If you have $5000.00 of negative equity, selling the Volkswagen on your own is probably a bad idea. Aside from the ethical questions, you have to consider that in a private sale of a used car, the buyer will expect you to have the title. The only way for you to get a clear, negotiable title from the state would be to pay of the entire balance of the loan. You probably don't have the cash in the bank to do that, so unless you can get a home equity loan, a private sale won’t work. The only way out is to trade the Volkswagen in to a dealership and buy a new car. It can’t be a used car either, it must be new, and I’ll try to explain why. When a customer is buying a new car and they’re “upside-down” on their trade the dealership has to add the negative equity to the price of the new car. The problem is that the banks don’t want to finance inequity so the dealer has to “hide the money” in the new loan (or lease). On the purchase of a new car most banks and finance companies will finance up to 110% of the MSRP. However the dealership isn’t going to charge you 110% of MSRP for the new car; if they did that they would go out of business. The dealership will discount the new car, possibly all the way down to invoice, and then add the inequity amount back in to the total, effectively “hiding the money” in the cost of the new car. Oh and don’t worry, this is all perfectly legal. The banks know that the dealerships do this, its just a matter of complying with state and federal banking laws. I would recommend buying a new Honda, possibly an Accord. You can finance it, but a lease would be better because Honda has a very aggressive lease program. You may also want to consider a Toyota. Both Toyotas and Hondas hold their value, and both American Honda Finance and Toyota Financial Services give their dealer the tools their dealers need to help customers like you.

Good Luck

David Brindisi