Author Topic: Car Payment Question  (Read 10745 times)

Returnoftheyeti

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Car Payment Question
« on: December 09, 2014, 09:50:25 PM »
So back in January 2014 I got a burr up my ass and bought a car I don't really need. It was brand new, sexy, fast.  I have driven it less than 6000 miles so far this year.

My payments are $600 a month, and I owe about 28k for it.
If I were to sell it, the best offer I am getting is 23k. 

I can afford the payments every month, but that is $600 a month I am not saving, or not spending on fun stuff.

I would like to have a car, but I don't need this fast sexy car, an econo box would be fine. 

I have no real liquid savings, I am ok with selling the car and not having a car for a while.
I can come up with the 5k difference between selling at 23k and owing 28k. That would wipe out my cash.

So the question is, keep making the payments, work harder at living frugaly, save more cash and sell the car later?  Sell now at an extream loss and wipe out my bank account? 

The interest rate on the loan 1.5% if that matters.

Also, being honest here, I am new to the way of the mustache, and I don't practice it's lifestyle. I am starting, and this is a reflection of that, but as evidenced by my lack of cash, there is no real guaranty that the extra $600 a month by not having a car payment will not just go to other useless things like TVs and football tickets.


Professor Ecks

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Re: Car Payment Question
« Reply #1 on: December 10, 2014, 06:34:47 AM »
Quote
Also, being honest here, I am new to the way of the mustache, and I don't practice it's lifestyle. I am starting, and this is a reflection of that, but as evidenced by my lack of cash, there is no real guaranty that the extra $600 a month by not having a car payment will not just go to other useless things like TVs and football tickets.

Kudos for the honesty, but herein lies the problem. If you have no idea what you would do with the increased funds if you sold the car, then there really is no way for us to determine the most beneficial route for you. We can only go about as deep as "Having no car payment is better than having a $600 per month car payment." We have no insight to the rest of your financial picture, and this decision can't be made in isolation from the rest of your financial circumstances.

You're sort of putting the cart before the horse. You need to get your mind right regarding what your financial goals are and how disciplined you are willing to be in regards to reaching those goals. Once you have determined that, you can start exploring strategies to reach those goals (like selling the car).

Gin1984

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Re: Car Payment Question
« Reply #2 on: December 10, 2014, 06:44:59 AM »
Here is what I would do, prepay the loan, without your spare cash.  Find ways to cut to get the extra cash.  That will get you into a different mindset and once you have saved up the money to sell the car you will be less likely to waste the money.  It also would only take you less than a year to save up for a cheap used car once you have sold your fancy car, if you save up your current payments.  Keep that in mind.

Le Barbu

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Re: Car Payment Question
« Reply #3 on: December 10, 2014, 07:14:36 AM »
You are new at MMM but if you feel you are ready to aim big goals, then, the short answer is: sell the car, go without for few months, think about the minimum car you need and follow us for next steps.

Longer answer?

1-Sell the car, that 5k difference is ALREADY LOST for you! You'll just transfer this loss (depreciation) to your bank account. In fact, it's the loss that cars experiment "driving of the dealer’s lot". It cost 5k to you, fine enough; you'll remember that one forever. This 1.5% is completely irrelevant, in fact, it's a piece of the trap Dealers use. I would prefer to buy a car for 3k @ 8% and repay the loan over 4 month than buy a 20k car @ 0.9% over 5 years.

2-Go with no car for a while if you can, walk, bike, take the bus (peoples get sexier whit firm butt walking and biking provide then sitting in a "sexy" car). If you repay your 5k with the 600$/month you save, this step will last 8 month with no need to optimize your 600$/month saving.

3-What is your need for a car? Can you live without? The 8 months "test" will show you. Then a decent "econobox" can be bought for less than 5k (MMM; 10 Cars for Smarts People" post is great)

4-What to do whit the cash surplus? Repay all of your debts, fill all of your retirement accounts (with employer, government etc). Invest in Vanguard Index Funds

5-Believe me, in 12 month from today, you will be completely stunned. Completely

Keep up Returnoftheyeti !

