If you’re struggling to make ends meet, your problem may not be too many lattes or dinners out. It may be sitting in your driveway.
Your monthly car payment is the tip of the iceberg.
Counting gas, registration and taxes, depreciation, tires, insurance and finance charges, Americans spend $8,700 a year on average — $725 a month — for the privilege of owning a typical midsize sedan, according to AAA, and more than $10,600 a year for an SUV. If you’re struggling with bad credit, the increased cost of financing and insurance will push those numbers even higher.
In my latest for NerdWallet, how to determine if you have too much car in your driveway.
In 2012 I financed a 2008 Honda from the credit union. The car was priced at $16500, with a trade-in, the loan came to $22000.
GAP coverage insurance was factored into the loan payments ($464 a month). In 2015 the car was wrecked and deemed a total loss by the insurance company. They paid the “book value” of $8860 to the credit union. However, $6000 remained on the loan. The GAP insurance paid $3000 and now the bank is saying I owe the remaining $3000. They said the GAP would only pay a percentage of the balance because the car was “over financed” back in 2012. This seems to be unfair, and I feel like the bank should get the money from the GAP provider ( per the contract that was signed when the car was financed). Is it possible for the GAP provider to refuse to cover the whole balance left on the loan? I will be meeting with the loan officer next week to discuss payment options.
I strongly feel that I should not have to pay the balance. Do I need a lawyer?
You’d need to read the GAP contract, but these policies typically don’t cover the negative equity from a previous vehicle you rolled into the balance of the new loan. Also, regulation is haphazard, at best. If you can prove you were misled about the extent of the coverage, you could make a complaint to the National Association of Credit Unions and perhaps the Consumer Financial Protection Bureau. If you don’t pay what the CU says you owe, though, your credit likely will be trashed and you could get sued. Sorry I don’t have better news for you.
In my opinion I think if you even have a car payment at all you have “too much car”. If someone took out a 10k line of credit to buy a giant television we’d call them crazy, but people do it all the time for cars and for some reason it’s considered perfectly okay. I get it, in this day and age you literally NEED a car, but if you have absolutely no money you better be getting the cheapest car you can find. When I was 18 I got my first car and it was an $800 1989 Chevy Beretta. It was a piece of crap but it got me where I needed to go. And I paid cash for it – money I had saved up over the years doing a paper route as a kid.
If you can’t figure that out as a full grown adult then, damn, I don’t know what to tell you.