from the loan balance. That difference is your negative equity. Now you know exactly what you’re up against.
Once you have that number, consider these strategies.
1. The Refinance and Paydown Double-Punch: Hannah is on the right track with refinancing. If you can get a lower interest rate, it will reduce your monthly payment and, more importantly, a larger portion of your payment will go toward the principal balance. This will help you pay down the loan faster and chip away at that negative equity. But don’t just refinance and sit back. Make extra payments whenever possible. Even an additional $50 or $100 per month can make a massive difference in how quickly you get above water on the loan. This is the most direct way to solve the problem without getting a new car.
2. The Private-Party Sell and Settle: This is a good option if you’re willing to put in a little extra work. Your car is worth more to a private buyer than it is to a dealership. This could be the difference between being $5,000 upside down and being only $1,000 upside down.
The transaction is a bit more complicated since a lender holds the title, but it’s completely doable. You’d work with the buyer to visit your bank and complete the transaction: the buyer pays the bank the payoff amount, and you pay the remaining negative equity out of pocket. In return, the bank releases the title, and the buyer takes possession of the car. This is a great way to avoid rolling the debt into a new car loan entirely.
3. The Strategic Trade-In: If a trade-in is your only option, go into it with power. Get multiple trade-in offers from various dealerships and online retailers like Carvana or CarMax. This gives you leverage and helps you find the highest offer. When you find the best offer, and you still have negative equity, consider “bringing cash to the table.”
Paying off the negative equity directly at the time of trade-in is the cleanest way to move on. It prevents the debt from being folded into your new loan, which keeps your new car payment lower and your new loan from being upside down from day one.
4. The Long-Game Play: Sometimes, the best solution is to wait it out. If your budget can handle the payment, and you genuinely love your car, just keep it. Continue to make your payments diligently, and in a few months or a year, your car’s value will eventually catch up to the loan balance.
This is especially true if you are consistent with your payments and avoid adding more debt to your plate.
Conclusion and a Question
The moral of the story is to be like Hannah and acknowledge the problem, but don’t just stop there. Be proactive and strategic. It might feel like you can’t get out of this expensive car payment, but you absolutely can. It just takes a smart plan, not a simple one.
The key is to address the negative equity head-on, rather than simply trying to bury it under a new loan. Whether you refinance, sell it yourself, or pay it down, you have options. Taking control of your car’s value and your loan balance is the first step toward getting your financial freedom back.
What about you?
Have you ever been in a similar situation with negative equity? What steps did you take to get out of it, and what advice would you give to others? Let me know in the red Add New Comment link below.
Check out my Toyota RAV4 story: I Paid Too Much For My 2024 Toyota RAV4 Because the Dealer Stung Me By Issuing a Verbally Undisclosed Credit Card For an Extra $1,500 Down Payment
I am Denis Flierl, a Senior Torque News Reporter since 2012. My 30+ year tenure in the automotive industry, initially in a consulting role with every major car brand and later as a freelance journalist test-driving new vehicles, has equipped me with a wealth of knowledge. I specialize in reporting the latest automotive news, covering owner stories, and providing expert analysis, ensuring that you are always well-informed and up-to-date. Follow me on X @DenisFlierl, @WorldsCoolestRides, Facebook, and Instagram
Photo credit: Denis Flierl via Hannah
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Source: torquenews.com