NumberCruncher

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Re: Car Payment Question
« Reply #4 on: December 10, 2014, 07:31:20 AM »
Look up the "Sunk Cost Fallacy" - essentially what Le Barbu explains in point (1). Doesn't matter what you paid for it, essentially.

If you are someone who spends money with money in the checking account, you might try automating savings. Up 401k contributions an equivalent amount, for example - if you don't "see" the money, it's harder to spend it. Of course, you need to be careful with credit cards, too.

skunkfunk

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Re: Car Payment Question
« Reply #5 on: December 10, 2014, 07:46:59 AM »
You'll save on insurance with a used car too.

I think you need a full case study, it is hard to divorce this from the rest of your finances. The car needs to go, but if you want good advice about how to deal with it all pertinent expenses, income, assets, and liabilities would be useful.

Le Barbu

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Re: Car Payment Question
« Reply #6 on: December 10, 2014, 07:55:56 AM »
NumberCruncher, I went to read about that Sunk Cost Fallacy

Remembered me 3 years ago, my mom was about to travel on a cruise in Northern Sea. She already put a 500$ down and still have to pay another 2k. Few weeks before the trip, she called me and said "-I'm not in great shape (recovering from a shoulder surgery) and my friend I was supposed to travel with choked, what should I do?" I asked her, do you want to travel anyway? "-Not realy, but I already spent 500$..." Fuck that, are you gonna spend another 2k to go even if you don't feel it anymore? Save that 2k + sanity + health FGS! Then my mom just feel better and did not went to the cruise, no regrets.

Thank you for the link !

NeuroPlastic

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Re: Car Payment Question
« Reply #7 on: December 10, 2014, 08:02:12 AM »
I would sell the car as soon as practical.
(I sold my own clown-mobile earlier this year and bought an '07 Yaris.)
  • The payment is gone.
  • The insurance is lower.
  • The registration fee is lower.
  • The fuel costs are lower.
  • The maintenance costs are lower (A complete set of new tires for the Yaris costs less than $200, versus over $800 for the clown-car.)
  • The new car is much easier to drive - mostly because I don't have the stress of driving something  crazy-expensive that is owned by someone else (the lender).
And I'm no longer eating a big, daily helping of depreciation.  The $5k is gone, and that sunk cost will continue to grow until you sell this hole in your wallet.

Le Barbu

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Re: Car Payment Question
« Reply #8 on: December 10, 2014, 08:17:37 AM »
I would sell the car as soon as practical.

+1

And I'm no longer eating a big, daily helping of depreciation.  The $5k is gone, and that sunk cost will continue to grow until you sell this hole in your wallet.



If the decision is taken 6 month from now, the sunk cost could be more than 5k, especialy when 2016 model will be released

Professor Ecks

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Re: Car Payment Question
« Reply #9 on: December 10, 2014, 08:35:43 AM »
I would sell the car as soon as practical.

+1

And I'm no longer eating a big, daily helping of depreciation.  The $5k is gone, and that sunk cost will continue to grow until you sell this hole in your wallet.



If the decision is taken 6 month from now, the sunk cost could be more than 5k, especialy when 2016 model will be released

Or it could be less. With an APR of 1.5%, most of his payment is going towards principal. The gap between the amount owed and potential sale price could be lessened significantly. This, of course, doesn't take into consideration the extra out-of-pocket expense of making additional payments, additional fuel costs, maintenance, etc. It also doesn't take into account the potential utility and convenience of having a vehicle vs not having a vehicle. I say all this to point out that the "sunk cost" aspect probably shouldn't be the deciding factor.

I've noticed that the prevailing "sell your car ASAP" mentality expressed in these "to sell or not to sell" threads can often ignore the reality of the situation. It's not as simple as just deciding to sell the car. Someone has to WANT to BUY your car. What if OP can't find an interested party. What if he gets some interest, but the loss is going to be closer to $10k than $5k? I mean sure, if you can find multiple interested buyers who are willing to pay close to your asking price, then it's a no-brainer. However, that's rarely the reality, especially in cities with tons of inventory, year-end deals, etc.

Le Barbu

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Re: Car Payment Question
« Reply #10 on: December 10, 2014, 08:51:13 AM »
I never bought a new car but is that 1.5% loan could be "transfered" like the warranty etc?

