The Impact of a Voluntary Vehicle Surrender

[LounginMKL]

A relative took out a loan to buy a flashy European car a year ago. After convincing her to sell the car to prepare for retirement, we realized that the loan is underwater (~$9k gap to sell and pay off). The destruction of the value of luxury cars is unbelievable (and enhance my hatred toward new car salesman)

 

Then I thought- what if she just stop paying and surrender the car? Quick research online suggests that it may not be a good idea- impact on credit and potential lawsuits to garner wages. Then again, she doesn't need credit or earn wages- she's retired (in her 70s), house paid for, can sunset comfortably if she manages her nest egg well. What are the potential blowbacks for her?

 

I remember back in '09/'10, people were walking away from their mortgages. If banks/ PEs can lever up and walk away unscathed from a blowup, it'd be great if she can too. I know it's recourse vs non-recourse, but still...

[DooDiligence]

Depends on the legacy you want to leave.

 

Do you man up & take responsibility for your actions in life or duck out & blame someone else?

 

Pay it off & enjoy it.

[Parsad]

Depends on the legacy you want to leave.

 

Do you man up & take responsibility for your actions in life or duck out & blame someone else?

 

Pay it off & enjoy it.

 

Agree with Doo Diligence.  Although, maybe taking a $9K hit and getting a very nice used car is an option.  Alot of dealers will wrap the $9K into a new loan...or if she has the cash, then a loan isn't necessary. 

 

Other option is to sell privately and get a few thousand more in the sale.  Cheers!

[Spekulatius]

Getting her credit shot for just 9k doesn’t seem to be worth it.

[LounginMKL]

@DooDiligence- Hey hey- just thinking out loud here, let's not get into a moral argument. What sort of legacy are you talking about? She's not a Lannister- there is no legacy to protect. Maybe I'm just not old enough to think about "legacy?"

 

Yes, credit is important for us who still need a mortgage and credit cards. For someone who is settled into retirement (70+y/o), I'd think protecting the nest egg is more important.

 

She's pretty financially illiterate and I feel like she took a bath at the dealership, so I don't feel as much remorse on her behalf.

[DooDiligence]

Maybe my wording was to elaborate. We’re basically discussing your relatives situation based on a hot take post so whatever.

 

You said she has enough savings to live it out.

 

Why is the debt even an issue?

 

She has a nice ride. She should enjoy it & just make the payments.

 

Or sell / trade it & live with the loss.

 

People who walk away from their mistakes like they don’t own them, make shit more expensive for the rest of us who live up to our responsibilities.

 

I quit working offshore in 2000 & started a business. By the time it became apparent that it was not going to be successful, I had dug a significant hole filled with debt obligations. I went back to work offshore & paid every penny of it back even though the majority of it was unsecured & I could have filed BK & possibly negotiated it down significantly in the process. Some people may call me stupid, but karma rewarded me & now I’m rolling better than ever.

 

If you make a deal, honor it, if you feel like you were cheated, don’t make the same deal again.

 

[Gregmal]

I agree with others. You bought it, you pay for it.

 

I had a situation were I needed to get out of an Audi lease early. I was told by the salesman they would buy it back. Long story short, they did, but for $6000 out of my pocket. But you made the commitment, honor it.

[LounginMKL]

Man, you guys got me soul-searching a bit.

 

Since this post is focusing on morality/ committment/ acting in good faith, I'll let Roger Lowenstein take the opposing side: https://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html

 

"Sam Zell, a billionaire, let the Tribune Company, which he had previously acquired, file for bankruptcy. Indeed, the owners of any company that defaults on bonds and chooses to let the company fail rather than invest more capital in it are practicing “strategic default.”

 

So when Sam default on $9B, it's a strategic default. When a borrower defaults on a car lona, s/he is an immoral a-hole.

 

Also, I should stress that I have no dog in this fight. Just thought of this alternative for my relative and wanted to solicit thoughts. The CoBF has spoken, loud and clear!

[Orchard]

I feel like she took a bath at the dealership, so I don't feel as much remorse on her behalf.

Someone made her go to the dealership against her will? I would definitely go after that person as well.

[Jurgis]

So when Sam default on $9B, it's a strategic default. When a borrower defaults on a car lona, s/he is an immoral a-hole.

 

LOL, this is CoBF, what do you expect?

You should have asked how to structure RE business so you could walk away from non-recourse loans/mortgages. ::)

 

Just invest into the (preferably used) car dealership(s), pawnshops, for-profit education companies, and be on the other side of poor suckers who get screwed.  ::) This is the moral way .

 

[A_Hamilton]

Man, you guys got me soul-searching a bit.

 

Since this post is focusing on morality/ committment/ acting in good faith, I'll let Roger Lowenstein take the opposing side: https://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html

 

"Sam Zell, a billionaire, let the Tribune Company, which he had previously acquired, file for bankruptcy. Indeed, the owners of any company that defaults on bonds and chooses to let the company fail rather than invest more capital in it are practicing “strategic default.”

 

So when Sam default on $9B, it's a strategic default. When a borrower defaults on a car lona, s/he is an immoral a-hole.

