2021 Jeep driver owes more than 4X what it’s worth and can’t find a way out
“I need the best advice you can give me,” the owner begins. They purchased a 2021 Jeep Compass Latitude about a year ago. After several headaches, including the one happening as they speak to an Atlanta-based car dealer, they want out. Unfortunately, though, the details of the driver’s car loan and financial situation are quite complicated. Finding the exit door is no easy task.
Driver owes $30,000 on a 2021 Jeep Compass with a trade-in value of only $7,000
The Compass, which the owner says has 90,000 miles, has been nothing but trouble. As they talk with Yusef Bennallal, an independent used car dealer and vehicle loan consultant, the Jeep is on a tow bed heading to a shop. Again. Its battery is dead, even after the driver just replaced it.
The driver purchased the vehicle a year back, and they’ve navigated tough circumstances since. They’re a student with a mind for business, but several family members – including her grandmother, father, and brother – needed care. Unfortunately, all three passed away. “My brother was 26,” she explains, saying that since they’ve passed, “Now I gotta get my life back together.” They called Benallal to explore possible avenues out of the Jeep loan.
The numbers don’t look good, so options are slim
The Manheim Market Report, a resource dealers use to determine a car’s trade-in or wholesale value, shows the 2021 Jeep Compass Latitude is only worth between $7K and $8K. Since it needs repairs as-is, Benallal assumes the offer would be more in the $7,000 range.
Considering they still owe $30K on the car loan, that means the driver is $23,000 underwater. They say they have $3,000 to put toward another vehicle loan on a different car. Unfortunately, the caller has late payments on their credit, leaving their score hovering at a sub-par 490. They blame the Jeep for hurting their score.
Dealer tells Jeep owner to save up another grand, buy a cash car, and let the Compass go into repossession
It’s unlikely any financial institution will approve the Jeep owner for a trade-in toward another car. This is because the negative equity would need to be rolled into a new loan. With a 490 credit score and late payment on record, the driver’s too big a risk to finance.
As such, Benallal tells the caller to take their $3,000 cash and continue saving. Once they hit $4K, they can go buy a reliable used car for cash, like a Toyota Camry. Next, they should surrender the Compass back to the bank.
It’s not ideal, but with such a low credit score, the driver doesn’t have much to lose.
