SMART MONEY: Negotiation may turn car loan into a win-win
DEAR BRUCE: My mother passed away a few weeks ago. She has a car loan with a credit union in the amount of $20,000 on a 2010 vehicle. I can’t afford to continue making the car payments, even though I can really use the vehicle. What do I need to do in order to give the car back to the bank? — Jeanie
DEAR JEANIE: First of all, you say you own a 2010 vehicle with a $20,000 note. It sounds to me that the bank has a problem because there is no way in the world a seven-year-old car would be worth $20,000 or even close to it!
I would go down to the bank and say something like this: “We have a problem, which we may be able to solve. I am the executor of my mother’s estate, and I have to settle her affairs. Since her estate was almost cash-free, there is no chance of you getting paid.
“Given that, let’s come down to what the vehicle may be worth. If you’re willing to finance that amount for me, I will benefit from getting a car and you’ll benefit by getting rid of a potentially bad loan.”
If the bank is not amenable to that negotiation, just have your attorney write it a letter saying there is no money to pay for this loan and you are relinquishing the vehicle. I think you’ll find that most banks will recognize they’re in a bad situation they can’t correct and will end up negotiating with you.
DEAR BRUCE: I would like to give my son power of attorney because I am getting up in age. Does this mean I can’t make money decisions for myself anymore? — Paul
DEAR PAUL: The idea of giving an individual limited power of attorney, conditioned on your physician recommending such an activity, doesn’t take away any of your financial decision-making. But with a limited power, under certain circumstances, your son can do routine bookkeeping and so forth.
I would not give an unlimited power of attorney at this point in your life because there is no reason for it. In the event that you have a turn for the worse, then the limited power of attorney can kick in and your son can handle your affairs.