In car buying, a “trade” usually means trading your current vehicle to the dealer as part of the deal for a new or used car. The trade-in value matters because it can determine whether you have negative equity that gets carried into the next loan.
Book value is an estimate of what your car is worth, based on pricing guides. A dealer might say they’ll pay you more than that, but you still need to check the full deal—especially what you owe on your current loan.
“Upside down” means you owe more on the car than it’s worth. If that’s your situation, trading it in doesn’t automatically fix the problem—it can carry into your next loan.
Negative equity means your car is worth less than what you still owe on it. If you trade it in, that “extra amount” usually doesn’t disappear—it often gets added to your next car loan.
“84 months” is a 7-year car loan. Longer loans can make it easier to end up owing more than the car is worth if you trade or if the car loses value quickly.
A Honda Odyssey is a minivan that’s built to carry people comfortably. It’s a good example here because it has extra seats (including a third row) when you need more room for friends or family.
A Ford Explorer is an SUV that usually has more space than smaller cars. In this discussion, it’s brought up because it can give you more seats (like a third row) when you need it.
A Nissan Sentra is a smaller car. The hosts are saying that if you need more space for people or stuff, a smaller sedan like this may not feel big enough.
The Ford Maverick is a small pickup. The story here is about how choosing a smaller vehicle can feel great at first, but if you don’t live with it for a while, you might regret it—so the host recommends longer test periods.
Buyer’s remorse is regret after you buy something. In this case, the host says they felt that “did I make the right choice?” feeling after taking the smaller truck home.
A long test drive (or keeping the vehicle overnight) is a way to evaluate a car beyond a short dealership loop. The episode suggests it helps you confirm fit, comfort, and practicality so you don’t end up regretting the purchase.
The Tahoe is a big SUV from Chevrolet. The host is using it as an example of a car you might want, but you probably can’t just take it home right away without a process.
Term
multiple test drives
A test drive is a dealer-arranged drive to evaluate how a car feels and fits your needs. Doing multiple test drives helps you compare options and notice issues like visibility, comfort, and drivability before committing.
A driveway test is when you take the car home for a short time so you can see how it fits your life. It’s meant to help you decide calmly instead of buying on impulse.
Fuel economy tells you how far the car can go on a gallon (or how much fuel it uses). It matters because it changes what you’ll spend on gas over time.
Insurance cost is what you pay each month (or term) to have the car insured. It’s important to estimate it before buying so the car doesn’t end up costing more than you expected.
The Ford Bronco is an SUV designed to handle rough roads and off-road driving. The podcast is suggesting it as a potential choice if you want something more capable than a typical everyday car. It’s mentioned as a “you might end up with” option.
Employee pricing is a dealer discount tied to a manufacturer’s employee or employee-program pricing structure. It’s often used as a promotional lever to reduce the selling price for certain buyers during a limited-time event.
Default means you’re not paying the car loan as required. When that happens, the lender can take the car back and may still try to collect money from you afterward.
An “auto auction” is where repossessed cars are sold to other buyers by bidding. The amount it sells for affects what the lender tries to charge you next.
Toyota Motor Credit is the company that may have financed your Toyota loan. If you can’t keep paying, the lender is who you’d deal with regarding the loan and repossession process.
GMAC is a financing company tied to General Motors that may have your car loan. The episode is saying to contact the lender if you can’t keep up with payments.
A “deficiency” is the gap between what you still owed on the loan and what the car sold for at auction. If the auction price isn’t enough, you may still be responsible for the difference.
“File bankruptcy” means going to court to deal with debts you can’t pay. It can sometimes reduce what you owe, but it’s a serious legal step with long-term consequences.