I agree, Returnoftheyeti is not in a "rush" to sell and increase the lost. In fact, he should make his homework and try his best to sell at highest price possible (i.e. not to the dealer nor to a used car dealer. Not to any "pro" in car business). Make the car clean, take good pictures, set a good ad on Craiglist or whatever used stuff site is his area.

But the final statement remains the same, he should het rid of this clown car. Just calling it a Clown Car himself mean he feel bad about it. Its gonna be a relief to sell it!

Bob W

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Re: Car Payment Question
« Reply #11 on: December 10, 2014, 08:59:13 AM »
Sell and get yourself an 8K car with a 3% note.   

NeuroPlastic

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Re: Car Payment Question
« Reply #12 on: December 10, 2014, 09:16:50 AM »
I would sell the car as soon as practical.

+1

And I'm no longer eating a big, daily helping of depreciation.  The $5k is gone, and that sunk cost will continue to grow until you sell this hole in your wallet.



If the decision is taken 6 month from now, the sunk cost could be more than 5k, especialy when 2016 model will be released

Or it could be less. With an APR of 1.5%, most of his payment is going towards principal. The gap between the amount owed and potential sale price could be lessened significantly. This, of course, doesn't take into consideration the extra out-of-pocket expense of making additional payments, additional fuel costs, maintenance, etc. It also doesn't take into account the potential utility and convenience of having a vehicle vs not having a vehicle. I say all this to point out that the "sunk cost" aspect probably shouldn't be the deciding factor.

I've noticed that the prevailing "sell your car ASAP" mentality expressed in these "to sell or not to sell" threads can often ignore the reality of the situation. It's not as simple as just deciding to sell the car. Someone has to WANT to BUY your car. What if OP can't find an interested party. What if he gets some interest, but the loss is going to be closer to $10k than $5k? I mean sure, if you can find multiple interested buyers who are willing to pay close to your asking price, then it's a no-brainer. However, that's rarely the reality, especially in cities with tons of inventory, year-end deals, etc.

Yes, it's true that continuing the payments would lessen the gap between the principal outstanding and the potential sales price.  But the potential sales price of the car will continue to fall with time and mileage regardless of the outstanding principal.  I'm guessing here, but with a $600 payment, the price for the car is probably north of 35k.  Maybe it's worth $15k after 5 years.  For straight-line depreciation that's about 330 dead green soldiers a month - a dozen a day.
That being said, yes, mangaging the mechanics of selling/purchasing to minimize losses is very important, but its separate from the decision to hold or sell.

frugaliknowit

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Re: Car Payment Question
« Reply #13 on: December 10, 2014, 09:36:59 AM »
Owning the car is an inefficient use of your resources.  The sooner you are rid of it, the better.

You need to look at your income and expenses and never again be in a position where you have no cash.  You need to plan how to "grow your money" by spending much less than you earn and investing the difference.

neo von retorch

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Re: Car Payment Question
« Reply #14 on: December 10, 2014, 10:17:47 AM »
8 year old math for simplicity
(btw looks like 48 months remaining, currently $35/month in interest)

Current net worth:
$5k cash
-$28k loan
$23k private party car value
$0

Next month (assuming you break even with income/expenses):
$5k cash
-$27.435k loan
$22.7k private party car value (assuming depreciation of $300/month)
$265

Wow, you're slowly improving your net worth. Great. But if you sold it for $23k in the first month?

Next month:
$600 cash
$150? (add in what you're not paying in insurance and gas here...)
$0 loan
$0 car
$750 Whoa. your net worth seems to increase pretty quickly here.

Depreciation bites. Insurance bites.

Returnoftheyeti

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Re: Car Payment Question
« Reply #15 on: December 11, 2014, 08:19:23 AM »
Sunk Cost Fallacy.  Now that is an eye opening concept.  I think I needed that more than anything else.  Thanks for the advice.

Le Barbu

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Re: Car Payment Question
« Reply #16 on: December 11, 2014, 08:52:24 AM »
then, are you gonna keep or sell that beauty?

