Author Topic: How to Rectify the car mistake  (Read 6246 times)

Miss. Takes

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How to Rectify the car mistake
« on: March 15, 2014, 12:07:44 AM »
I bought a car for work 3 years ago, a new toyota camry. Yes I know, I'm an idiot, I didn't know better at the time though. I paid about 20k for it and today I still owe 10k. I am wondering what my best options are at this point. I do need a car because my job does require driving to several different locations. Which of the following should I do, please choose one and elaborate if you can. Thanks so much, long live mustachianism!

A) Keep the car, pay it off, and just use it for as long as humanly possible for hundreds of thousands of miles
B) Sell the car immediately and purchase a used car for a few thousand dollars
C) Sell the car and lease a cheap one (I know this may be shocking to some, but I have heard mixed things about leasing and I'm kind of thinking what is wrong with having a really good reliable car every 3 years and paying around 170 bucks per month considering I won't pay for maintenance and I can have my money in investments rather than spending a lump sum on a used car)
D) Other...something I haven't thought of yet

Also, if you say to sell it, I am very new to this, how does one go about selling their car in the best way? Do I just put a post in the paper? put on craigslist? sell it to a dealership? How can I get the most money?

Thanks so much!

Greg

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Re: How to Rectify the car mistake
« Reply #1 on: March 15, 2014, 12:21:51 AM »
Your biggest sale amount will come from a private sale, period.  But, it may take some time.

Milspecstache

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Re: How to Rectify the car mistake
« Reply #2 on: March 15, 2014, 12:29:49 AM »
I have used Craigslist to buy/sell cars in the past.  Seems to work well if you put enough info on it.

FrugalSpendthrift

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Re: How to Rectify the car mistake
« Reply #3 on: March 15, 2014, 06:48:31 AM »
What is the mistake that you are trying to rectify?  Are you trying to limit how much is wasted on depreciation?  or just how much is paid to the bank in interest?  Are you trying to limit how much you spend on gasoline?

Leasing may seem inexpensive, but after three years, you have to give the car back, so you are left with nothing.  With a lease, you are only paying for the depreciation and wear.  The car payments may be cheaper, but they never stop, so it isn't the most economical long term solution.

You current car now is used and you have likely already taken the brunt of the depreciation.  You should look at what it is worth right now, and how much it might depreciate over the next few years.  Compare that to the cars you might replace it with.  If you think you can save money on gas and depreciation, then sell it.

I vote for option A, but to put some effort into paying down the debt faster, so you can experience what it is like to live without a car payment.


MMMat

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Re: How to Rectify the car mistake
« Reply #4 on: March 15, 2014, 07:59:45 AM »
Best thing to do is to calculate your annual cost of owning a specific car. To do so, open an Excel spreadsheet and enter the following : How many miles are left on the car, divide by your annual miles (ex : 150 000 miles left in the life of the car / 15000 annual miles = 10 years left of life). Then calculate your spending for every year : bank payment, gas, insurance, maintenance etc. Usually, by calculating all of this, you should try to find a car that coasts no more than 2100$/year, and the only way I have found to achieve this is by buying a used, compact car that is light on gas ex : (2006 Yaris, 2006 Accent, 2006 Aveo). So after calculating this, you would probably find that option B is best... Last pointer : NEVER, EVER buy from a dealer. Always negociate an end user and inspect car before buying.

Joel

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Re: How to Rectify the car mistake
« Reply #5 on: March 15, 2014, 10:31:43 AM »
What is the mistake that you are trying to rectify?  Are you trying to limit how much is wasted on depreciation?  or just how much is paid to the bank in interest?  Are you trying to limit how much you spend on gasoline?

Leasing may seem inexpensive, but after three years, you have to give the car back, so you are left with nothing.  With a lease, you are only paying for the depreciation and wear.  The car payments may be cheaper, but they never stop, so it isn't the most economical long term solution.

You current car now is used and you have likely already taken the brunt of the depreciation.  You should look at what it is worth right now, and how much it might depreciate over the next few years.  Compare that to the cars you might replace it with.  If you think you can save money on gas and depreciation, then sell it.

I vote for option A, but to put some effort into paying down the debt faster, so you can experience what it is like to live without a car payment.

I agree.

Exflyboy

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Re: How to Rectify the car mistake
« Reply #6 on: March 15, 2014, 12:29:07 PM »
Yes pay it off ASAP.. You can also look at the prices for 3 year old Camry's, my guess is what you owe on it will be close to what its worth. If you like the car and can afford it then keep it.

But the 10K you owe on it will be much more than 10K if you keep your current repayment schedule.

If you want something cheaper then put it up for sale at the same time as your paying the loan off faster.. the two activities are not mutually exclusive.

Frank

Ayanka

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Re: How to Rectify the car mistake
« Reply #7 on: March 15, 2014, 12:43:24 PM »
First question: do you know anything about cars?
Second question: does your current car have hickups (some kind of chronical problem that isn't serious but might get so)?
Third question: is your car fuelinefficient?

Unless the answer on at least one of the cars is yes, I would keep your current car and pay the loan off.
The reason being the story of my ex who managed to pay more than a car payment in cheap cars, because he just kept buying lemons.

