Monday, November 27, 2017 was the happiest day of my life.
I sold my 2015 Honda Crosstour and only had to pay in $15,000 to do it.
Yes, you read that right.
I paid $15,000 to sell my car.
Now, this may sound silly to be so happy to pay to get rid of a car, let me give you the back story on my negative equity.
First, let me describe what negative equity is.
Negative equity results when you have an asset that is worth less than the loan value on that asset. Or in more words, negative equity is when you buy something and it loses value faster than what you repay it.
This can happen in multiple ways, the most common way is when people buy a new car and it loses value really quickly or a house that you owe more money on than what it is worth. (FYI- a car as an investment is a terrible idea).
Another way this can happen is if you co-sign for someone that already has negative equity.
This is what happened to me, I’ll dive right in.
The mistake begins
When I was twenty-six years old, I thought I knew everything.
I had my apartment and a career. I was living as well as everyone else I knew.
Now, when I was 26-ish I made a HUGE mistake. I learned the hard way what negative equity on a car meant. I made the fatal decision to co-sign a car loan for a “friend” in order to help get a lower interest rate.
“If your name is on the loan the interest will go down SO much. Please help me, I promise I will make all the payments.”
Foolishly, I did it.
Lessons are learned the hard way
At twenty-six I was also super naïve.
I didn’t really know what negative equity was- although I figured it was bad.
It also never occurred to me that this person could be lying.
Especially someone that I thought I knew so well.
Anyway, I now “owned” a brand new Hyundai Elantra but I was driving a 2002 Toyota Corolla.
Makes sense, right?
No it doesn’t.
As you can imagine, this relationship fell apart shortly after this transaction had happened.
Leaving me with the new car and $20,000 of negative equity.
That’s right… $20,000.
After a messy argument of “It’s not my car, it was a gift from you, so you need to pay it” and trips to visit a lawyer- I had the car in my possession along with ALL THE DEBT.
So, not really knowing what to do, but knowing I could not pay for this car and risk the possibility of this “friend” coming and taking it from me in the middle of the night,
I had no choice.
I got rid of it.
I traded it in for a brand new Honda Crosstour, right off the showroom floor with 33 miles on it- I needed to get a car that would allow a loan high enough to cover all the costs, from what I was told.
(I am still not sure if it was the best advice- but it was all I had at the time.)
A $30,000 car tacked with the $20,000 of negative equity left me in a $50,000 hole.
I wanted to die.
“I’m a teacher, how am I ever going to afford a 7-year loan of $663 a month?” I asked my mom.
It seemed as though my entire life was over.
In her trying to be calm and reassuring tone she told me, “You’re smart, you’ll figure this out and karma is a real thing- they’ll get theirs.”
She was right.
Twenty-seven months later, I was able to get rid of the car.
Let me tell you how I did it- It has been a bit of a strange journey.
Update: I’ve received a ton of feedback on this post and lots of people that have negative equity have bad credit. Joseph over at Peer Loans Online has created a super helpful list for people with bad credit to get personal loans. This can really help you out if you’re in a pickle.
The [surprising] road to recovery
After buying the car, I was living with my mom, teaching full time and side hustling.
After school and on the weekends, I had a lot of extra time with not much to do, so I got a second job.
I was able to save basically all of my money and make extra payments to the car.
Then, in May of 2016 I bought my first house- a townhouse for my 28th birthday.
I was in love- It felt like things were finally starting to turn around for me.
This house was everything I had wanted and the best part, it was 100% mine and nobody else’s.
It was a really empowering feeling- something I needed at the time.
Time to move on- life is changing
Since I became an expert side hustler to make extra car payments, I decided to rent out the spare bedroom to another young girl needing a temporary place to live- I found her on Craigslist.
Sketchy we both admit, but we laughed about it later.
This allowed me to save money and make extra payments toward my car loan.
The changes didn’t stop there.
In December 2016, Denis (my boyfriend) moved to Virginia for his job and asked me to consider going with him.
I obviously couldn’t leave my class, so I was staying in Florida until the school year ended in June- this gave me plenty of time to weigh my options.
Ultimately, home ownership was short lived for me.
I decided to give Virginia a try.
I packed up my classroom that I had been in for the past four years, gave my roommate some notice and put my house up for sale.
My saving grace was that my house had gone up in price so much in one year, that after all closing costs and such, I would have just enough money to get rid of the car.
My house closed on October 4, 2017 and I went right home and tried to privately sell my car.
This came with no such luck. SUV type cars don’t seem to have a high demand on the small city streets in this area.
On the Monday after Thanksgiving, my patience had run up.
I was getting rid of the car before Christmas.
I decided to take my car to a Honda dealership in Bethesda, Maryland.
After some negotiating, they agreed to buy the car for $18,000.
“Come back on Monday so the car can be inspected and then the transaction will be made.”
This was GREAT news!
I’d been waiting for months to hear this.
The final ride
I woke up early that Monday morning and drove 30 minutes to Bethesda, Maryland to the Honda dealership.
At the time of sale, I still owed roughly $32,000.
Honda agreed to pay $18,000 to take the car.
That left me with still owing a lot of money- $15,000.
Walking (in the cold) back from the bank, clutching the check in my hand for an amount that count fund a family a lavish European vacation, a swirl of mixed emotions pulsed through my head.
So excited to get rid of this burden that I’ve had for so long but at the same time, almost sure that something would go wrong and I will end up having to take the car back- I was an internal wreck but tried to keep my composure.
As I handed over the check and the keys, I waited for someone to rush in and say a mistake had been made and they in fact weren’t going to take the car.
This, thankfully never happened.
I signed some paperwork, got my Florida license plate and stepped off the property $32,000 lighter.
It was such a surreal feeling; it didn’t even hit me until half way home.
That section of my life was over.
As you can imagine, I learned a lot from this experience.
Negative equity is not a small thing, however as the old saying goes: “what doesn’t kill you, makes you stronger.”
Here’s some advice so you can avoid a similar fiasco:
• Never co-sign for a friend
• Make your money work for you- I learned this by accident with my house, but it was the best accident-lesson ever
• No matter what mistake you may have made, there is a way out- where there is a will, there is a way.
I think that the hardest part about being in a financial bind is how long it can take to sort itself out.
If you are in a similar situation, the best thing you can do is to refinance your car.
I wish I would have done this.
If you keep at it, you will work it out.
As for that “friend” I don’t know whatever happened to them- we obviously lost touch but my mom was right. Karma always comes around. I tried to help, karma came back and helped me.
Now, on to paying off all my student loans! One step closer to becoming debt free!
If you would like to vent your story- leave it below. Trust me, you are not alone.