Returnoftheyeti

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Re: Car Payment Question
« Reply #17 on: December 12, 2014, 04:50:24 PM »
Car is listed on CL and Autotrader for exactly what I owe on it. 
If it sells, awesome, if not....

I have run the numbers, and I am not going to wipe out my cash reserve on this. 

So, pay off the CC and save a few bucks for a trip in March. 
Then, save the cash for making up the difference between selling to CarMax and What I owe.

My guess is that the car is gone by May 1. 

Le Barbu

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Re: Car Payment Question
« Reply #18 on: December 12, 2014, 06:05:18 PM »
Nice job, good luck dude

Returnoftheyeti

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Re: Car Payment Question
« Reply #19 on: January 01, 2015, 04:03:16 PM »
Just an update on this mess... 

After much, much consideration on this, I was planning on selling the car (at a loss), primary for the main reason of "I Just Dont Like It".  If I loved the car, I would have wanted to keep it, and not worried about it, or at least not in the sense that I have been.  I didn't like the way it drove, I didn't like worrying about it,  I didn't like making payments on it. 

The plan was to finish getting some increased cash flow, sell it to CarMax at a loss, and then just not have a car for a while.  I don't haven any need in my life for a car, I live in a major city with public transit, Zipcar is paid for by work, I bike to work, and there are rental cars for camping trips. 

So, welcome to December 30th.  A rare occasion that I drove to work, and parked in the public garage next to the office.  I leave and go out to the car and the back window is broken.  FML - Seriously.  Someone broke into the car, pulled down the back seat so they could get into the trunk.  Where they stole... NOTHING.  I live in the city, I street park, there was NOTHING in the car.  Nothing to attract their attention at all, and they got nothing.  They also broke into 15 or so other cars in the garage as well.

Anyways, as I said, I street park, so I drove the car to my favorite airport parking lot where they have indoor, secure parking for the night.  The next morning I retrieved the car, drove to CarMax and sold the car.  I didn't even want to deal with fixing it.  I was done. 

I sold the car for $5598 less than I owed on it.  I pretty much cleaned out my Bank Account / Emergency savings.  Car is gone, that is all that matters.

I made 10 payments on this car at 569.07 (5690.70).
I put a down payment on the car of $2000.

So the total I paid for the car was $5598+$5690.70+$2000 = $13288.70
And we are not counting the trade in value of the car I got rid of ($1000)

346 Days I owned this car.  $38.41 Per Day. 
And we have not counted in
1 - Not my Fault Accident - $500 Deductible
Several Parking tickets
1 - Speeding ticket - $300 or so bucks
1- Oil Change - 85.00
1 - Car Cover - $300
Insurance - Approx $1100

And Just because we are in this for the fun....
I drove the car... 5521 Miles. 

Just 5521 Miles
$2.41 per mile.  + all the stuff listed above...

I think I learned something here.  I hope this helps someone besides myself.  But the next time I get the urge to go buy a car, this is the first thing I am going to read.   


Le Barbu

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Re: Car Payment Question
« Reply #20 on: January 01, 2015, 04:55:17 PM »
A lesson wich cost that much will be remembered for the rest of your life. Take it like a "real life tuition"

Good luck for the futur!

RWD

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Re: Car Payment Question
« Reply #21 on: January 01, 2015, 05:15:54 PM »
I can afford the payments every month, but that is $600 a month I am not saving, or not spending on fun stuff.

Technically only the part that goes towards interest is not being saved. It just so happened that your depreciation outpaced the speed at which you paid down principal. If you had kept the vehicle longer eventually depreciation would slow down to less than the amount of principal you were paying down.

I agree with your decision to sell the car, of course.

DeltaBond

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Re: Car Payment Question
« Reply #22 on: January 01, 2015, 06:12:32 PM »
I'm in the same situation and decided to sell.  If you're going to sell it, do so sooner rather than later.  I'm using my tax return to pay the difference in mine.   Paying 6K down on mine, yet saving 18K in not paying it off the rest of the way. Also, aside from the depreciation that would happen between now and a year from now, or whenever you're thinking of selling, you risk damaging the car and having to sell it for even less.

