I agree with the dealer. Screw the first finance company. It's every man for himself in America these days. Congrats on the new car man!

The salesman is indeed an idiot looking to make a sale and giving you horrible advice.

If you allow your car to be repossessed, it's going to ruin your credit, and by the time they are finished with things (and you were given an excellent picture of what is going to happen) you will wind up paying probably more than just keeping it and paying it off. Take your balance now, add the repossession costs, the attorney and court fees, and subtract the cents on a dollar they will get when they auction it, and you will owe more than you owe now.

Yes, you can do it. but let's ask just one question. if you lose 25% of your income, can you still afford the new car and all the rest of your bills? If the answer is no, you will end up with 2 repossessions on your record for 7+ years. Once you fail to pay off the old loan, they will garnish your check. They can take up to 25% of your NET pay. This means it will be harder to pay the rest of your bills. This is a very slippery slope you are headed down, so tread lightly and think it through.

The salesman will tell you it is all good as he is in desperate need of a sale and he sees an easy mark. He does not care about the real financing dilemma you have. He gets paid when you buy a car. If it gets repossessed or you have other financial problems, it does not affect him as he keeps his commission.

Good luck, and I hope it all works out.

You will still pay for the repossessed car one way or another.
If you let it get repossessed, it will just cost you more.

Uncle Jed did a good job explaining the process.
The car salesman you talked to is an idiot.

credit scores are determined by many things, but enjoy making two payments when you get this new car.

P.S. You were "preapproved", which means nothing. You still have to go through the whole darn process and a fresh repo ain't looking good for you!