Cassie

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Re: How to Rectify the car mistake
« Reply #8 on: March 15, 2014, 01:00:05 PM »
I would keep it and pay off as fast as possible.  We always drive our cars until they are total junk. Sometimes we have been so determined to keep them that we pay too much to repair until we come to our senses. Older cars break down & need repairs-some more then others.  Also you will have the benefit of knowing that this car is well taken care of since you will have always owned it. In the future I would look at buying a car 3-4 yo that is pre-certified so it comes with a warranty & everything works when you get it.

darkadams00

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Re: How to Rectify the car mistake
« Reply #9 on: March 15, 2014, 04:39:35 PM »
From the OP I assume that one-person, work-related travel is the primary use of the car. If so, Option D might be just to sell the Camry and buy a Honda Fit. Toyotas and Hondas have similar reliability ratings. Depreciation rates don't mean much if you intend to drive the car to salvage value anyway. A 2011 Camry should sell for more than the cost of a 2011 Fit, so you should at least be able to make the trade in cars and come out ahead on the loan balance. Also, your gas and insurance savings will likely be significant, and you can shift that money immediately toward loan payoff. Of course, you could trade to an older and/or domestic car to get to payoff faster, but there are repair caveats to consider if you're not familiar with purchasing older cars. Given the many ways to advertise a private car sale now, I rarely think staying in a financially inefficient car is the best option. Ten years ago, I would have said Option A in a heartbeat.

FYI, this exact trade-down method is one I suggested to my mother-in-law (would have saved her about $8000)--minivan in, economy sedan out in her case. Instead, she sold the van and bought a compact SUV for $6000 more dollars than she already owed!...but I'm not about to facepunch the MIL.


daverobev

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Re: How to Rectify the car mistake
« Reply #10 on: March 15, 2014, 06:37:16 PM »
Depends on the interest rate on the loan. Generally I'd say keep the car if you like it. It isn't extravagant. If the interest rate on the loan is < 4%, just keep paying it off. Any more than that and it's maybe worth paying earlier. 7%+ and it's definitely worth paying early.

Unless you have to have more expensive insurance than you would otherwise buy, in which case pay it off and lower your coverage.

Thegoblinchief

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Re: How to Rectify the car mistake
« Reply #11 on: March 15, 2014, 07:35:42 PM »
I would keep it unless it is worth considerably more than the outstanding loan balance.

Cassie

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Re: How to Rectify the car mistake
« Reply #12 on: March 16, 2014, 06:05:39 PM »
Also the FIT is a really small car. I would not feel safe in something that small. We recently bought a 2010 HOnda Accord and love it!

TreeTired

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Re: How to Rectify the car mistake
« Reply #13 on: March 16, 2014, 06:36:20 PM »
Maybe... just maybe... your mistake was buying a NEW Camry.  Now you own a 3 yr old Camry (probably a 4 cyl if you paid 20k new) so what's wrong with that?  They are good, economical reliable cars.  I would drive the wheels off the thing.   It will be hard to improve your situation by selling and buying unless you are really shrewd.  The uninitiated (like me and you) tend to sell wholesale and buy retail. 

CarDude

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Re: How to Rectify the car mistake
« Reply #14 on: March 16, 2014, 06:40:14 PM »
Also the FIT is a really small car. I would not feel safe in something that small. We recently bought a 2010 HOnda Accord and love it!

Agreed. I'd recommend a mid-sized or larger vehicle if possible. And seeing as the Camry is already a mid-sized vehicle, I'd stick with that.

La Bibliotecaria Feroz

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Re: How to Rectify the car mistake
« Reply #15 on: March 16, 2014, 06:55:06 PM »
I am not an expert on the safety of smaller cars, but I do know that there is a lot more to safety than size--like side airbags and electronic stability control--so maybe do your own research.

We recently unloaded a car from a very similar position to yours--we owed about $5K and had about $5K in equity. Personally, I think that you have too much money tied up your car instead of out working for you. Why suggest a 2011 Fit? What about an '07 or '08? The "fancy" car that we just sold was an '07 CRV.

If you do decide to sell, yes, private party will give you the best value but it can require a lot of trust on the part of the buyer. We were not able to find a private buyer--one that we had lined up backed out at the last minute over not having the title. In some states and with some lenders, escrow.com and similar services can give assurance to the buyer. S/he sends the money to the service directly from the bank; once you deliver the car, the escrow service releases the money. Escrow.com offers a lien payoff service where they send the money directly to the lender, and in many cases the title can be sent straight to the buyer.

That didn't work for us in Pennsylvania, though. I don't claim to be an expert but in our personal situation, the dealership seriously lowballed us. They offered us $6500! We eventually got $10,300 from webuyanycar.com. They don't pay quite as much as an individual would--they couldn't stay in business if they did--but it's hassle-free, they pay much better than the dealership, and you do not have to have the title.

mc6

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Re: How to Rectify the car mistake
« Reply #16 on: March 17, 2014, 12:15:18 PM »
I go with Option A.  A 3 yr old Camry seems like a pretty decent ride for you, actually.   

HairyUpperLip

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Re: How to Rectify the car mistake
« Reply #17 on: March 17, 2014, 01:22:25 PM »
I would suggest trying to keep the Camry at this point. It's a great vehicle itself and you have been maintaining it properly then it should last a very long time.