LIVE
Welcome back folks to another edition of My Car Guru with me, the Car Guru,
Lenny Lawson, a real-life new car dealer with a twist. I tell it like it is. And
what that means for the regular listener is that you will learn things that will
save you money when you go to a new or used car dealer or to an independent
place that does auto repair, mechanic shop, body shop. There are little things
that you can learn that will improve your overall experience, the quality of the
work that you get, and help you avoid the lies, the misleading stuff. Like we'll
pay you $8,000 over book value for your trade no matter how much you owe. Or we'll
pay off your trade no matter how much you owe. If you heard that, what does that
mean? If you went to a previous dealership and they said, well man, you're too far
upside down, you owe $15,000 more in your car than the actual cash value. We can't
trade with you. And then you see that ad for the other dealer. And he says, we'll
pay off your trade no matter how much you owe. What does that mean to you? Well to
you, that means that negative equity, that extra $15,000 is going to go poof. It's
going to go away. They're going to pay it off. Somebody else is going to be
responsible for that. What does it really mean? It really means that that negative
equity is going to be carried over to your next car loan. So not only do you get
to pay for your new car, but you get to pay for the negative equity from your old
car. That's not fair. Yeah, it is fair. That's on you. You finance too much on your
car. You strung out the payments for 84 months. You didn't pay anything down. And so now
you're wanting to trade two years later and the car is depreciated $15,000 more than
you ever thought it would. And so you're upside down. What should you do at that
point? I'll tell you what you should do. Don't trade cars. Pay that thing off. Suffer
the consequences of your bad decision. I mean, why do you want to trade anyway? You
want to change? Oh, we're going to have a baby. I understand that. And on the surface,
that would be a good reason to move up to a, I don't know, minivan, like a Honda Odyssey
or to a Ford Explorer, you know, where you have that extra back seat. You got a third
row in case you ever need to carry any other friends. But right now you're driving a Nissan
Sentra or a Honda Civic. Boy, that's not going to have as much room. Is it? But you're upside
down. And you can get by with that car. You just don't want to. But then you add the extra
cost of trading, you carry over your negative equity, the insurance costs more. Maybe if
you're going up to a bigger vehicle, the gas mileage is worse. All of this adds in and
you're not thinking about all of that. You're just thinking about we need more room. And
room is nice. It really is. So several weeks ago, I might have fibbed a little bit. I said
I was going to trade my F 150 for a Ford Maverick. And I didn't get, well, I didn't follow up
and give you an update. I decided not to do that. Why? Because I drove the Maverick home.
And I said, you know, this is really nice. This thing is so smooth and I'm going to get
3540 miles to the gallon and it's just it's fine. It's all I need. And then I went to bed,
woke up the next morning, walked out, saw it in the driveway. And my first thought was buyer's
remorse. I just I couldn't go that small. There's no substitute for room and comfort.
And so I since I own a car dealership, I was able to take it back and say, I don't want this,
I parked it. Now what would happen if you had purchased it just made an overnight decision
or on the spot purchase decision? And you woke up the next morning, and you were all
the sudden out of love with your Maverick, you'd be stuck. I guess the moral of that story is to
take a long test drive or get them to allow you to keep it overnight. You know, just to make
sure it's the right decision. Not a lot of dealerships will do that, especially in larger
towns. They're not real keen on letting a total stranger take a vehicle home just to try it out.
And if you make that a stipulation of your purchase, maybe they will. But now if you go to
a small town dealership like mine, and they might let you do it unless, you know, you give them
some kind of a reason not to want to. You know, for example, if they you have a trade in that's
worth about $500 and it looks horrible, and you want to take home a new Tahoe, probably not going
to happen. But if you are a reasonable person, and you know, they they feel like they're fairly
certain that you just need to spend the night with their vehicle, they might let you do it.
It's a great thing. Or, you know, you can just go back for multiple test drives.
You know, you can always do the driveway test as well. As long as you don't live too far from the
dealership, you can drive it to your house, park it in your driveway, go inside, eat a baloney
sandwich, come back out, look at it. You know, maybe you get that heart throb that, you know,
you're still in love. And then you take it back. And then you come back home, spend the night,
think about it, go back. I mean, if you still feel the way the same way the next morning and you
thought through all the different scenarios, how you use your vehicle, do you take it on trips,
what's it going to be like on vacation? Is the fuel economy going to be adequate? Are we going
down? Are we going up in fuel economy? What's the insurance cost? All of these things. People
don't want to do that. They want to make instant decisions. You make instant decisions on things
like what cereal to buy, cinnamon toast crunch or apple jacks. You do not make instant decisions on
automobiles. But people do because they just, you know, I guess it's the Amazon disease.
