Trade in Tacoma?

[annamal_instinct]

Hi! I bought a ‘17 Tacoma in a mid-divorce “emergency” last August (during the pandemic related spike in auto prices) for $36.5k. I have a loan 😆, so about the only good thing I can say is I also have a great interest rate.

FFWD to today: I’d like to explore buying something more economical. The trade-in value is now $31k, so I lose money on this idea but improve my net worth. I have mutual funds I would be willing to sell when the market improves to cover the $5.5k I’ve lost and pay for the vehicle outright.

I’m a landscaper so need something with storage and multi-ton towing capacity (I can be flexible with the exact tonnage). I can also live without hauling capacity (ie, a truck bed). I need something with room and good safety ratings for my two young kids (no car seats anymore though!). 

What would you do in my shoes to get back into more frugal decision-making that’s in my retired self’s best interest? Which vehicles would you look at? Other ideas from a financial standpoint?

[oldmanintech]

What is left on your loan and what is the interest rate?

[sonofsven]

I would explore other "trade in values"; other dealers, online buyers, private party. I'm hearing anecdotally from friends that they are being offered more than they paid for used Tacomas. The dealers make more profit selling near new vehicles than they do selling brand new, at least that's what I've read.

[annamal_instinct]

Thanks to both of you for the replies. I still owe about $35.5 and have a 3.99% interest rate. I like the idea of exploring other options for selling…appreciate it!

[yachi]

The trade-in value is now $31k, so I lose money on this idea but improve my net worth.

I still owe about $35.5 and have a 3.99% interest rate.

I see no way this improves your net worth.  I mean, you said you lose money on the idea, where do you make it up?  Maybe a table will help:

Net worth now:                            Net worth after:
'17 Tacoma                                   + Value of New Car Itch Scratcher
-$35,500  loan                              - What you paid for New Car Itch Scratcher
mutual funds                                 mutual funds
                                                    -35,500 loan
                                                    +31,000 from sale of Tacoma

See?  The value of whatever you replace the Tacoma with adds to your net worth, but whatever you paid for it subtracts from your net worth.  It's actually worse than this because you get nothing for the taxes you pay, and a lot of the transfer costs.  Meanwhile, you have to cover the $35.5K loan with money from the sale of the Tacoma and from your mutual funds.

So, what are you really looking to do?  It makes sense to me to look for something cheaper to operate (more economical), but that mostly moves you away from things that tow.  For example, minivans, or small cars.  It also makes sense to me to move to something older, so you don't have so much of a loan and depreciation on a "newer" truck.  Do you run your own landscaping business, or are you just showing up and providing the labor?  If you're just labor for someone else's landscape business, you don't need to accommodate them in your choice of vehicle.

[bryan995]

What are you planning to buy to replace? I’d almost start there to find out what the whole picture looks like. It is an even worse time to be buying used vehicles right now. Especially used trucks.

[chemistk]

How much are you willing to spend on a replacement vehicle? If you need something that can reliably tow at least one ton, you're looking at vehicle classes that are stretched extremely thin in terms of inventory and you're almost guaranteed to pay more than what the vehicle is "worth" (in terms of 2019 prices). Chances are also high that prices never really go back down, even adjusted for inflation (for whatever that's worth right now anyway).

Best case, you're looking at trading your truck in and then turning around and buying an older Dodge Grand Caravan or something similar. And then you're stuck with the older vehicle that will need more invested into it while not improving much in terms of fuel economy.

You could certainly make this work, and there's definitely a case for it, but if you look at it what's available at a reasonable price for your needs (and because this is your business vehicle, do you want to put more risk on the vehicle needing repairs?), I don't think your intentions align with the desired outcome.

[JungYo]

Fellow Tacoma owner here (2017 SR5 DCSB V6 4WD AT)...

What model/trim is your Taco? If it is an SR Access cab 2WD 4-cylinder, the $31k is very reasonable. At the other end, if you have a TRD Pro, TRD Offroad doublecab, you'd net more than what you owe on a private party sale if you're not in a rush; maybe even with a sale to a dealer/Carmax/other service. Even an SR5 doublecab V6 4WD should fetch mid-30's easily. Mileage, condition, accident and maintenance history all play a role.

Sorry I'm of no help with the financial side, but the market for Tacos is really insane right now.