Question Leased Cars, Buying, Abuse?

[Pizza]

Well, since one of the obvious reasons for filing is to get out of financial trouble, I have thought about getting rid of a leased vehicle that we frankly can't afford the payments on anymore and are already nearing the mileage allowance.

But then there's the obvious: we need a vehicle. If my wife finds a cheaper vehicle that we can afford payments on (or she could buy outright with her tax refund) and buy it before surrending the other vehicle as part of the bankuptcy, is it considered abuse or good financial sense? I'm not trying to defeat the system; I just know that when turn-in day comes in 2011, if I have already filed, we're screwed, since it will be difficult if even possible to get a car loan, pay the charges owed to the dealer, or even pay the residual to try to save it.

It's a 2008 Dodge Nitro that was purchased two years ago, long before I lost my job. We could afford the payments then, and were going to pay the residual at the end of the road. Now that I'm jobless, we barely can afford the lease payments and definitely can't come up with the residual.

So I'm stumped. My wife needs a car for work; she's a teacher and reliable transportation is a must if she wants to keep her job. Can we do this automobile downsizing idea, or not? I'm running out to time to figure this one out. Any thoughts?

[MiSSMaGoo]

I would say there isn't anything that looks like abuse. You know the lease will be up and you need transportation. If you do end up buying a car out-right, make sure it's within your exemptions or if you owe on it you should be fine to continue to pay on it, whether you do a "ride-through" or reaffirm it. When's your lease up and when do you plan to file? I ask b/c my lease was repo'd in mid Dec 08' and the first week in Jan 09' they had re-sld it and sent a bill for the difference plus the over mileage charges. However of course it would have taken much longer for them to get the legal action going but I ended up filing in Feb...

[Pizza]

I would say there isn't anything that looks like abuse. You know the lease will be up and you need transportation. If you do end up buying a car out-right, make sure it's within your exemptions or if you owe on it you should be fine to continue to pay on it, whether you do a "ride-through" or reaffirm it. When's your lease up and when do you plan to file? I ask b/c my lease was repo'd in mid Dec 08' and the first week in Jan 09' they had re-sld it and sent a bill for the difference plus the over mileage charges. However of course it would have taken much longer for them to get the legal action going but I ended up filing in Feb...

It's a three year lease that ends in January of '11. We were spending more repairing a ten year old vehicle than a car payment would be, so at the time it made perfect financial sense to replace the car with a new, fully warrantied vehicle. Then these past two years came along.... ugh...

I don't have a planned date for filing; I'm just waiting for the right letter to show up. The longer the better. Thanks for the advice on the exemptions. If I can't do the downgrading thing I'm not sure what my options are. In your situation, it looks like things turned out okay. Timing is everything after all.

[keepmine]

Nothing abusive about getting reliable transportation prior to filing.

[JimKutkowski]

Nothing abusive about getting reliable transportation prior to filing.

No, go on Craigslist or somewhere and get a $1000 car or something you can afford to get from point A to point B and drop the lease. The point of the bankruptcy is to get yourself out of the financial doghouse.

Then save the equivalent of a car payment per month ($300 or so) and in a year you will be able to upgrade the car. You might find you like your beater. I did a similar deal. I had a car coming off lease and rather than get a new lease I found a 1997 Plymouth Neon (this was in 2004) that I paid $1500 for. (This was a fantastic deal that I shopped almost 2 months to find)

I kept it for four years before I got my current car, a Kia Rio.

If you learn anything from bankruptcy, it should be to live below your means so when stuff happens, you can handle it.

[Pizza]

This is really going back to the basics of car buying, but can you have the mechanics of a vehicle checked out by a mechanic before you buy? My wife is okay with the idea, but is worried that we wouldn't be able to save for a better vehicle if we're constantly paying for expensive repairs.

Somehow my dad has managed to get these $500 junker cars and drive them until they're dead and get another one. He's done it since he was a teenager. Lucky?