Everything has to be fast and instant now. And, you know, the thing about a car is that you buy
it and you live with that decision for many years, unless you made a mistake and then you go try to
trade it. And then that leads to financial problems. Slow down, put some thought into it.
And you might end up with a Bronco. I'll be back in just one minute.
Okay, that's what happened. I ended up buying a Bronco, trading my F-150.
Yeah, we had this beautiful Bronco come in. And for me, it's about an 18 month decision.
That's how often I trade my vehicles. I don't think I've ever gone two years.
But I buy a vehicle because I like driving the same vehicle all the time.
And I don't like to have to bring it back every time a salesperson wants to show it to somebody.
So I bought this Bronco knowing how they drive. I was going to sacrifice some ride quality.
I'm also sacrificing a bed because the Bronco has a big hatch. The one I'm buying is the Badlands
Edition. So I can haul pretty rough stuff in the back. I'm not going to throw a load of mulch in
the back unless it's in bags. But this particular package, you can actually turn a hose on and
rinse out your interior in this Bronco because the whole floor is rubber and it has drain holes in
it. I'm not going to do that. If I want a truck, well, if you wanted a truck, you maybe borrow
one from your neighbor. If I want a truck, I just come to the dealership and grab a truck.
And so, you know, you have to look at your circumstances. But I was willing to sacrifice
some ride quality and the bed because I just love the way this thing looks. I love the way it
drives. It's like a sports car that's an SUV. And if you listen to this program very long,
you know that I like sports cars. And it's something I just enjoy. I don't enjoy getting
in and out of it. It doesn't have power running boards like my truck did. And so,
I have to really maneuver and stretch and pull and to get inside of it. But I can do that for
18 months. The reason I'm telling you all this is just simply because you don't have as much time
as I do. And you obviously, well, I mean, you might own a car dealership, but probably don't.
And so, your decision has to, well, it deserves more of a thought process.
And it's important to slow down. Now, the advertising for car dealers, it's all urgency,
urgency, urgency. You know, this sale is going to end absolutely on July 4th. For example,
we've got employee pricing right now on Ford. And we're clearing out our Ford inventory right now.
It is, it's been incredible. And, but it ends, you know, it has an end date. July the 6th, I think.
It's to celebrate the 250th birthday of our nation. And so, Ford decided to do that and several
other manufacturers have followed suit. So, is that a good reason to come in and shop for a vehicle?
Yeah. If you need a vehicle, if you really need to change, if it really makes sense for you to do it.
But please, first, find out what the actual cash value of your vehicle is. One way to do that is
to go to a dealership and say, I'm thinking about selling my vehicle. What would you pay me for it?
Are you going to trade? No, we're not interested in trading. We're just interested in selling.
And then you can get a price from Carvana. You know, there's, they have that opportunity online.
You can get a price from CarMax. And then you can just compare all of those and see where you stand.
If, if you look at all three of those and none of them are within, let's say $5,000 of what you
own the vehicle, then that's, that's going to affect your decision. Will $5,000 break you?
If you carry that over to another car, no, that's not too bad. But when you're talking
eight, 15,000, you don't need to trade. You need to sweat it out.
And if you're talking, I mean, I've had, I've seen people come in, they're,
they're $25,000 upside down. They have no money to pay down. And just because of the
aggressive nature of some, some of these financial institutions, they will actually buy the deal.
They'll finance it for you. And then they're just keeping their fingers crossed
that you never default on that loan. You know what happens when you default on a car loan?