Returnoftheyeti

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Re: Car Payment Question
« Reply #23 on: January 01, 2015, 06:30:33 PM »
Quote
It just so happened that your depreciation outpaced the speed at which you paid down principal. If you had kept the vehicle longer eventually depreciation would slow down to less than the amount of principal you were paying down.

I dont know the math, but I am not sure that there would ever be a point where I could have sold the car for what I owed on it. 
The $5500 negatiave equity would have taken me another 10 months with normal payments, and the car probably would have depreciated another 5k at that time. 

RWD

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Re: Car Payment Question
« Reply #24 on: January 01, 2015, 07:10:29 PM »
Quote
It just so happened that your depreciation outpaced the speed at which you paid down principal. If you had kept the vehicle longer eventually depreciation would slow down to less than the amount of principal you were paying down.

I dont know the math, but I am not sure that there would ever be a point where I could have sold the car for what I owed on it. 
The $5500 negatiave equity would have taken me another 10 months with normal payments, and the car probably would have depreciated another 5k at that time.

Of course there would be, though depending on the loan term and interest rate it could be when you get close to paying it off. Depreciation will never bring the value of a vehicle to zero.

DollarBill

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Re: Car Payment Question
« Reply #25 on: January 02, 2015, 09:49:47 AM »
That's one expensive lesson but I'm sure it looks similar to everyone else who buy new. Most of those people tend to want something new in 3-5 yrs.

If I lived/worked/parked in the City I'd buy a hooptie.
https://www.youtube.com/watch?v=l_F76ySzk48

DeltaBond

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Re: Car Payment Question
« Reply #26 on: January 02, 2015, 10:18:09 AM »
I don't think its the worst money mistake in the world, honestly, there are much worse decisions one could make.  I'm going to make this change, same one you're pondering, and drive this paid for car for as long as it takes me to feel like I have evened out financially with cars.  I'll be saving money in the mean time, and next time I need something, I'll at least be putting cash down, if not paying entirely with cash... and probably won't be a brand new car.

And also, I'm tired of worrying about keeping my car clean... its a utility, and if I spill crums or ding the door, I don't want to feel badly over something silly like that.

JLee

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Re: Car Payment Question
« Reply #27 on: January 02, 2015, 12:02:06 PM »
I don't think its the worst money mistake in the world, honestly, there are much worse decisions one could make.  I'm going to make this change, same one you're pondering, and drive this paid for car for as long as it takes me to feel like I have evened out financially with cars.  I'll be saving money in the mean time, and next time I need something, I'll at least be putting cash down, if not paying entirely with cash... and probably won't be a brand new car.

And also, I'm tired of worrying about keeping my car clean... its a utility, and if I spill crums or ding the door, I don't want to feel badly over something silly like that.

I've noticed there seems to be a huge emphasis on paying cars off around here, which isn't necessarily bad...but keep in mind other things you could potentially do with a lump sum of money. If you're able to finance the vehicle you're able to pay for with cash and then finance it at a low rate (my local credit union is offering 2.49% on used cars right now, PenFed is at 3.24%, and Kirtland is at 3.49%) and invest the lump sum for an average return of 5-10%, math says you'll come out ahead.  This assumes you are already going to maintain comprehensive/collision insurance (if you are running liability only, then you won't be able to finance).

Just a thought. :)

DeltaBond

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Re: Car Payment Question
« Reply #28 on: January 02, 2015, 12:57:39 PM »
JLee, what solved that riddle for me was what I will save in not having to continue to pay for this car.  I might pay a lump sum, but I'll be saving myself $18-19K in payments.  Yes, I'll need a vehicle, but there are much cheaper ways to go about this.  In my situation, I have another car to drive that is paid for.

neo von retorch

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Re: Car Payment Question
« Reply #29 on: January 02, 2015, 01:50:27 PM »
And Just because we are in this for the fun....
I drove the car... 5521 Miles. 

Just 5521 Miles
$2.41 per mile.  + all the stuff listed above...

I think I learned something here.  I hope this helps someone besides myself.  But the next time I get the urge to go buy a car, this is the first thing I am going to read.

