Author Topic: Get out of a new car?  (Read 7299 times)

Murr

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Get out of a new car?
« on: May 21, 2014, 01:15:23 PM »
Well, I've been lurking for some time and must say, this forum/blog has really made an impact on my life. over the past 30 days I've taken quite a number of steps to limit wasteful spending and have a fairly clear path. The two largest expenses left to deal with are mortgage/car loan(face punch). We bought a brand new(ouch) 2014 Honda Pilot in feb. Nice car, but bad gas mileage and breaking my heart making that payment every month. I've been contemplating ways to reduce this cost and would like opinions on the following:

-pay the loan off on the pilot as quick as possible(about 1.5 years is possible). Problem with this route is I'm still left with a gas guzzler

-continue with adding as much extra every month to my payment as i can until I get back to even(probably about 6 months) with whats owed and what its worth. Sell it and get something more reasonable

-trade it in now, suck it up and pay the upside down difference and do whatever possible to get the hell away from this car. Write it off as a "life lesson".

Cassie

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Re: Get out of a new car?
« Reply #1 on: May 21, 2014, 01:17:02 PM »
I would do either choice 1 or 2. I would not trade it in after just buying it. I think you would lose too much $.

okashira

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Re: Get out of a new car?
« Reply #2 on: May 21, 2014, 01:21:07 PM »
I would do either choice 1 or 2. I would not trade it in after just buying it. I think you would lose too much $.
I'm sorry - but disagree 100%

The best option is #3.

#1 and #2 do little to save you from the decision you made or to cut costs.

http://en.wikipedia.org/wiki/Sunk_costs

Murr

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Re: Get out of a new car?
« Reply #3 on: May 21, 2014, 01:25:23 PM »
Thanks for the replies. Okashira, I think you are correct. It really comes down to wanting to feel stupid now about a decision or stupid later. Doesn't really make a difference so I should stop the bleeding......quickly.

frugaliknowit

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Re: Get out of a new car?
« Reply #4 on: May 21, 2014, 01:37:29 PM »
The answer depends on:
1.  How many miles you drive (per year).   
2.  Why you bought a Pilot in the first place and what you would replace it with.  Do you "need" an SUV (like do you live in the mountains...?). 
3.  How much cash you have available.

For example, if you only drive 5,000 miles per year, you might be better off keeping the car to avoid the depreciation hit.
If you drive 30,000 miles per year, have $15k in cash, and would be happy in a sedan, you might sell the pilot and buy a used Honda Civic.  If you have no cash, your options are limited and the answer would depend on the loss in depreciation versus the gasoline savings.

Murr

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Re: Get out of a new car?
« Reply #5 on: May 21, 2014, 01:44:30 PM »
This is the car my wife drives(my work car is paid for by my company) so mileage is low, probably about 7-8K. We bought the pilot really for no good reason. We live in the burbs and haul typical stuff for a family with two boys, 7 and 4. Take 1-2 longer trips per year to visit family but thats about it. Got $17K in cash available. Appreciate all the feedback

okashira

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Re: Get out of a new car?
« Reply #6 on: May 21, 2014, 01:46:46 PM »
The answer depends on:
1.  How many miles you drive (per year).   
2.  Why you bought a Pilot in the first place and what you would replace it with.  Do you "need" an SUV (like do you live in the mountains...?). 
3.  How much cash you have available.

For example, if you only drive 5,000 miles per year, you might be better off keeping the car to avoid the depreciation hit.
If you drive 30,000 miles per year, have $15k in cash, and would be happy in a sedan, you might sell the pilot and buy a used Honda Civic.  If you have no cash, your options are limited and the answer would depend on the loss in depreciation versus the gasoline savings.

How would keeping this new car help him avoid the depreciation hit ???!?
Read the wiki article on sunk costs. Understand it.

He needs to sell it ASAP as it's currently at it's steepest point in the depreciation curve. Sell it now while it's super low miles and new condition.
Not to mention he has full coverage insurance too.

Mountains ??? We have paved roads, even in the mountains.

MoneyCat

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Re: Get out of a new car?
« Reply #7 on: May 21, 2014, 01:47:04 PM »
I bought a new car before joining the forums, but I paid for it in cash instead of financing, plus it's a hybrid, so I just decided to hold onto it for fifteen years or so to get my value out of it.  In your case, since you financed it, you are paying way, way more than the vehicle is actually worth, plus it's a gas guzzler, so it still won't be a good investment even when you pay it off.  Your best option is probably to pay it off as quickly as possible, so you won't lose as much money and then sell it for the best price you can get and buy a fuel efficient used hatchback with cash from the sale.

okashira

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Re: Get out of a new car?
« Reply #8 on: May 21, 2014, 01:49:11 PM »
I bought a new car before joining the forums, but I paid for it in cash instead of financing, plus it's a hybrid, so I just decided to hold onto it for fifteen years or so to get my value out of it.  In your case, since you financed it, you are paying way, way more than the vehicle is actually worth, plus it's a gas guzzler, so it still won't be a good investment even when you pay it off.  Your best option is probably to pay it off as quickly as possible, so you won't lose as much money and then sell it for the best price you can get and buy a fuel efficient used hatchback with cash from the sale.