Some of you probably have done that. But when you do, you park it in your driveway,
the record shows up, they pick it up, you know, it can be voluntary or you can
raise all kinds of cane. It's better just to hand them the keys and get all your stuff out of it.
Get all your stuff out before they show up. And they'll get it or you'll turn it in.
You'll take it to the dealership. So here's the keys, you know, call Toyota Motor Credit or
GMAC or whatever it's called now and tell them to come get it. I can't pay for this anymore.
So are you off the hook? No, you're not. Because what happens then is they pick it up.
And they take it directly to an auto auction where the vehicle is sold and whatever it brings,
that's the baseline number. The other number is what you owe on the car. They subtract the two.
And if there's $20,000 left that the bank doesn't want to eat, which they don't,
then they're going to sue you for the deficiency and you're going to have to pay it or file bankruptcy.
If you challenge it in court, I guess you could challenge it in court, but you're not going to
win. I mean, if you say, well, this is a problem car, I had to have it in the shop
over and over again to get this same problem fixed. That's not the problem of the financial
institution that financed the car. That's between you and the manufacturer of the car.
The bank doesn't care that you've had problems with it. They just want their money and they're
going to sue you for it. And then they're, if you have a good job and you don't want to file bankruptcy,
then they're going to garnish your wages. They're going to take a little bit out of every check
until that balance is gone. Or you can write them a check and finally pay it off. It's not good
because they're going to be a bunch of extra charges added to that default fees, additional
disposal fees, any kind of damage that was done to the car. They're going to,
they're going to nickel and dime you to death. The alternative to that is to call the financial
institution that you're behind on and say, what can we work out? I think we need help.
Can you defer payments for a couple months? You know, what can we do so that we can stay in
this car? If you are, if you see this coming and you know that you've got financial difficulties
and you call them in advance of being in default, then they're more than likely going to work with
you in one way or another. Some will, some won't. But if you just wait until your 90 days pass due
and then you beg for forgiveness and ask for help, they're not going to give you any help.
You should have handled this on the front end and done it professionally. Too many people don't.
How do people become so ignorant of personal responsibility when it comes to finances?
I don't get it. I mean, it's almost like, you know, when somebody comes in here and they're
they're $30,000 upside down in a trade in, they don't have any clue how that happened. And for them,
they just don't understand that when they trade in their car, why don't, why do we have to pay that?
It doesn't make sense to them. They can't relate to the fact that the value of the car
and what somebody's going to pay them for the car has nothing to do with what they owe on the car.
That only impacts them. You know, the seller, I mean, the purchaser is just looking at an automobile,
deciding in their mind what it's worth and they're willing to pay that. What you owe on it is irrelevant
to them. Now, like I say, it's not irrelevant to you because you've got to figure out some way
to get the title and you only get the title to that car if you pay it off.
You know, and then you'll have somebody, for example, that, well, they're making their monthly
payments. So all of a sudden they have a tough month. They get a big credit card bill, you know,
maybe it's after Christmas or something. And so their payment comes due and they don't make it.
And then their next payment comes due. And then they make that one. And then they make every
subsequent payment after that. What happens is that they have never made that one payment. So
they're showing 30 days past due on every payment after that because they didn't catch up the one
that they missed. How would they know that they need to catch up that payment? You know, if you
missed a payment and then you pay the next one and then the next one and the next one, at some
point you would think, well, you know, I need to make up that payment that I missed. And so you
pay two payments to get caught up. I mean, to me, that's common sense, but it's, it's not common to
them. They say that the only thing common about common sense is that it's not very common. You
know, it's one of the reasons I think when you're probably in your early 20s, you don't have many
assets, if any, you know, at some point when you get a little bit of money, maybe you save five or
$10,000, I think it's time to get a financial advisor that they may not want to take you on
fully like a full fledged financial advisor. Typically they require a whole lot more
net worth in order to take you on, but you might be able to go to a bank that offers financial
advice and develop a plan so that you can start building your wealth. I'll never be able to build
wealth. Well, with that attitude, you are absolutely right. But sometimes building wealth
happens in small increments. And if you start early enough, then you will be amazed what compounding
interest, what investing in the stock market with under good leadership. I'm not talking about just,
you know, pinpointing stocks, but buying into a mutual fund. You start that early enough.
