CAN I HIDE NEGATIVE EQUITY
Hello, I have a 2003 Yukon Xl Denali, owe $40,000, yes $40,000. Has 51,000 miles. I need to get a lower or about equal monthly payment (current 782/m) and better gas mileage (current 12-14). Some dealers say I should lease a higher end vehicle to "hide" some of my negative equity, which is at about $16,000. Lease it for 3-4 years and turn in the keys at the end. Some say I should just keep it, which would be 5 more years. I was negative when I traded in April 2005 for this vehicle and it just created a dirty snow ball effect that is making trading difficult with so much negative equity. What should we do?
[Unsigned]
Unsigned,
First learn this rule. “Don’t take advice from a salesman.”
How can you hide negative equity? The dealer will know; the lender will know; and you will know. I would not count on selling to a totally unconscious buyer for $16,000 more than the vehicle is worth. Chances are even less of finding a dealer that will lease you a vehicle with $16,000 negative equity and let you just “turn in the keys.” I have never heard of a legitimate way to make negative equity just disappear. If you find one, get back to me. With that knowledge, I will make both of us rich.
Eventually, you will have to confront the negative equity. Now is the best time. If you are a homeowner, an equity loan might lower the monthly payment and the interest rate. PRUDENT use of teaser rates on credit cards could buy some low interest time. Trip planning that reduces usage can lower operating cost.
Replacing the vehicle at this time will add “new car” depreciation to your negative equity. Bite the bullet! Work more; drive less: forgo some luxuries.
Sixteen thousand dollars is bad enough – don’t make it worse.
Everybody’s Uncle