Thanks for sharing the math! Even though I was the one blabbing about cost per mile, I hadn't done that exercise for one or two of my past mistakes. For example, I had bought a 2008 Acura TL in 2011... sold a year later. 16,747 miles (according to my Fuelly logs).  Purchase price, repairs, insurance, gas... minus what I got for it... $0.76 / mile. For comparison, I had bought a brand new Honda Fit in 2007. Not sure of the exact figures but a napkin calculation for the 56,682 miles I put on it would put me at $0.25 / mile. And the CX-5 I bought new and sold two years later, maybe $0.28 / mile. Not as bad as I feared. By far, the Acura TL was the biggest mistake in my case. Sorry to hear you hit such a high cpm benchmark, but it is behind you, and you have a solid education bought and paid for.

JLee

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Re: Car Payment Question
« Reply #30 on: January 02, 2015, 02:31:45 PM »
JLee, what solved that riddle for me was what I will save in not having to continue to pay for this car.  I might pay a lump sum, but I'll be saving myself $18-19K in payments.  Yes, I'll need a vehicle, but there are much cheaper ways to go about this.  In my situation, I have another car to drive that is paid for.

Oh sure, it's definitely not going to apply in all situations. But for example, let's say you have a $7000 cash budget for a car and your investments are returning ~8%.  If you have a 3% loan available, you would be better off investing $7k at 8% and borrowing $7k at 3%.

My intent isn't to disagree with any advice here, but just to put an additional option on the table.
« Last Edit: January 02, 2015, 02:33:23 PM by JLee »

Le Barbu

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Re: Car Payment Question
« Reply #31 on: January 02, 2015, 03:56:43 PM »
The thing is, low rates are linked to new car (boosted price) and beaters are more difficult to finance. For me, I buy used cars with HELOC (if needed for few weeks) and keep every other pennys fully invested

DeltaBond

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Re: Car Payment Question
« Reply #32 on: January 03, 2015, 05:33:13 AM »
JLee, what solved that riddle for me was what I will save in not having to continue to pay for this car.  I might pay a lump sum, but I'll be saving myself $18-19K in payments.  Yes, I'll need a vehicle, but there are much cheaper ways to go about this.  In my situation, I have another car to drive that is paid for.

Oh sure, it's definitely not going to apply in all situations. But for example, let's say you have a $7000 cash budget for a car and your investments are returning ~8%.  If you have a 3% loan available, you would be better off investing $7k at 8% and borrowing $7k at 3%.

My intent isn't to disagree with any advice here, but just to put an additional option on the table.

OR, look at it this way... would you take out an $19K loan for a new car or pay $6K cash for a car that has even more life left in it than the new car?  That's the example of my particular situation.

Le Barbu

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Re: Car Payment Question
« Reply #33 on: January 03, 2015, 06:00:22 AM »
JLee, what solved that riddle for me was what I will save in not having to continue to pay for this car.  I might pay a lump sum, but I'll be saving myself $18-19K in payments.  Yes, I'll need a vehicle, but there are much cheaper ways to go about this.  In my situation, I have another car to drive that is paid for.

Oh sure, it's definitely not going to apply in all situations. But for example, let's say you have a $7000 cash budget for a car and your investments are returning ~8%.  If you have a 3% loan available, you would be better off investing $7k at 8% and borrowing $7k at 3%.

My intent isn't to disagree with any advice here, but just to put an additional option on the table.

OR, look at it this way... would you take out an $19K loan for a new car or pay $6K cash for a car that has even more life left in it than the new car?  That's the example of my particular situation.

That would be the Mustachian way to do ;)

DeltaBond

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Re: Car Payment Question
« Reply #34 on: January 03, 2015, 06:07:09 AM »
Now that I think about it, the OP could very well look at it the same way... would you rather have your current loan or a lesser loan?  I'll be honest, I won't have much savings after I do this, but I do have another source of emergency money... and in the mean time, I'll be adding that car payment to my normal $1K monthly savings.  Its just one of those times you have to dig out of a hole, so to speak.  If some emergency DOES happen, I think I'd rather it happen with a little less savings and without the expensive car payments.  That would definitely make the situation worse.