You're going to have people that are your age at 40 that have still have nothing.
And you've got 200 grand in assets. And you've got a nice house and, you know, you've got one
paid for car. The other car has a debt on it, but, you know, you paid $20,000 down to get it. And
these people are looking at you and say, how do you do that? Well, we saved money.
We had a financial advisor. We led a disciplined financial lifestyle.
And, you know, we only bought what we could afford and we didn't sign up for a bunch of
credit cards. We pay off our credit cards every month. We never charge more than we can pay every
month. Those types of disciplines are not automatic. That does not just happen. If you
the typical teenager or credit card, they have no idea about the ultimate consequences
of using that every day. I see it with debit cards as well. I got behind a lady at a 7-Eleven
type store and she was trying to buy some kind of energy drink and she handed over her debit card,
got rejected. She has no clue how much money she has in that account. Obviously none or not enough
for an energy drink. So she leaves the energy drink there, goes out to her car, I guess,
rummages around in her car, finds some loose change, comes in, pays for her drink, then leaves.
Financial responsibility is a rare thing, but it's important to develop it at a young age.
I'll be back in just one minute.
So the My Car Guru teen driving guidebook does not dwell a lot, well doesn't dwell any,
on financial responsibility. And I think that would probably be a real snoozer
for a lot of young folks. They just, especially kids that are still being supported by their parents,
it's just, they look at financial responsibility as somebody else's deal. That's not mine. I do
my chores, I get my allowance if I'm lucky and somebody else worries about all that other stuff.
And then they go to college or they go into a trade school or they join the workforce and they
don't know anything about managing money. They open an account at a bank and the bank offers them
a debit card, but they don't really reconcile their bank account every month and know where
they stand and how much money they're spending. And then they go to a 7-Eleven and can't charge
an energy drink on it. And then they have no life other than just surfing the internet on their
phones that they can't afford. It's kind of depressing, really, but the teen driver program
was very successful that we conducted at our dealership. I had just had this idea one day.
I was thinking about my grandson who is, well, I think he had his driver's license for three months
when he wrecked his vehicle that I had given him. And I think about the things that a teen
or anybody really needs to do when they're involved in an accident,
things that they need to be to just know how to jumpstart a car, how a car works,
just go through all the different systems on vehicles and to understand that it's their
responsibility to maintain their vehicle. It's not like their phone. You don't have to change
the oil on their phone or change air filters and transmission fluid and all that stuff. You
don't have to put brakes on an Apple device, but you do want a car. And some of the responsibilities
of a car owner, if they go ignored, can endanger their lives. And I think it was important for
kids to be able to see that and boy, they saw it. And I created this guidebook as just a something
for us to go by when we were doing the seminar with them. And now I offer that to the general
public for free. You just have to send me your email address and I'll send you a copy of it.
It's the actual book that we used with these kids and has a lot of good points in it. And I think
you can use it as talking points. If you can get them to sit down and listen to you,
that's problem number one. But if it is a condition of their driving ability, then they might pay
attention. And then you give them a test after and you know whether they listened or not. Well,
thanks for listening to this edition of My Car Guru. If you need me, 423-552-2020, that's my cell
send me your or text me your email address and I'll send you a copy of the teen driver guidebook
or the My Car Guru guidebook, which is about buying, selling, trading, servicing cars that
can really make a difference in your car life. And I'll see you next time.
About this episode
New car buyers get a reality check on trade-in deals: “paying off” a trade often just rolls negative equity into the next loan. The host advises slowing down—take a long test drive or keep the car overnight—and verify the vehicle’s true cash value before negotiating. Then the conversation shifts to financial responsibility after repossession, explaining how deficiency is calculated and why contacting the lender early can lead to workable options. A free teen driving guidebook is also offered.
