Car Trading in/ Buying advice

Spring182

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Question for people that swap vehicles before they're paid off. Last June I purchased a 2013 Ram pickup truck. I am interested in trading it in for a car so I can get better MPG. I owe 28K on the truck. NADA Blue book on it says average trade-in is 19K. So with that I am negative 9K. The cars I have been looking at are priced around 15-16K (2-3 year old vehicles with under 30K miles). Using online auto loan calculators say with that information alone my payment would be the same and thats with a higher interest rate. My interest rate is a 2.5% right now and I plugged in a 8% on the calculator just to see.

I guess my question is does it seem likely my payment wouldn't change much making the switch?? Is it worth it to get better MPG??
 
Why not sell it private party and get a bit more cash for it? You'll still probably be in the red either way, but with selling it yourself your guaranteed to get a few thousand more for it. Which will help you take out a smaller loan for the car.
 
If you are upside down that $$ will have to be paid one way or the other. Whether you have a check for the difference when you get the new vehicle or finance it in with the cost of the new car.

Depending on how you handle being upside down will determine the final monthly payment.
 
I guess my question is does it seem likely my payment wouldn't change much making the switch?? Is it worth it to get better MPG??

That was my experience when I traded-in a car with remaining loan due to get a different car. As to the question of "worth", that's something you can work through from a $$$ standpoint... What would the payback period be for having better MPG (and lower fuel costs) versus not (assuming the loan payments would end up being very similar)? The payback period would be better if you put a lot of miles on the vehicle, but, again, that becomes a value discussion as well. Figure out what your cost per mile is for each vehicle, then apply that to the expected number of miles you drive.

What this doesn't take care of, though, is the non-$$ value you place on the vehicles. Would you be happy/OK with driving the car versus the truck? For me, I went with a Camry, a couple of years ago, due to the mileage. This was after I drove an SUV for 5+ years. It only took me a year to trade the Camry in (great car, BTW), because of my comfort and use for an SUV. I am taking a hit on MPG, but I feel more comfortable with the vehicle I have now.
 
If you are upside down that $$ will have to be paid one way or the other. Whether you have a check for the difference when you get the new vehicle or finance it in with the cost of the new car.

Depending on how you handle being upside down will determine the final monthly payment.
Yep, if you are upside down in one car, and you buy a cheaper car to keep your payments relatively the same, you will be more upside down, percentage-wise, in the new vehicle. You're still the same dollar amount upside down, but now your paying the same amount for less car. Although you should offset some of that with the gas mileage difference. Have you checked insurance rates too? With my company, Dodge cars and trucks cost more to insure. You might be able to save more money by finding out which makes cost more to insure with whoever you have.
 
I feel you can get yourself in some trouble if you are trading in with $9000 left. What happens when you are not happy with the new car or you are trading up/down again. That $9,000 will haunt you for quite awhile. You now have a huge loan of $25 thousand with a value of approx $16,000. How many years are you looking at to get the loan even with the value? You may want to wait.
 
I feel you can get yourself in some trouble if you are trading in with $9000 left. What happens when you are not happy with the new car or you are trading up/down again. That $9,000 will haunt you for quite awhile. You now have a huge loan of $25 thousand with a value of approx $16,000. How many years are you looking at to get the loan even with the value? You may want to wait.
This is basically my view of things too. I generally don't like the idea of being even more upside down on an older car with more miles. The projected new car will likely need repairs sooner than the truck, expediting those expenses (and it won't be covered under warranty now either, so you expose yourself to some risk there). Personally, I'd rather pay more in gas.
 
I've seen some dealerships "guarantee" to pay off your current car no matter how much you owe. I'm guessing there's fine print so they don't lose money, but it might be worth looking in to just in case they can help.
 
I've seen some dealerships "guarantee" to pay off your current car no matter how much you owe. I'm guessing there's fine print so they don't lose money, but it might be worth looking in to just in case they can help.

All they mean is that they are going to tack it onto your loan.
 
Don't do it. Bite the bullet and keep what you've got. You're going to lose your shirt either way, might as well keep the truck and roll the windows down this summer.
 
I love Dodges, but trade in SUCKS unless it is a Diesel. Try to find a Dodge Dealsership to trade with. They will give you more than anyone else.
 
I would say your stuck in that timeframe where the biggest drop in trade-in value has hit, without really having paid a lot on the truck.

Guessing you would do much better private sale but I did hear a money guy (Cincinnati radio) say that dealerships were loaded with trucks right now & to expect some great deals available this summer.

Obviously you liked the truck last summer when you bought it. If you want to keep it, can you swing the cash to buy a daily driver for $2-3k? I've got two friends one with Camaro, another Mustang, they both drive 8-12 year old Civics or similar back & forth to work.
 
My advice, don't do it. If you can't write the check then don't start an endless cycle of debt creation. All that does is push a bitter pill into the future, but a bitter pill that will have to be swallowed at some point. An extra $20 or so a week on gas won't eat into the $9K. If you are adamant that you won't to move on then wait it out until you have paid more of the car down, you highest depreciation is the first 24 months coupled with the fact that you are paying more interest on your note in the early years.
 
