It needs a catalytic converter, a repair that the mechanic tells the owner could cost around $3,000. The driver says she has about $1,000 cash to get into a new car. The thing is, she still owes $15,000 on the 2016 Buick Encore. The kicker is that she’s been paying $526 a month on it for four years, and no one will let her roll over the negative equity into a new loan. One local dealer told her to just let the SUV get repossessed.
So she called Yusef Benallal, an independent car dealer and vehicle loan consultant operating out of Legacy Motor Cars in Georgia. He often helps drivers work out how to get out of bad car loans. Honestly, he tells her, that’s what she should do – surrender the car to the financial institution. He moved on to another option, though, and questioned several aspects of her narrative.
First, he said, her loan numbers don’t seem to make sense. How was it that she paid $35,000 for a 2016 Buick Encore? And how is it that she still owes more than it’s worth?
Well, she responded, the retail on the SUV was $27,000. After adding the warranty and “all that,” the sales agreement came in at $35K.
The driver says it took a month to get approved on a high-interest loan. The sales staff let her use the car for a month while they looked for someone to sign with her. Benallal listens intently, commenting that it’s abnormal for the dealership to let her have the car without buying it.
Still, though, $526 a month at 19% interest on a credit score of 579 approved via Santander, with a $15,000 balance, starting at $35K…things just don’t seem to add up right to him. What’s the loan term? She doesn’t even know, she tells him. In any case, she’s trying to get out of Encore ownership without fixing the SUV.
In the end, he recommends she take her $1,000 cash and fix the Encore. “If I’m being honest with you, you shouldn’t get into a new car because it’s going to affect you in a bad way,” Benallal tells her.
He seems suspect of the $3,000 repair estimate…which I second. I wrote service for more than a decade here in the Midwest, and that sure seems pricey. If the mechanic is pricing OEM parts, there are alternative suppliers. He might also have included estimates for other repairs that the driver didn’t mention in the call.
Despite the bad car loan and her underwater status, Benallal tells the Encore owner to fix the Buick, pay down the balance, work on her credit, and land in a better financial position to get a better car at a better rate.
There’s more to the story, too – the driver apparently has late payments on her credit report, keeping her score sub-550. Benallal tells her it will take at least a few years of better habits to build her score up to the high 600s and qualify for a credit union car loan as opposed to an entity like Santander.
Benallal says he doesn’t know her, so doesn’t know what situation she’s facing at home, or what life has thrown at her, but walking away from the Buick and into “whatever, whoever” will approve her in her current financial state isn’t worth the result. Spend whatever cash she has on the repairs and work to build up her financial profile, the car dealer says.
I couldn’t agree more, for what it’s worth. I’d also add that she might be better off saving whatever she can and buying a cash Toyota Camry that’s in good shape. Heck, that $526 a month for four years adds up to more than $25,000. It’s a real shame that so many Americans get tangled up in these loans.
