Upside Down Car Note

[zaratekid86]

Hey Mustacians,

I'm 27 and prior to opening my eyes about how i should be saving my money, I purchased a pre-owned Honda Ridgeline. I currently owe 21k on it and I now realize what a mistake I have made. if i were to sell it I would still owe about 6-7k.

What would be the best option of getting it off my shoulders?

is it worth selling it and eating the difference or paying extra till I am even with it and then sell it? I appreciate any insight

thanks,

the Zaratekid

[ketchup]

Yes, it is worth it, assuming you have the cash of course.  Many people would say no, because "then you're losing money," but that money is already gone.  It's not coming back.  But more will go the longer you wait.  You come out ahead immediately upon selling it.  All you lose is very short-term cash-flow, so again, just be sure you have the ability to comfortably eat the 6-7k right now.

Welcome to the forums!

[Wolf_Stache]

I'm struggling with this same issue. I bought a brand new (facepunch deserved) Nissan Leaf two years ago. I still owe $18K on the loan, but the car is only worth about $14K.

As far as selling it, from what I've researched, if you sell the car, when you go to pay off the loan you have to have the cash to pay off the difference before you can get the title.

[Thegoblinchief]

Assuming you don't have a need for a pickup (by tone of post I would say no), then maybe.

Depends on whether you would be replacing it with another (but more efficient) car that is more than 7K cheaper.

Ideally you would be going car-free if possible and freeing up around $15K in cash.

[Comella]

I agree, the money is already lost.  You most likely don't have the money to pay the difference... So depending on how fast you can live on nothing and save up the difference, I would suggest going to a local credit union and taking a small loan for the difference.  Then it is done, and you can by a beater to get around if you can't ride a bike.

That's my suggestion.  Seems crazy, but it was crazy getting that car. :) 

Comella

[CarDude]

I'd sell it; it's not like an Accord or Civic that's more practical and worth driving into the ground.

[Forcus]

If you have the ability to make up the difference, it would (in general) make more sense to sell now and eat the negative equity. Otherwise you are just chasing depreciation with more monthly payments.

BUT I would also say that if it meets your needs, you know the maintenance history, it's a solid vehicle, and the depreciation curve is gradually flattening out, I might be inclined to consider keeping it and just doubling up on payments. I have played the downgrade game before and not always been at a net gain. I've bought beaters "cheap" (3-4k) and then spent 3-4k just getting them to a minimum level of reliability (and this is doing the work myself). So lets say your Ridgeline got 25 MPG and had 30k miles, and was worth 14k, would I downgrade to an Accord that got 28 MPG and had 100k miles? Probably not. Big picture, including total cost of ownership, the difference would likely be less than the difference in payments. Just food for thought. Of course if you could go no car / zip car / cheap beater without fixing it up, I would think that you would definitely have a net gain by just getting rid of the Ridgeline ASAP.

[lackofstache]

I think it really depends on where you are financially. If you can afford to take the $6k hit plus the money to buy another car, I say sell. If, on the other hand, you don't have the $6k or the money for another car, it would make more sense to me to put extra money towards the loan each month and start saving for another car until you can sell for what you owe and have the money for another car.

[zaratekid86]

awesome advice guys. I have a toddler running around so needless to say I can't afford to eat the 6-7k right now. my girlfriend however has a paid off car and she only works 1 mile from home p/t. I am trying to convince her to ride a bike and let me drive her car that way we can sell my money pit of a car and take a small loan on the difference.


thanks,

Zaratekid

[CarDude]

^ Hah, good luck with that :D

[Forcus]

^ Hah, good luck with that :D

Lol I can just imagine. Are you saying I need to exercise? Are you saying I am fat? I can't believe you said I'm fat! OMG! OMG!

[zaratekid86]

-------update----------

yea, my girlfriend wasn't having the "bike or walk to work" idea. but she did find a new job where she works from home 2 days a week. she also will be babysitting our friends kiddos for the summer for extra income.

this past Memorial day i finally got rid of my truck. i figure id downgrade to dependable 4 cylinder car and ended up getting a 2011 ford focus 5m with 75k miles. with a few hours of negotiating, i managed to only eat 4k instead of the 6-7k i would have had to eat if i sold my car to the local carmax. I ended up getting a 10000 focus for 14400. and reducing my total car debt from 20.5 to 11000(with a 3400 downpayment on the focus). It's still more than i wanted to owe on a car but i have peace of mind knowing it will last a long time instead of buying a 1-2k junker and hoping it lasts. 

also with my truck i was getting about 17mpg spending about 7.50 a day to and from work. now in this hog im getting roughly 38mpg and only spending about 3.25 a day.


have a good weekend

[Jamesqf]

...but i have peace of mind knowing it will last a long time instead of buying a 1-2k junker and hoping it lasts.

False economy, as you could have bought 5 $2K 'junkers', and still come out ahead.

[S0VERE1GN]

two options (from a mustachian standpoint)

Drive the money out of it: drive it for the next 10-15 years, repairing everything and keeping up on maintenance, and then shed a single tear as you escort her to the crusher on her last day.

sell it and get more economical.

its up to you. where you're at currently, tracking your cash flow from now, you would probably end up in about the same boat.

unless you have the cash to buy another car outright I would keep it.

[ketchup]

...but i have peace of mind knowing it will last a long time instead of buying a 1-2k junker and hoping it lasts.

False economy, as you could have bought 5 $2K 'junkers', and still come out ahead.

I'd agree with this mindset.  A month ago, I sold a $1750 "junker" (1996 car with 168k) to buy a $1000 "junker" (1999 car with 146k).  The depreciation of the 1996 was less during my ownership of the car than it cost to register the 1999 car and put plates on it.  I expect this $1000 car to last me years, but even if it doesn't, I still win.

I'd use the "junker" label to describe a car worth no more than $350, that is missing window glass, doesn't start for multiple reasons, is missing body panels, has suffered multiple impacts with other vehicles or sledgehammers, and maybe has a flat tire or two.  Anything else is a car that can do the job of supporting my butt while transporting me to somewhere other than where I started.

[zaratekid86]

Thanks for the advice, guys.. I'm going to hold on to if for a while more. I am supposed to be getting a company car with a gas card at the beginning of 2015, as soon as I do I'm selling off the focus and sticking to no cars under my name until I absolutely have too. cheers

[Forcus]

Sometimes junkers are false economy as well. I just got done going through what was supposed to be a cheap car and replacing mileage related wear parts. My $6.3 purchase is now at $10k (all work but rear axle setup, done by me). This is one of the more extreme examples in my purchases, and I do have high standards for my daily drivers (no vibrations, rattles, noises, leaks, etc.), but it can bleed you dry trying to keep a sub-2k car running (which did not seem to be an issue in the 90's... you could get a runner for under $1k that didn't really need anything).

Not ideal by true MMM standards I find the newer Focus to be perfectly acceptable. Again may be not hardcore MMM but better than the Ridgeline. I'd drive it til it dies (which should be 200k+). Love that you got a manual too.