Author Topic: Help Me With My Simple Car Selling Query  (Read 2645 times)

Brian5000

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Chicago, IL
Help Me With My Simple Car Selling Query
« on: July 21, 2015, 10:06:19 AM »
Before discovering the ways of Mr Money M, I made a big un-mustachian purchase: a luxury sports car via 5-year financing payments in order to get girls.
While successful for its original intent, I now would like to move on to a cheaper and more efficient vehicle, especially due to my 50-minute-each-way daily car commute.
I have never sold a car that I didn't 100% own, so I am having trouble working out the particulars of the money-shifting necessary to make this change, which is where you come in.

Details:
The payoff quote for the car is around $22,500.
My payments on it are $480/month.
Payments go until 08/05/2019 if not paid off early.
Loan interest rate: 2.19%
EDIT: I can sell my car for around $32,000 privately. /EDIT
I intend to buy some Honda or Toyota sedan for around $8,000-$10,000.
I have about $6,000 in my checking account.
I have $76,000 in my taxable Vanguard index fund portfolio

It would be nice to use the taxable Vanguard portfolio to loan that money to myself to payoff the loan, get the title from the bank, sell the car with its title, buy a new car, and put the remaining cash back in to the Vanguard portfolio. However I'm thinking this would result in a big capital gains tax and messy tax work next April. (I could be wrong). Also keep in mind that due to the job/commute, I must have at least one car at all times so I can get to work.

So what's the proper sequence for financial success in my situation? Hopefully this is an easy one.
« Last Edit: July 21, 2015, 12:15:42 PM by Brian5000 »

TheThirstyStag

  • Bristles
  • ***
  • Posts: 301
Re: Help Me With My Simple Car Selling Query
« Reply #1 on: July 21, 2015, 10:12:36 AM »
I once bought a car off a guy that owed a good chunk of its value to the bank.  He wanted me to pay it all off, but I laughed and said he owes more than its worth, and I will not get him out of his loan.  So we agreed on my negotiated price, but he still had to put up the difference.   

Using simplified numbers, say he owed $10k and we agreed the sale price is $8k.  We both then went down to his bank (who held the title) with our shares of the loan amount (me: cashier's check for $8k, him: check for $2k).  We had already drawn up a bill of sale.   The bank took care of it there, removing the lien and issuing me the title.   

So I would say you should find a buyer, and sort everything out at the bank.  Even if you have to put up some money and withdraw from your taxable account, the amount will be far less if you already have a buyer to put up the bulk of your loan amount. 

DeltaBond

  • Pencil Stache
  • ****
  • Posts: 526
  • Location: U.S.
Re: Help Me With My Simple Car Selling Query
« Reply #2 on: July 21, 2015, 11:47:52 AM »
You left off one number, how much can  you sell your car for?

I posted a poll on here about Carmax, if you're thinking of selling it, don't bank on them giving you the best deal on buying your car.

Brian5000

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Chicago, IL
Re: Help Me With My Simple Car Selling Query
« Reply #3 on: July 21, 2015, 12:17:09 PM »
Quote
So I would say you should find a buyer, and sort everything out at the bank.  Even if you have to put up some money and withdraw from your taxable account, the amount will be far less if you already have a buyer to put up the bulk of your loan amount. 
Good advice, very helpful. Thanks.

Quote
You left off one number, how much can  you sell your car for?
Oops, my bad. I can probably sell for $32,000. I added it to original post.

DeltaBond

  • Pencil Stache
  • ****
  • Posts: 526
  • Location: U.S.
Re: Help Me With My Simple Car Selling Query
« Reply #4 on: July 21, 2015, 12:21:38 PM »
Ok, so your pay off amount is $22K, and you can sell it for $32K?  If this is what you're saying, you don't need to take any money out of anything to make this transaction.
« Last Edit: July 21, 2015, 12:41:39 PM by DeltaBond »

Brian5000

  • 5 O'Clock Shadow
  • *
  • Posts: 20
  • Location: Chicago, IL
Re: Help Me With My Simple Car Selling Query
« Reply #5 on: July 21, 2015, 01:01:55 PM »
Quote
Ok, so your pay off amount is $22K, and you can sell it for $32K?  If this is what you're saying, you don't need to take any money out of anything to make this transaction.

Any buyer will want the car's title. I don't have it... the bank that I'm financing the car though has it until I pay off the loan.
I don't have $22K in cash to pay off the loan, only if I were to sell my index funds which I would prefer not to do because of the tax implications.
It's just an awkward situation where I don't have the liquid cash available to loan myself what I need to make this transaction.

DeltaBond

  • Pencil Stache
  • ****
  • Posts: 526
  • Location: U.S.
Re: Help Me With My Simple Car Selling Query
« Reply #6 on: July 21, 2015, 01:23:30 PM »
Ok, I see, well, lots of cars are sold and the transactions take place at the bank, that's not new, and the new owner has the bill of sale and just waits in the mail for the title.  Don't take money out of anything, this is a small hurdle to sell the car.

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: Help Me With My Simple Car Selling Query
« Reply #7 on: July 21, 2015, 03:18:04 PM »
http://www.autotrader.com/car-tips/how-to-sell-a-car-if-the-bank-has-the-title-215870

Quote
Use the Buyer's Money
Here's the tricky part: Once you've determined the payoff and sold the car, you'll have to use the buyer's money to pay off the note. Of course, you can use your own money, as well. For many sellers, however, paying off the car won't be possible without the buyer's money.

The result is that some buyers won't be comfortable with this type of transaction. To ease a potential buyer's worry, accompany him or her to the bank where your car is financed and have an employee explain the situation. If the buyer is still uneasy, you may have to use your own cash to pay off the loan -- or you may need to find a different buyer.

The good news is that many banks will accept payment directly from the buyer. We suggest having the buyer write two checks: one to your bank for the payoff amount, and one to you for the remainder of your deal amount.

Transfer the Title
Once the buyer pays for the car and you pay off the loan, the title is free and clear. Most banks give you two options: You can take the title, or you can let the bank know where to send the title. If the buyer is financing the car, your bank will need to send the title to the buyer's bank. Otherwise, the title can go directly to the buyer.