I’m in a Bad Spot With My Auto Loan and Lease. Is it My Fault?


Dear Steve,

I went to buy a new car, and trade in my new one even though it has negative equity, the value would still be higher.

This is what I was convinced of and I couldn’t have been more wrong.

They did inform me of everything concisely, it was a matter of misunderstanding.

I did sign a lease contract, it was obligational. So they said I could do a voluntary repo, and It is my fault for not doing all of my research completely, but if that were the case I would still owe on my old car, and then I would be paying both, I simply cannot afford this.

I went and explained my situation to a credit representative, and they said they could help negotiate me out of my old auto loan, and that I would save the $9000 I owe on my old car. If I follow along with what the credit guy told me, I would have my new car and they could completely get me out of my old car payment. I do not know if this is for sure.

I did get myself into the situation, I thought that they would handle my situation. I misheard and misunderstood contractual terms, so now I’m paying both. The credit rep said he could help me out here but I don’t know if this is completely true.

I just want to walk away from all of it and take a credit hit, but I’m sure that is not the case. I got myself into a bad lease, and still owe on my old car. I do not know what to do.

What do you recommend doing in this situation???



Dear Caleb,

I’m completely sympathetic to your situation. Dealing with automobile financing and sales promises can be a daunting task.

As a customer, you want to trust in what the person is telling you but many times the documents you are asked to sign do not match with what the salesperson said. And the written agreement supersedes anything the salesperson said that was knowingly or unknowingly incorrect.

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It seems you went to buy a new car and trade in the old one. However, as it stands now you are making payments on two vehicles. You mention that one may be a lease instead of a purchase agreement. That’s a technical issue but does not change the underlying problem here.

At the heart of the issue is that one or more lenders feel you owe them for two vehicles and it does not seem that you can afford both payments.

There are a few ways to tackle the problem.

  1. Do Nothing – Yea, that’s not the smart move here. You need to take some action because you say the math doesn’t work and you can’t afford this mess.
  2. React Emotionally – That is understandable and a natural thing to do but it is not the smart play. You need facts to make a good choice about how to proceed. I have no magic “stay calm” wand but if I did I would wave it your way.
  3. Turn the Car(s) Back In – Let’s not get ahead of ourselves here. Before we take any steps I need for you to be confident that you are making the best move for you. A repossession will most likely result in you owing something so let’s not walk into that situation until we explore the rest of your options.
  4. Get Some Legal Advice – Ding-ding-ding. This would be the smart first step. One place to look for a consumer attorney that has experience with automobile financing is here. The attorney may be able to find a violation in the financing agreement that can help to unwind the transaction and get you back in a better position.
  5. Go for the Fresh Start – If the attorney you talk to can’t find anything that would unwind the transaction, you can see if the attorney can negotiate an exit for you. You need an experienced person that knows the ropes to not fall into something you are told that is not true. The next step would be to contemplate filing bankruptcy. In consultation with a bankruptcy attorney, you may decide to turn in both vehicles and discharge all remaining financial obligations or turn in one and see if the lender will allow you to keep one and make the payments on it. This is called a reaffirmation.
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Post a comment below and let me know what you decide to do.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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