Dear Terry, My son's car was a total loss in a car accident and the insurance is paying a lot less than the loan balance. Now he has no car and still owes $5,000. How is it possible to work a reduction of the loan balance with the lending institution? -- MariaDear Maria, This is an all-too-common situation now that it's possible to finance cars for 100 percent or more of the purchase price. All cars depreciate once you drive away, so if you finance the full purchase price, you're in danger of having a gap between what you owe and what the insurance company will pay. Some insurers are now offering gap coverage in addition to the standard policy to avoid such issues.In your case, since I assume the insurance company has already settled and there's no room to negotiate the amount they paid the lender, your son should contact the lender and try to negotiate the balance owed. They may be willing to roll the amount owed into a new car loan, but again you'll be in a position of owing more than the car is worth.This week•Car incentives often hidden -- but they exist•When a leased car is repossessed is there an early termination fee?•How can an elderly woman get rid of an 18 percent car loan rate?•My son still owes $5,000 on a car he totaled. What can he do?If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car -- sign up for Bankrate's new weekend Car & Money newsletter advertisementRelated Links:7 best off-to-college carsNational auto loan averagesWhat changes auto loan rates?Related Articles:All new cars for 20105 steps to 'clunker' dealTake the 'cash back?'
Dear Terry, My son's car was a total loss in a car accident and the insurance is paying a lot less than the loan balance. Now he has no car and still owes $5,000. How is it possible to work a reduction of the loan balance with the lending institution? -- Maria
Dear Maria, This is an all-too-common situation now that it's possible to finance cars for 100 percent or more of the purchase price. All cars depreciate once you drive away, so if you finance the full purchase price, you're in danger of having a gap between what you owe and what the insurance company will pay.
Some insurers are now offering gap coverage in addition to the standard policy to avoid such issues.
In your case, since I assume the insurance company has already settled and there's no room to negotiate the amount they paid the lender, your son should contact the lender and try to negotiate the balance owed. They may be willing to roll the amount owed into a new car loan, but again you'll be in a position of owing more than the car is worth.
If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car -- sign up for Bankrate's new weekend Car & Money newsletter