It has been a while since I sat down and calculated the difference, but if you are considering this solely on fuel economy, divide your average miles per year (say 20000) by the fuel economy of both the truck and the car you are considering. Those results multiplied by the gas cost will give you the fuel costs of each for the year which you can compare to see how much you will save.

When I looked once at the 10-15 mpg difference of a hybrid versus non-hybrid, even at $5 a gallon gas, it was going to take me a long time to make up the $5K difference in cost.
 
Since you purchased the truck last June, you have had it for less than a year. Any vehicle depreciates the second it is driven off the lot and less than a year's payments will not cover that depreciation. My suggestion is to keep the truck for at least another year or so and pay off as much as you can.
 
Having worked for an auto-finance company, I can tell you that if your options are to trade in or not to trade in, then definitely do not. As others have said, you'll owe a lot less but will have an older vehicle thats worth less.

If you must get a different vehicle, sell it privately. Dealers have to build in enough profit to pay the salesman, finance manager, GM, company, etc... thus you're going to get bottom dollar for it. Keep the truck of sell it privately.
 
A lot of banks have moved away from financing negative equity. I'd be very surprised if you found a bank that would even give you $25k for a $16k car.

I'd personally keep the truck for a dependable vehicle and buy a beater to commute in. You often get multi car insurance discounts too.
 
I appreciate everyone's responses. My thought process behind this was that right now i have a 3 minute drive to work and after changing jobs soon my trip everyday will be about 30 mins. I bought the truck due to the huge rebates I got on it plus I thought it would be nice to have a truck for the bed and hauling. Since I've owned the truck I haven't really utilized it the way I thought I would.

Hmm I just don't know. Quite a pickle.


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A lot of banks have moved away from financing negative equity. I'd be very surprised if you found a bank that would even give you $25k for a $16k car.

I'd personally keep the truck for a dependable vehicle and buy a beater to commute in. You often get multi car insurance discounts too.

This is probably the direction I will go. Thanks!
 
I'd keep the truck if it was me.

30 mins drive is maybe 20 miles one way and 40 miles per day to and from work at 4 dollar gas your looking at maybe $9 (18mpg) to and from work for the truck. If you get a car at that gets 30 mpg your at about $4.25 to and from work. So that's $4.25 per day or $21.25 per week or $552.5 per yr in savings vs the truck for fuel. That's savings drops as fuel price goes below $4, not tires oil changes and breaks will be cheaper on the car but you'll have zero warranty so anything that breaks your responsible for. So best case scenario is that you save $900 per yr in operating costs that's 10yrs you need to drive the car to break even on what your upside down.
 
Car Trading in/ Buying advice

You may not get financed for the total amount since the new car is worth less than the total amount to be financed.

It doesn't seem likely that better MPG is going to make up a $9k loss quickly. You'll have to do the calculations re how much you drive, the delta in MPG to determine how much the switch will save you. Factor in difference in insurance if any as well. Also, of you need some down payment for the new car, that would be additional money out of pocket to factor in.

Might be better to keep the truck until you can sell it for break even.

You'll have to do some math.
 
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I'd keep the truck if it was me.

30 mins drive is maybe 20 miles one way and 40 miles per day to and from work at 4 dollar gas your looking at maybe $9 (18mpg) to and from work for the truck. If you get a car at that gets 30 mpg your at about $4.25 to and from work. So that's $4.25 per day or $21.25 per week or $552.5 per yr in savings vs the truck for fuel. That's savings drops as fuel price goes below $4, not tires oil changes and breaks will be cheaper on the car but you'll have zero warranty so anything that breaks your responsible for. So best case scenario is that you save $900 per yr in operating costs that's 10yrs you need to drive the car to break even on what your upside down.

Thanks for breaking that down for me!
 
Thanks for breaking that down for me!

Your welcome, sometimes seeing the #'s in black and white makes things clearer.

For what it's worth my wife and I own 3 vehicles 95 Camry(my daily driver) 09 corolla(her daily car) 06 dodge diesel truck(bought new was my daily for about 2.5yrs till she got her car). We kept her old car and turned it into my daily driver/run around vehicle since it was paid for and it saved us on insurance with it labeled as the primary car.

I did a lot of figuring when we decided to keep the Camry and again when I put a motor in it on break even points and costs analysis. For me if I spent less than a 1,000 per yr on my beater to maintain it I came out ahead.
 
You could always buy a used motorcycle and keep the truck. Given you are in Texas, you should be able to use the motorcycle most of the year.

Getting rid of the truck, as GolfinFF has pointed out, really won't help you break even.
 
I feel you can get yourself in some trouble if you are trading in with $9000 left. What happens when you are not happy with the new car or you are trading up/down again. That $9,000 will haunt you for quite awhile. You now have a huge loan of $25 thousand with a value of approx $16,000. How many years are you looking at to get the loan even with the value? You may want to wait.

I agree.
 
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