I do agree here. Find a way to pay it off so you are in a better position to sell it. But if it will take too long, then you'll need to drop the price.

The truck i only 3 months old, so if you have to delay even 6 months to pay it off for a easier private sale, then you'll lose a lot of depreciation.

CarDude

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Re: Get out of a new car?
« Reply #9 on: May 21, 2014, 03:19:08 PM »
I'd suggest 1 or 2.

Another Reader

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Re: Get out of a new car?
« Reply #10 on: May 21, 2014, 04:00:28 PM »
Have you discussed this with your wife?  She drives the car.  What is her opinion?

okashira

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Re: Get out of a new car?
« Reply #11 on: May 21, 2014, 04:04:06 PM »
Advice on this forum has really gone down hill. :-(

CarDude

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Re: Get out of a new car?
« Reply #12 on: May 21, 2014, 04:15:23 PM »
Have you discussed this with your wife?  She drives the car.  What is her opinion?

Mmm, this is a good point. I missed the fact that this was his wife's car. What would she like to do with it?

Shor

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Re: Get out of a new car?
« Reply #13 on: May 21, 2014, 05:20:05 PM »
Sell it off to someone that needs it,
use the payment to pay off most of the car loan,
the difference in the short sale will be due to a lack of negotiation on each end, and the slight depreciation from driving it off the lot. It might not even be that large if you're undercutting the dealer by $1k or 2 enough to get someone interested. It will depend on the state and mileage of the vehicle, hopefully you can recoop most of your expenses though.

Next, you will want to buy a used car, and preferably a hatchback for the additional backspace to help with ferrying the two ferrets.

Get input from the driver and show her the figures and why this vehicle is not suitable and what you are thinking might be a better fit. You might need to get started on the car before you can sell off the Pilot. It'll be easier to explain to sellers that there's nothing wrong, it was simply too bulky of a vehicle for your wife to drive well (take one for the team Mom!)

I think this, is your way out, which I guess is similar to option 3.
Though the term 'trade-in' is usually reserved for returning it to your dealer for a few grand off your brand new vehicle, which you are buying from then... again! Which is clearly not the option you are looking for.
Options 1 and 2 are resigning to the payments, maybe selling it later rather than handling the problem right away before the depreciation compounds further. This will be a short sale. You fell in to that trap when you bought this vehicle. That's the lesson, but I'm confident you can find some way to recoop most of your losses here. Best of luck!

Murr

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Re: Get out of a new car?
« Reply #14 on: May 21, 2014, 05:38:47 PM »
Thanks all. Some good advice here. My wife is with me on this, we need to get rid of it. Expensive lesson for sure.

James

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Re: Get out of a new car?
« Reply #15 on: May 22, 2014, 06:49:06 AM »
Sell it off to someone that needs it,
use the payment to pay off most of the car loan,
the difference in the short sale will be due to a lack of negotiation on each end, and the slight depreciation from driving it off the lot. It might not even be that large if you're undercutting the dealer by $1k or 2 enough to get someone interested. It will depend on the state and mileage of the vehicle, hopefully you can recoop most of your expenses though.

Next, you will want to buy a used car, and preferably a hatchback for the additional backspace to help with ferrying the two ferrets.

Get input from the driver and show her the figures and why this vehicle is not suitable and what you are thinking might be a better fit. You might need to get started on the car before you can sell off the Pilot. It'll be easier to explain to sellers that there's nothing wrong, it was simply too bulky of a vehicle for your wife to drive well (take one for the team Mom!)

I think this, is your way out, which I guess is similar to option 3.
Though the term 'trade-in' is usually reserved for returning it to your dealer for a few grand off your brand new vehicle, which you are buying from then... again! Which is clearly not the option you are looking for.
Options 1 and 2 are resigning to the payments, maybe selling it later rather than handling the problem right away before the depreciation compounds further. This will be a short sale. You fell in to that trap when you bought this vehicle. That's the lesson, but I'm confident you can find some way to recoop most of your losses here. Best of luck!


Bingo, this is the right option, I can't believe there are people here suggesting you keep a brand new SUV to drive? Where the hell do they think they are posting! This is MMM!!! We don't drive brand new SUVs!!!


The initial depreciation is gone, you can't get that back by pretending that driving it longer will magically make it better, that just prolongs your pain and extends the depreciation. Sell it now for the most you can get for it and get a cheap car.


Best of luck, great to hear about all the improvements you have been making!

randymarsh

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Re: Get out of a new car?
« Reply #16 on: May 22, 2014, 07:00:25 AM »
Yeah there's no way keeping it is the best financial move. Get upside on the loan, get rid of it, and then buy something cheaper. You'll start saving on gas and probably insurance immediately.

okashira

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Re: Get out of a new car?
« Reply #17 on: May 22, 2014, 04:10:41 PM »
Thanks all. Some good advice here. My wife is with me on this, we need to get rid of it. Expensive lesson for sure.

You're being too negative. It's a cheap lesson. You may have never found this forum, and kept the SUV for 10 years, and incurred the extra $50,000 in expensive gas, expensive, tires and expensive insurance.
But it's still in new condition and only 3 months old so you're only out a couple to a few grand.