Can you do a short sale on a vehicle? Well, of course, this is a question that may arise, especially with the increasing number of people facing challenges keeping up with their car payments. The typical car loan terms often span six to seven years, with the average car payment around $11,000. Consequently, more individuals find themselves unable to afford their car payments, leading to potential repossessions or a strategy known as a short sale.
Navigating negative equity
The biggest issue with car payments is negative equity. Unlike real estate, where negative equity is less common, owing more on a car than its current value poses a significant obstacle. Traditionally, unless a substantial down payment is made, which most people don’t, driving a car off the lot often results in owing more than its worth. This situation renders the option to sell the vehicle impractical.
The Car Short Sale Process
However, there exists a process akin to short sales in real estate, tailored for vehicles. This involves contacting your lender and presenting a comprehensive package detailing the car’s value and your income. By engaging in a well-structured approach and providing the requisite documentation, you can initiate a negotiation with your lender for a short sale.
Collaborating with Lenders
Lenders, in many cases, prefer short sales over repossession due to the considerable costs and negative impact on their financial records associated with the latter. A voluntary short sale can be mutually beneficial, sparing you from further liability and potential damage to your credit score. Additionally, lenders may be more willing to accept a short sale as it mitigates their losses and eliminates the need to pursue deficiency judgments.
Protecting Your Financial Standing
Opting for a car short sale before facing repossession can be a prudent move if you find yourself in a challenging financial situation. Rather than passively allowing repossession, exploring the possibility of a short sale demonstrates proactive financial management. By initiating this process, you can potentially mitigate the adverse effects on your credit and alleviate the burden of unmanageable car payments.