A CAR-FINANCING NIGHTMARE

Author: Patrick Blair

Plans go wrong for lack of advice;
many advisers bring success. -Proverbs 15:22 (NLT)

In my book Faith & Finances, I discuss the importance of getting financial advice from knowledgeable people.  We often make an effort to save money on small purchases, so why shouldn’t we do the same when we make larger purchases?  The excitement and stress of larger purchases like buying a car or home can overwhelm us and make us abandon common sense.

In my law practice, I recently came across a young woman in court who had an outstanding car debt.  Her $16,000 car had been repossessed, but she still owed another $17,000 (called a deficiency).  There was nothing wrong with the repossessed car, so why would she owe so much?  I was very curious, so I had to ask.

She reluctantly shared with me that she had bought a Camaro against the advice of her husband and father.  They told her she couldn’t afford it, but she stubbornly bought it anyway.  In just a few months, she couldn’t make the payments, so she traded the Camaro in for a Chevy Malibu.  Although she lowered her car payments a little, what she didn’t realize was that the trade-in value of the Camaro was $12,000 less than what she had paid for it!

A few months later, she filed for bankruptcy.  After doing so, she voluntarily turned in her Malibu to the lender.  At the debt sale, the Malibu sold for many thousands less than what she bought it for.  It wouldn’t have mattered, except that she failed to qualify for bankruptcy protection.  After losing two new cars in less than a year, she ended up with no car and a $17,000 debt!

This was truly a self-inflicted nightmare with lots of blame to go around.  First, the car dealership acted unconscionably by making a car loan with a $12,000 negative-trade in value!  That ought to be against the law, but sadly it isn’t.  Just know that car dealerships are looking out for their best interests, not yours.

Second, the woman made one bad decision after another.  She ignored the sensible advice of her family.  Maybe even more tragically, she entered into one of the worst car purchase deals on the planet.  If she had brought someone knowledgeable to the dealership, that person would have steered her away from that horrible loan.

There are many stories about personal finance in my book Faith and Finances, including my own failures.  Please see www.faith-finances.com for more blog articles.