Any advice? Mainly on the first question? My wife's job is extremely dependent on a reliable vehicle, as in, if the car breaks down a bunch on her way to work, she's bankrupt too. So she's a little more nervous about the situation than I am. I could take the bus for all I care.

[JimKutkowski]

This is really going back to the basics of car buying, but can you have the mechanics of a vehicle checked out by a mechanic before you buy? My wife is okay with the idea, but is worried that we wouldn't be able to save for a better vehicle if we're constantly paying for expensive repairs.

If they won't let you do that, go buy another car from a seller who will.

[Snickers]

Somehow my dad has managed to get these $500 junker cars and drive them until they're dead and get another one. He's done it since he was a teenager. Lucky?

My brothers do the same thing but they never buy off lots etc. They mostly buy from friends etc who are selling their elderly parents cars, lol. For the most part, these cars are older (10+ years) full sized cars that have been dealer maintained but have very little mileage.

When mom/pop go into a nursing home, if no one in the family wants their car, it just becomes one more thing the kids need to get rid of. Having someone make an offer on the car is a god-send because then they don't need to run ads, take calls etc.

Just keep your ears open when you hear someone mention they are clearing out their parents house and ask about vehicles.

[Pizza]

Thanks for the suggestions. We'll get this figured out somehow.

[pcn]

I may have missed it, but if you purchase a vehicle you will have equity you did not have with the lease. Make sure your state allows as much in a vehicle exemption as you create when you buy it, or you will either lose it or pay it back twice. If you still have good credit get one with as low a down payment as you can and take advantage of the low interest offers that definitely will not be there for some time after you file. Most likely your lawyer will recommend getting as good a vehicle as you can before you file to tide you over during the time that you will have poor credit due to filing.

[StartingOver08]

OP, to avoid the situation above regarding the exemptions (or if you need the car payment to keep you in a Ch 7) keep the car until the 341, then surrender the car IN THE BK. Just change your statment of intentions before your discharge to surrender. You will be able to drive it awhile before they pick it up. Buy the inexpensive cash car after the 341. Do as one of the others suggest and save for a better car and then when you are on your feet and have enough savings buy the next car with cash too. These car/vehicle payments keep us broke. Some of these payments are the size of mortgage payments! Take advantage of your fresh start...you will not believe how good you feel without a car payment

[frogger]

Somehow my dad has managed to get these $500 junker cars and drive them until they're dead and get another one. He's done it since he was a teenager. Lucky?

I don't know if it's lucky or not, but think about it this way.

You buy a 500.00 car, drive it for 2 months and it dies. You buy another 500.00 car, drive it for 6 months and it dies. Buy another, drive it for 1 month and it dies. You have spent 1500.00, and have driven a vehicle for 9 months. That figures out to 166.66 per month for a vehicle.

Or.... go buy a new one and get that 500.00 car payment.

And...... when they die, you can sell them for salvage and recoup even more of your money that way.

[OhioFiler]

I don't know if it's lucky or not, but think about it this way.

You buy a 500.00 car, drive it for 2 months and it dies. You buy another 500.00 car, drive it for 6 months and it dies. Buy another, drive it for 1 month and it dies. You have spent 1500.00, and have driven a vehicle for 9 months. That figures out to 166.66 per month for a vehicle.

Or.... go buy a new one and get that 500.00 car payment.

And...... when they die, you can sell them for salvage and recoup even more of your money that way.

Or buy that $500 car, spend $200 to fix the brakes. $300 for new tires, $50 for registration, $150 to recharge the A/C....

[NoMoreCards]

I also have a lease car, way over the mileage allowed. (allowed 36K, currently at 50K with 20 months remaining on lease)

My attorney advised returning the car with the BK, and getting something else to drive. I ended up getting a car for 3K (borrowed part from my parents and am paying them back with the old "lease" money), but it should easily last a year. I am waiting for them to pick up the leased car, but driving it until they do.

It is recommended to get out of the lease, as the BK is your your chance to stop digging that financial hole that is so tough to get out of.

I wish you the best.