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Being upside down on a loan is bad enough, but when the loan is on a very expensive Ford F-Series truck, the numbers can be terrifying. Out of desperation, one owner called Dave Ramsey’s show for help, thinking her best option may be just to let the repo man come for her truck. Mr. Ramsey had a novel solution, but first, let us present exactly what she said and the background on the truck:
We have an $80,000 Ford F-250. We want to get out of it, but whenever we take it to trade it in or try to sell it, we are offered about $10,000 less than we owe on it. Is it a dumb decision to let it get repossessed?
Mr. Ramsey did not judge the owner or speak down to this caller seeking help. He politely asked for more details at this point. Specifically, he wanted to know the Kelley Blue Book value, who holds the loan, and the outstanding balance. KBB says the truck is worth up to $37K as a trade, or as much as $48K for selling it outright. The owner says that she owes $58 on the truck to her Federal Credit Union.
Mr. Ramsey spoke calmly and respectfully to her and suggested that she visit the credit union in person, ask to speak with the manager, and tell the manager the problem. He said, “Tell the manager, ‘we don’t want to repo this, we want to sell it, but we don’t have the $10,000.”’ He went on to advise the owner to ask the credit union to allow her to sell the truck for $ 48,000, and then to be responsible for paying back the $ 10,000 that she would still owe them for the truck. Here’s why this is excellent advice.
Suppose a person allows their vehicle to be repossessed. In that case, the entity that owns the vehicle (the credit union in this case) will simply move the truck to a quick sale via a repo auction or wholesale auction. This will bring the very lowest possible price for the vehicle. The credit union will then sue the former owner for the difference between that very low price and the amount left on the loan. As you can see, this is the worst outcome for the owner. In addition, the owner’s credit may be adversely affected by the repo action. To make matters even worse, the cost of the repossession will be included in the amount the former owner will be responsible for.
Mr. Ramsey made it clear that when the owner goes to speak to the credit union, the tone is very important. He advised:
You go in there humbly, asking for mercy, asking for help. Say to them, ‘I want to do the right thing. Please help me do the right thing. Help me sell it, and then I will pay you the $ 10,000 I owe as a regular, unsecured note.’
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Don’t Put Yourself In A Position to be Upside Down on a Vehicle Loan
This overview is a good reminder of why very expensive vehicles and long finance periods can often lead a buyer into a tough spot. When you owe more than a vehicle is worth, that is called “being upside down” on the loan. You become trapped into keeping the vehicle. Sadly, many owners in this predicament will go to a car dealership, buy yet another new vehicle, and roll the amount they still owe on the old car into the new loan. While this can sometimes offer a short-term solution, the interest rate is often very high, and the monthly payments don’t change all that much.
Advice On How To Avoid Being Upside Down on a Loan
Mr. Ramsey frequently advises those still establishing themselves to never buy a new car. The depreciation hit is just too much to handle. Here is a helpful list of advice when buying a vehicle:
-Instead of a luxury model or a large truck, buy the most modest vehicle you can.
-When possible, keep the loan to under five years.
-Shop for your loan outside the dealer, before you start to shop.
-Do not purchase a third-party extended warranty. Only buy them from the manufacturer of your specific vehicle.
-Do not finance extended warranties, taxes, or added accessories. These are all budget busters long-term
-Fuel will usually be your second-largest cost of ownership. Buy the most fuel-efficient vehicle you can. This normally means a hybrid.
Having heard Mr. Ramsey’s suggestion, what advice would you offer this vehicle owner who is upside down on her F-250 loan? Tell us in the comments below.
About Mr. Ramsey
Dave Ramsey did not sponsor this story in any way. Torque News does not accept direct advertisements. Mr. Ramsey is the author of a book called Baby Steps Millionaires, which helps young people to understand how they can become multi-millionaires. Mr. Ramsey learned the hard way how to succeed, having built a fortune, lost it, and built a second. His advice is research-based. His team interviewed over 10,000 millionaires and, from the data, built a set of best practices he passes on in his books, shows, events, and podcasts. You can view the original post this story is based on here.
John Goreham is the Vice President of the New England Motor Press Association and an expert vehicle tester. John completed an engineering program with a focus on electric vehicles, followed by two decades of work in high-tech, biopharma, and the automotive supply chain before becoming a news contributor. He is a member of the Society of Automotive Engineers (SAE int). In addition to his eleven years of work at Torque News, John has published thousands of articles and reviews at American news outlets. He is known for offering unfiltered opinions on vehicle topics. You can connect with John on LinkedIn and follow his work on his personal X channel or on our X channel. Please note that stories carrying John’s by-line are never AI-generated, but he does employ grammar and punctuation software when proofreading and he also uses image generation tools.
Image of Ford F-250 by John Goreham
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Source: torquenews.com
