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Ask Dave

Big Debt on an Old Car

What's more ridiculous, Pablo's car loan balance or his interest rate?

QUESTION: Pablo in Georgia says his wife co-signed a car loan for her sister. The car is now being repossessed, and the sister still owes $23,000 at 20%. Dave does not understand why there is so much owed on a car from 2007. It doesn't take him long to advise Pablo on what to do with it.

Dave's ANSWER: Tell them where the car is, and tell them to pick it up. Then your wife is liable for whatever the car doesn't bring. Let's say it sells for $4,000 or $5,000. That is subtracted from what is owed. You guys will owe it, but you can negotiate to settle it for pennies on the dollar, and I certainly would.

The other thing you need to do in that process is to demand a full audit on this account back from day one because a 20% interest rate does not explain why a car did not pay off, especially a $23,000 car. If this was a $5,000 car on a tote-the-note car lot, and they were ripping you off and charging you only interest and that's all your wife was paying, then she gave up on it and punted it, that's fine. But $23,000 cars don't usually have 20% interest. That's an unusual deal, and I want to get to the bottom of where the money went.

From a bank's perspective, I don't see how they thought this was going to work out, because that car is going down in value the whole time. That doesn't make sense to me.

I'd just let them pick it up. There's nothing you can really do about it here unless you've got $50,000 lying around and want to negotiate with them now, but I'd let them pick it up and then negotiate with them later.