We're not talking about cleaning out $50K in savings, either, this is a savings amount that won't take years to rebuild.

BBub

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Re: Car Payment Question
« Reply #35 on: January 03, 2015, 08:57:10 AM »
Nice job OP.  Takes courage, humility & wisdom to realize the folly of your old ways and cut your losses to move forward.  I have no doubt you'll make that ~$13k back in spades with your newfound outlook.

I strongly disagree with many of the comments here about various justifications to finance cars.  My view is if you have to finance & insure anything besides a primary residence or an investment, you can't afford it right now.

Sid Hoffman

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Re: Car Payment Question
« Reply #36 on: January 03, 2015, 09:52:06 AM »
So the total I paid for the car was $5598+$5690.70+$2000 = $13288.70
And we are not counting the trade in value of the car I got rid of ($1000)

That really highlights how expensive short-term ownership of a high-end car is.  Out of curiosity, what was it?  At first I was thinking maybe a V8 Mustang or Camaro, but those cars have tiny plexiglass rear windows that are both too small to crawl through and also virtually unbreakable.  It's tough to get in a new BMW for $32k or so unless you did CPO, but I have trouble believing you'd actually be unhappy with how the car drove if you had a BMW.  Anyway, just curious.

Anyway, even among new cars, there's certainly ways to hop between brand new cars for a lot less money.  I say this because currently I have an old kind of crappy car myself.  It gets middling gas mileage (22mpg) isn't very comfortable (no heat, no A/C) and because it's a 97 it's very unsafe compared to a modern car.  There's also that element of the unknown every time I drive it.  Will today be the day it just outright quits?  I've owned it only 9 months and 3200 miles and its already left me stranded once.

So for comparison right now you can lease a new Corolla for $139/month... sorta.  They say right on the website "Taxes, license, title fees, insurance and doc fee are not included. Doc fees vary as they are determined by dealer. See dealer for doc fee."  I've actually leased a Prius in the past when I was married so I'm familiar with the process and fees for my state.  I think it's pretty safe to say it will be another $1200 in addition to Toyota's $2238 due at signing.  So bottom line for me is that it would be about $3300/year for their two year lease.  To many, $3300/year looks stupid expensive if they can buy a used car for $6000 and maybe have it only cost them $500/year in repairs for 5 years of ownership, for a total 5-year cost of $8500, or $1700/year.

Clearly $1700/year is less than $3300/year, but it's always a matter of "it depends."  If you're in an area where you do not want to be driving late at night and have your car break down, or if you highly value having the most modern safety systems, spending extra for that new car begins to look more attractive.  Still, bottom line is that obviously even $3300 is less than the $14,000+ you ended up losing on your deal.  I don't say that to make you feel badly, only to help you in the future.  If you really do want a new car, I want to encourage you to at least know it's certainly possible to get yourself in a brand new car for a somewhat reasonable cost.  Honda runs similar lease deals on their Fit and Civic since they also both have exceptionally high resale, which is what makes cheap leases possible.

DollarBill

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Re: Car Payment Question
« Reply #37 on: January 03, 2015, 11:58:31 AM »
Quote
So for comparison right now you can lease a new Corolla for $139/month... sorta.  They say right on the website "Taxes, license, title fees, insurance and doc fee are not included. Doc fees vary as they are determined by dealer. See dealer for doc fee."  I've actually leased a Prius in the past when I was married so I'm familiar with the process and fees for my state.  I think it's pretty safe to say it will be another $1200 in addition to Toyota's $2238 due at signing.  So bottom line for me is that it would be about $3300/year for their two year lease.  To many, $3300/year looks stupid expensive if they can buy a used car for $6000 and maybe have it only cost them $500/year in repairs for 5 years of ownership, for a total 5-year cost of $8500, or $1700/year.

Clearly $1700/year is less than $3300/year, but it's always a matter of "it depends."  If you're in an area where you do not want to be driving late at night and have your car break down, or if you highly value having the most modern safety systems, spending extra for that new car begins to look more attractive.  Still, bottom line is that obviously even $3300 is less than the $14,000+ you ended up losing on your deal.  I don't say that to make you feel badly, only to help you in the future.  If you really do want a new car, I want to encourage you to at least know it's certainly possible to get yourself in a brand new car for a somewhat reasonable cost.  Honda runs similar lease deals on their Fit and Civic since they also both have exceptionally high resale, which is what makes cheap leases possible.

