I welcome any advice that will help a friend out. So here is the story.
I work with a younger guy that was sapped into buying a car from a Buy Here Pay here lot. He is currently lower income and they sold the car to him for about 3 times its value. Currently he has made most payments on the car for about a year but recently has had difficulty making a payment. He currently is behind a payment and the car has mechanical issues. Its a 2009 Chevy with around 170K on it. The car blue books for $2000-$3200 range and he currently owes $6500ish on it. He does have a 2nd paid for car so Ive been tossing him the idea of getting rid of Chevy since he is struggling to make bills. So here are the avenues of options that i see (advise if there are more). The first one was his idea which the dealer seems to like...
1) Surrender the car. The dealer ship said they would sell the car at auction and he would owe the difference from the sale and the outstanding balance.
2) Pull a new loan from a bank with longer repayment date to pay off the dealer.
The 2nd was my idea and I based it on a few reasons...
1) Private selling the car would bring more than the dealer auctioning the car off.
2) He has insurance through the dealer that he could then drop and find private insurance for cheaper (its around $100 a month). FYI the car payment currently is $400 a month ($200 every 2 weeks).
I know nothing here is stellar but Im trying to find him the most painless way out of dealing with this car. The dealer really is a scumbag (fyi its a place in Hamilton Ohio). Im worried if he surrenders the car and stops paying that they will issue a judgement against him in court and garnish his wages.
Is there another route he can go?
Also, what banks would be willing to work with him on a private loan? He estimated his credit score to be around 500. I asked him about previous loans he might of had and he claims the car is the only loan he has ever had.
Any help is appreciated. I just want to him him get through this. I think he learned a tough lesson here how these places just prey on people.