Car question

machine528

machine528

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Ok in 2004 i bought myself a used vehicle. It was the previous years model. I still owe 13,000 on the vehicle. If i am looking to get rid of this vehicle and pick up a cheaper, newer suv how would i go about doing it. Does the dealership buy out the 13,000 that i owe or am i stuck with the 13,000 and whatever my new car loan will be. Im thinking about getting rid of my current vehicle and if i keep it until the 13,000 is payed off im definatly going to put well over 100,000 miles on it.
 
RenegadeRows

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Your "upside down" in your loan. That means if you owe more money than you have paid off, if you trade your car in, they will tag the difference onto your new car.

Say your car is worth 10,000 now. You bought it for 15,000, and only paid off 3,000 of it. They will buy your car for 10,000 (if your lucky), but the price of your new car will go up 2,000.

The question is: How much is your vehicle worth? If it's worth less than 13,000 ... your better off keeping it, otherwise the new car you are looking to purchase will cost more than the ticket, because your upside down.

Make sure to have the Kelly blue book (KBB.com) specs when you go in there.

HowStuffWorks.com
 
Dr Packenwood

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If they know you're desperate, they'll offer you even less on your trade in.

DO NOT EVER tell a dealer what you plan to offer them. **** them.

Make the deal on your newer car first, get it in writing, THEN tell them if you have a trade in, cash down, a hand job, whatever...,

But if you expose what you have, they'll just add it on to the back end of the deal. If they won't work with you, walk away.
 
EasyEJL

EasyEJL

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I've sold cars before, but i gotta run right now, i'll come back later and answer this :)
 
EasyEJL

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Basically its sort of already covered but i'll add a few details. The dealer will take what you owe ($13,000) add it to the price of the new vehicle, subtract what he gives you for trade in on the current vehicle, and that will be the price you pay to leave with the new vehicle. Most likely unless you put a bunch of money down before you bought this, you are upside down, so the existing vehicle is worth less than $13,000. The problem part is that you can only finance so much on any given car. If the vehicle you are considering is a used car, you can only get to around 105-110% of its value as financed amount. If its new, you may be able to get to as high as 125% with impeccable credit. Overall, its generally a bad idea unless there is an overriding reason to do it.

Look at it this way. Take the amount you used as down payment, add what you made in payments, then add the amount less than $13,000 your existing car's kelly blue book or edmunds value is. Thats what it will have cost you to drive it for this one year.... if you at least keep it 2-3 years more, it should break even at some point. Depends on how much you put down, and other details of course.
 
RenegadeRows

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Basically its sort of already covered but i'll add a few details. The dealer will take what you owe ($13,000) add it to the price of the new vehicle, subtract what he gives you for trade in on the current vehicle, and that will be the price you pay to leave with the new vehicle. Most likely unless you put a bunch of money down before you bought this, you are upside down, so the existing vehicle is worth less than $13,000. The problem part is that you can only finance so much on any given car. If the vehicle you are considering is a used car, you can only get to around 105-110% of its value as financed amount. If its new, you may be able to get to as high as 125% with impeccable credit. Overall, its generally a bad idea unless there is an overriding reason to do it.

Look at it this way. Take the amount you used as down payment, add what you made in payments, then add the amount less than $13,000 your existing car's kelly blue book or edmunds value is. Thats what it will have cost you to drive it for this one year.... if you at least keep it 2-3 years more, it should break even at some point. Depends on how much you put down, and other details of course.
Good info.

So your saying that the longer you keep a car (aka, the more you have paid off), the better off you are as far as trade ins go? (generally speaking.)
 
EasyEJL

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Good info.

So your saying that the longer you keep a car (aka, the more you have paid off), the better off you are as far as trade ins go? (generally speaking.)
Twice as important if you finance than if you pay cash. picture a brand new cadillac CTS. you pay 36,000 for it


yr 0 27,000 - 7000 walk off the lot depreciation
yr 1 24,000 - 5000
yr 2 20,000 - 4000
yr 3 17,000 - 3000
yr 4 14,500 - 2500
yr 5 12,500 - 2000
the numbers could be off by a bit, but thats the general "flow" of them, much more first year, and after 3 years it starts to get closer to level loss of value year after year. Where it gets worse is that in your loan of 5 years, the first year you are hardly paying anything against principal, its mostly interest.

$700/mo payment, 36,000 loan at 6%, about $2000-3000 down payment for tax, tag, etc

balance
yr 0 36,000
yr 1 29635.09
yr 2 22877.60
yr 3 15703.32
yr 4 8086.55
yr 5 0

these are exact numbers from a calculator :) but you can see that until year 3 you don't break even. It can be a little better on a used car if you pick it up at the right sort of price, you may break even before the end of year 3, but its really very individual car to car at that point.

So real world best bet for most bang for your buck is to buy 2-3 year old cars from a private party, and take only a 4 year loan on them, plan to keep them for 6 years. This way if you decide to change them sooner (or have a life even that requires you to change them) you minimize your loss. When my wife DECIDED she NEEDED a 7 passenger vehicle with the birth of our 2nd kid, I ended up needing to write a $4,000 check to get out of her prior car and into this one, and it was already 3 years old.... but she went from a lincoln LS to a kia minivan as part of the punishment for forcing me to do that :D
 
RenegadeRows

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I bought a toyota corolla and could only finance for 6 years. the reason i bought a corolla is because they last a long time ... so im hoping to own the car before it sh*ts the bed :)
 
EasyEJL

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you at least should be able to break even on it. part of the problem is things like life changes - a new job, getting married, having a kid, etc that make you end up needing to make a vehicle change. 6 years is a long time
 
RenegadeRows

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you at least should be able to break even on it. part of the problem is things like life changes - a new job, getting married, having a kid, etc that make you end up needing to make a vehicle change. 6 years is a long time
only 4 more years and its mine! :)
 

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