Sid, I get what you're saying here but please don't lease! It's a trap...especially if you have damage or over mileage.

Plus, for the "total 5-year cost of $8500, or $1700/year" car you can still sell it for about $2-3K which would bring down your cost more. Most of the vehicles I've driven over the last 20 yrs averaged out under $1K a yr (Not hoopties just 4-6yr old vehicles). It would be less if I kept them longer but I've had to move a lot because I was in the Military.   


Returnoftheyeti

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Re: Car Payment Question
« Reply #38 on: January 03, 2015, 01:12:20 PM »
The car was a 13 Regal GS. No one has ever heard of it, and it was a stick.  actually a great car, really, and if you are into those things, a hell of a deal, compared to a similarly equipped BMW.

What soured me was a hard blind spot on my left view above the greenhouse, and then just the constant fear that something would happen to it. Add in not driving it and not being able to take care of it, and it had to go. 

Cassie

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Re: Car Payment Question
« Reply #39 on: January 03, 2015, 02:01:40 PM »
When we were young we only drove beaters because that is what we could afford.  Now we buy used cars about 2-4 years old & drive them until they die.  This way they are safe for long trips for many years.  WE feel we get the most bang for our buck this way.

skunkfunk

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Re: Car Payment Question
« Reply #40 on: January 05, 2015, 08:47:32 AM »
So the total I paid for the car was $5598+$5690.70+$2000 = $13288.70
And we are not counting the trade in value of the car I got rid of ($1000)

That really highlights how expensive short-term ownership of a high-end car is.  Out of curiosity, what was it?  At first I was thinking maybe a V8 Mustang or Camaro, but those cars have tiny plexiglass rear windows that are both too small to crawl through and also virtually unbreakable.  It's tough to get in a new BMW for $32k or so unless you did CPO, but I have trouble believing you'd actually be unhappy with how the car drove if you had a BMW.  Anyway, just curious.

Anyway, even among new cars, there's certainly ways to hop between brand new cars for a lot less money.  I say this because currently I have an old kind of crappy car myself.  It gets middling gas mileage (22mpg) isn't very comfortable (no heat, no A/C) and because it's a 97 it's very unsafe compared to a modern car.  There's also that element of the unknown every time I drive it.  Will today be the day it just outright quits?  I've owned it only 9 months and 3200 miles and its already left me stranded once.

So for comparison right now you can lease a new Corolla for $139/month... sorta.  They say right on the website "Taxes, license, title fees, insurance and doc fee are not included. Doc fees vary as they are determined by dealer. See dealer for doc fee."  I've actually leased a Prius in the past when I was married so I'm familiar with the process and fees for my state.  I think it's pretty safe to say it will be another $1200 in addition to Toyota's $2238 due at signing.  So bottom line for me is that it would be about $3300/year for their two year lease.  To many, $3300/year looks stupid expensive if they can buy a used car for $6000 and maybe have it only cost them $500/year in repairs for 5 years of ownership, for a total 5-year cost of $8500, or $1700/year.

Clearly $1700/year is less than $3300/year, but it's always a matter of "it depends."  If you're in an area where you do not want to be driving late at night and have your car break down, or if you highly value having the most modern safety systems, spending extra for that new car begins to look more attractive.  Still, bottom line is that obviously even $3300 is less than the $14,000+ you ended up losing on your deal.  I don't say that to make you feel badly, only to help you in the future.  If you really do want a new car, I want to encourage you to at least know it's certainly possible to get yourself in a brand new car for a somewhat reasonable cost.  Honda runs similar lease deals on their Fit and Civic since they also both have exceptionally high resale, which is what makes cheap leases possible.

Mileage fees. My wife and I put over 20k miles on the car this year mostly just visiting family. We'd owe something like $20000 at the end of a 3 year lease!

And if you DON'T max out your mileage limit, you just gave them extra free money.