Tips on Buying Cars: car loans, voluntary repossession, 95 mercury tracer

Question
I'm not sure if you can help with this question or not, but.....

I have a 95 Mercury Tracer, right now, I owe more on that car than it's worth, so I can't trade it in.  That's a big problem because that car needs a lot of work done to it, and it's going to cost more money than I have.  I need to get rid of the Tracer so I can buy another car.

Do you know if I can voluntarily surrender the Tracer to the finance company?  If I do that, does that mean I won't have to finish paying off the loan?  I owe nearly $4000 on it yet.  I can't afford to pay off the Tracer & take on a loan for another car.  I also cannot afford to have the Tracer repaired so I can keep it.

Any suggestions?

Answer
Marcie:

Thanks for your question.

Do not surrender your car to the finance company. This DOES NOT release you from paying the balance on the loan. This is considered a voluntary repossession and will ruin your credit for years to come -- and you still have to pay.

Be very cautious if you talk to a dealer about trading. They will simply add your negative equity to the price of your new car, making you even more "upside down" on your new car.

I don't know the details of what repairs you need, but I suggest having the problems on your Tracer fixed, not all at once, but one at a time as you can afford it.

At some time in the future, if you continue making payments, your loan balance will catch up to the value of your car and you can then get out of it without penalty.