 

Also, I should stress that I have no dog in this fight. Just thought of this alternative for my relative and wanted to solicit thoughts. The CoBF has spoken, loud and clear!

 

Umm...so she doesn't pay and ends up with a deficiency. Car dealership sells that to a debt collector. Debt collector can garnish wages, potentially social security, pension payments, et al. Also in many states the creditor can just keep renewing the judgment every few years. She is very unlikely to get away without paying / if she doesn't pay now there will be penalties and fees on top of this.

[Cigarbutt]

A relative took out a loan to buy a flashy European car a year ago. After convincing her to sell the car to prepare for retirement, we realized that the loan is underwater (~$9k gap to sell and pay off). The destruction of the value of luxury cars is unbelievable (and enhance my hatred toward new car salesman)

 

Then I thought- what if she just stop paying and surrender the car? Quick research online suggests that it may not be a good idea- impact on credit and potential lawsuits to garner wages. Then again, she doesn't need credit or earn wages- she's retired (in her 70s), house paid for, can sunset comfortably if she manages her nest egg well. What are the potential blowbacks for her?

 

I remember back in '09/'10, people were walking away from their mortgages. If banks/ PEs can lever up and walk away unscathed from a blowup, it'd be great if she can too. I know it's recourse vs non-recourse, but still...

Anecdotally, some time ago, i assisted somebody within my extended circle (she was an older individual who more or less got convinced to buy a car she did not need) to 'undo' the transaction. In my jurisdiction (i assume similar rules apply in your area), there is a time limit (typically a few days) that applies. Without going into morality, it's kind of hard to justify having made a wrong decision a year after the car was bought...

 

i follow subprime auto loan stuff and debt collectors. It seems that the 'industry' could make her life miserable for a while if she decides to simply stop paying.

 

It won't help much but she's not alone. Underwater, negative-equity or upside-down loans are becoming increasingly frequent. Here's a recent and relevant piece coming from an industry analyst:

https://www.edmunds.com/industry/insights/negative-equity-is-surging-during-coronavirus.html

[Castanza]

This comes across like ordering a nice steak, eating most of it, sending it back; and then refusing to pay for it.

 

https://www.thoughtco.com/the-whistle-by-benjamin-franklin-1688774

[DooDiligence]

I was in a Circle K in Sarasota & a homeless looking dude came in with a half eaten chili dog & told the girl behind the counter that he wanted to return it.

 

She was a lovely Indian woman & said, in beautifully accented English, “sorry sir, I don’t speak English”.

 

It was the funniest thing I’d seen in a while & I fell in love with her immediately. You had to be there.

 

Funny women are my Achilles heel.

[Gregmal]

There's always this....

 

https://fortune.com/2018/01/11/woman-returns-dead-christmas-tree/

[rkbabang]

Next time by a 1-2 year old car and let the first owner pay the 10K drop in value as soon as it is driven off the lot.  I'd enjoy the vehicle, pay the loan, and learn the lesson.

 

I'm not a religious person, I like the idea of Karma, but I don't think it exists, and it sounds like she is too old to care about her credit score.  That said walking away from a loan that you took out freely, that you can afford to pay, sounds like the wrong thing to do.  There is something to be said for having peace of mind and being able to sleep soundly at night.

 

[LC]

So when Sam default on $9B, it's a strategic default. When a borrower defaults on a car lona, s/he is an immoral a-hole.

 

Exactly. Let her default if she wants, those who are morally offended should redirect their outrage at more impactful targets rather than an old lady who owes 9k on an overpriced car.

[Castanza]

So when Sam default on $9B, it's a strategic default. When a borrower defaults on a car lona, s/he is an immoral a-hole.

 

Exactly. Let her default if she wants, those who are morally offended should redirect their outrage at more impactful targets rather than an old lady who owes 9k on an overpriced car.

 

Two wrong's don't make a right.

[rkbabang]

So when Sam default on $9B, it's a strategic default. When a borrower defaults on a car lona, s/he is an immoral a-hole.

 

Exactly. Let her default if she wants, those who are morally offended should redirect their outrage at more impactful targets rather than an old lady who owes 9k on an overpriced car.

 

I'm not judging her.  I'm just saying I wouldn't do it.

 

What everyone sounds like to me:

 

"Hey everyone someone I know is thinking of killing someone, thinks he can probably get away with it, and even if he doesn't, he's old so won't serve much jail time anyway.  I told him why not? Ted Bundy killed 35+ people and you just want to kill one, so that isn't so bad at all. Go for it."

 

[Gregmal]

Entering a contract and then willfully disregarding it is grounds for legal trouble and a case can be made that it is fraud.

[LounginMKL]

This article outlines my thinking so much better than I can.

https://www.currentaffairs.org/2018/05/you-should-care-about-your-bank-exactly-as-much-as-they-care-about-you

 

To sum up everyone's reaction to my inquiry, I think context drives people's judgment of right/ wrong, with a lot of double standards being applied here

- buying an indulgence (car, steak, hotdog, xmas trees) vs productive assets (real estate, company)

- corporate vs individual

- ability to pay vs on the rope

- understanding vs not understanding the risks

- what's her intention when she borrowed?

