4 Steps to Get Out of a 5-Figure Car Loan and Stop Your Debt Cycle

The Table with Anthony ONeal

Anthony ONeal explores the predatory nature of car dealership trade-ins that roll negative equity into new loans, creating a cycle of perpet

Key takeaways

The average negative equity gap when trading in a car is approximately $6,884.
New car loans currently average $43,925 with 72-month terms at roughly 6.5% interest.

Main topics

Negative equity in auto loans
Car insurance cost optimization

Notable quotes

The borrower is the slave of the lender.

Conclusion

Listeners are encouraged to use specific financial metrics to break th

Transcript preview

Speaker 2 (0:00) The first car I ever bought by myself, no cosigner, was a brand new Nissan Maxima. And I was right around 24, 25 years old. I remember the car like it was yesterday because I used to see that on all the latest TV shows and hip hop shows. But check this out. A few years before that, I was sleeping in the back of the Nissan Maxima, specifically in 1987, part. on a street in Southern California, specifically in a Walmart parking lot, because I didn't have anywhere else to go. You see, I had the same badge, roughly about six to seven years apart, and I was stuck both times. You see, now most people believe the way out of a car you cannot afford is to trade it in and to get something cheaper, aka a new car. But coming from a former car salesman, that's exactly what the dealership is counting on. Because right now, Almost three out of every 10 people trading in a car, they owe more than what the car is actually worth. I'm going to give you a specific number up front in today's episode because that average gap is roughly $6,884. So we're going to round that up to $7,000. And that $7,000 doesn't disappear when you trade it in. Speaker 2 (1:14) You should know that because I promise you, as a matter of fact, if you're watching this on YouTube, let me know in the comments section below if you traded in the car and you were upside down, because we all know that that extra seven thousand dollars gets bolted onto the next auto loan, onto the next car. So you're not financing, quote unquote, a new car. You're financing the last three cars you had. Three numbers, two doors. That's the whole show today. And I'm not making you wait for it. And let me be clear before we get started on today's episode. I do not believe in financing a car. To be exact, I have not financed a car in the last 12, 13 years. And since I haven't done it in the last 12 or 13 years, huh. Speaker 2 (2:05) I have financed a car. The very first car had a co-signer by my California father. And then the next one I did finance, finance that one. That was the Nissan Maxima. So today's episode is not going to be any shame. I'm not trying to throw any guilt on anyone. I just want to be honest. I don't believe in financing a car. That's a liability. So listen. There's a second number attached to buying a car. And almost nobody prices it before they sign. It's the one that gets people. You see, I built a free tool that fixes it. And I'm going to be coming back to it here in a few minutes. So don't go anywhere. So we got three numbers, two doors, and I want to get straight to it. I'm going to give you the answer up front today. Then I'll spend the rest of today's episode proving it. Because if I make you wait, let's be honest, some of y'all are going to leave. And I need y'all to stay. As a matter of fact, while you're here, go ahead and hit that subscribe button and hit the thumbs up and share today's episode because I promise you it's going to save some of you all a lot of money and a lot of headache. But if you owe more on your car than it's worth, you have two specific doors. The very first door you can walk through is you can keep it and pay it off. Now, door number two is you can sell it and close the gap. Those are the two main doors. And we're going to go through all these doors throughout today's episode. Now, here's the door that isn't a door. And it's the only one. It is the one that when you walk through the dealership. This is what they want you to do. They want you to trade it in, roll what you owe into the next one, drive off with a longer term and a easy, affordable monthly payment. And to me, for my community, that is not a door. That is a hallway that walks you back into the same room with more furniture in it. Think about that. It's not a door. It's a hallway. And when you walk back to it, it's just more furniture, more bills, more issues. And most of you have walked that hallway already. And nobody ever told you what it cost. Speaker 2 (4:15) I want that to sit in just for a Speaker 1 (4:17) little Speaker 2 (4:17) bit. I did some research. I did some research. And as I am, you all know, as I'm getting my doctorate at one of the best schools, Regent University, here in the DMV area, I found that the average new car loan in America today is $43,925 at around 6.5 % interest rate if you have actually good credit. And a term, this is part of the thing that I do not like. 72 months, Lord Jesus, six years. Now, plenty of dealers will stretch this to about 84 months if you flinch at the payment over 72 years. Now, how long do you actually keep the car? For most people, it's two to three years on average. So I want you to sit with that just for a little minute. You sign for 72 months. You're leaving at 30 months. Pause. I signed a loan for 72 months, but I'm leaving at 30 months. Family, that's the whole problem right there. Your loan outlives the car every single time. Being upside down isn't bad luck. It's the whole thing they want you to be in. That's exactly where they want you to be, because that car starts losing value the day you drive it home, the day you drive it off the lot. But your loan doesn't even care. In the first years of the 72 month note, a big piece of every single payment goes to the interest, not the balance. So the car is falling. The loan is barely moving. And somewhere around year two or three, those two lines, they cross. That's the moment you go underwater. And most people have no idea because nobody's checking. Then you walk into the dealership. Uh-oh, we're going back to that hallway. And when that man runs your trade in and sees you owe $6,884 more than the car is worth, he doesn't say, sir. You're upside down. Let's fix this first. He says, we can take care of you. I got you. You