 

In the end, I probably wouldn't recommend this option because of the harassment/ income garnishment/ legal trouble. Not so much on the morality ground. Ok- now that I've tarnished my reputation here on CoBF, shall we get back to discussing tobacco, liquor, private prison, dirty energy stocks? =)

 

@Gregmal not honoring contract = fraud? you mean like LVMH backing out of Tiffany? What about all of the tenants who are walking out of their leases to leave NYC/SF?

[Castanza]

This article outlines my thinking so much better than I can.

https://www.currentaffairs.org/2018/05/you-should-care-about-your-bank-exactly-as-much-as-they-care-about-you

 

To sum up everyone's reaction to my inquiry, I think context drives people's judgment of right/ wrong, with a lot of double standards being applied here

- buying an indulgence (car, steak, hotdog, xmas trees) vs productive assets (real estate, company)

- corporate vs individual

- ability to pay vs on the rope

- understanding vs not understanding the risks

- what's her intention when she borrowed?

 

In the end, I probably wouldn't recommend this option because of the harassment/ income garnishment/ legal trouble. Not so much on the morality ground. Ok- now that I've tarnished my reputation here on CoBF, shall we get back to discussing tobacco, liquor, private prison, dirty energy stocks? =)

 

@Gregmal not honoring contract = fraud? you mean like LVMH backing out of Tiffany? What about all of the tenants who are walking out of their leases to leave NYC/SF?

 

NYC where the government won’t let people work. There are external factors preventing individuals from upholding their contracts. Buying an expensive car and then deciding you don’t want it anymore and letting it default is not the same thing.

 

All these situations can be summed up by a simple phrase. “Voluntary Association”. Your grandma entered into a contract willingly.

 

Solution, pay off the loan for her and have your grandma pay you $100 a month interest free until her debt is paid off (assuming you can afford this). Everyone is happy and a lesson is still learned.

[cwericb]

A relative took out a loan to buy a flashy European car a year ago. After convincing her to sell the car to prepare for retirement, we realized that the loan is underwater (~$9k gap to sell and pay off). The destruction of the value of luxury cars is unbelievable (and enhance my hatred toward new car salesman)

 

Then I thought- what if she just stop paying and surrender the car? Quick research online suggests that it may not be a good idea- impact on credit and potential lawsuits to garner wages. Then again, she doesn't need credit or earn wages- she's retired (in her 70s), house paid for, can sunset comfortably if she manages her nest egg well. What are the potential blowbacks for her?

 

I remember back in '09/'10, people were walking away from their mortgages. If banks/ PEs can lever up and walk away unscathed from a blowup, it'd be great if she can too. I know it's recourse vs non-recourse, but still...

 

 

 

How would you like it if you had lent your relative the funds for the car and she tried to stick you for $9K? Somebody is on the hook for that $9K.

What ever happened to honourable people? They have unkind names for people who take on financial obligations and then try to weasel out of them.

 

Not sure about US law but in Canada, here is what she might expect:

 

1) Loss of reputation

 

2) A period of increasingly nasty collection calls

 

3) A blot on her credit record resulting in difficulty in obtaining loans AND insurance and increased costs of both.

 

4) Legal action resulting in a court Judgement against her as the debtor

 

5) That Judgement will form an encumbrance against her property and belongings, similar to a mortgage

 

6) There is the potential of a forced sale of her possessions and/or her home to recover the debt.

 

7) Substantial legal costs of the actions required to satisfy the debt.

 

Not a good idea. Suck it up. Pay the debt. Lesson learned.

 

 

[DooDiligence]

This article outlines my thinking so much better than I can.

https://www.currentaffairs.org/2018/05/you-should-care-about-your-bank-exactly-as-much-as-they-care-about-you

 

To sum up everyone's reaction to my inquiry, I think context drives people's judgment of right/ wrong, with a lot of double standards being applied here

- buying an indulgence (car, steak, hotdog, xmas trees) vs productive assets (real estate, company)

- corporate vs individual

- ability to pay vs on the rope

- understanding vs not understanding the risks

- what's her intention when she borrowed?

 

In the end, I probably wouldn't recommend this option because of the harassment/ income garnishment/ legal trouble. Not so much on the morality ground. Ok- now that I've tarnished my reputation here on CoBF, shall we get back to discussing tobacco, liquor, private prison, dirty energy stocks? =)

 

@Gregmal not honoring contract = fraud? you mean like LVMH backing out of Tiffany? What about all of the tenants who are walking out of their leases to leave NYC/SF?

 

It has very little to do with morality.

 

It has everything to do with the fact that people who default on loans cost the rest of us, the same way that anyone who commits fraud costs the rest of us.

 

You're example of the LVMH deal is fuzzy at best.

 

Your reputation is in tact here.

[Jurgis]

Summary of this thread: businesses that exploit unwary customers are great moral pillars of society. If you were screwed, shut up, and pay the CoBF investors. It's your fault.