Author Topic: Is this car downsize enough!  (Read 4062 times)

FinallyWakingUp

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Is this car downsize enough!
« on: December 18, 2014, 05:57:16 AM »
Hi all
Currently I have a $313 payment on a 3 yr old used luxury car that gets 20mpg with 5 1/2 years to go in the loan. Face punching still ongoing!
Well, YNAB setup complete and underway for 2 months and we've already paid of $2300 while paying cash for Christmas too.
I would like to buy a $5k or $6k car cash and get rid of the current luxury car but it appears that it will be a fee months before I have the cash to do that and selling my car will not be easy. The other option is to trade my car for a used Prius. I would still have a small loan but after accounting for gas costs I could reduce my costs in the following way. Is this a decent decision?
CURRENT: $18,200 owed, $313 pmt. 20mpg. Total monthly cost $469
PROPOSED: $12750 borrowed ($9750 car note and $3k on home equity line), car payment would be $286 for only 3 years and total cost w gas  $342 month.

This frees up $127mo and the loan is 1.5 years shorter. It also keeps me in a relatively reliable vehicle since I am in sales and do need to travel some. A $5000 beater worries me a lot based on a liability concerns. I would plan on paying off the proposed car in 12-18months or so.
Cash flow is an issue now and so is cash to buy a car outright. This would improve the situation some and I'm not even taking reduced auto insurance into acct.
Thoughts?

Hugerat

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Re: Is this car downsize enough!
« Reply #1 on: December 18, 2014, 07:30:05 AM »
Oh dear... Get ready for face punches. Is a $5000 car really a beater?

orbix

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Re: Is this car downsize enough!
« Reply #2 on: December 18, 2014, 08:17:49 AM »
Oh dear... Get ready for face punches. Is a $5000 car really a beater?

Agreed. $5,000 buys you a nice car in good shape, provided you're looking at the right models. Look at any of the car recommendation posts on this site and stop looking at ludicrously expensive cars. Heck, if a Prius fits your needs, go for it, but not the trade-in one you've talked about! $8-9k buys you a *really nice* used Prius (which is a pretty fancy car, honestly, even at base-level trim), so I can't imagine why you think you need to finance almost $13k to get one...

Also, you're leaving out an important part of this conversation, which is the amount of cash involved in the trade-in process. Monthly payment costs are not the most important part of the process- they're relevant, but leave out a lot of the big picture. You really need to be looking at the total cost to you- the 'equity' in your current car (insomuch as anyone can consider it to be equity...)

One final observation:
$13,750 IS NOT A SMALL LOAN, UNLESS YOU'RE BUYING A HOUSE.

Jack

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Re: Is this car downsize enough!
« Reply #3 on: December 18, 2014, 08:23:33 AM »
Is a $5000 car really a beater?

Nope. $5000 is what I'd expect to pay for something fancy: a sports car (e.g. Miata), a super-efficient car (e.g. hybrid or diesel), or a 4x4 truck.

For a boring beater, such as a small Japanese or Korean sedan, I'd expect to pay no more than $3000.

FinallyWakingUp

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Re: Is this car downsize enough!
« Reply #4 on: December 18, 2014, 08:25:07 AM »
I suppose you are right. I am looking into getting a few thousand more on my equity line to buy the $5000 Honda and then sell the $18,000 car. That will add just a couple of bucks to the equity line per month and I can pay that off this year but will free up $313 in the monthly budget plus reduce gas cost by 30%. I think in the back of my mind I know that's what I should do.

Jack

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Re: Is this car downsize enough!
« Reply #5 on: December 18, 2014, 08:42:25 AM »
You're still not getting it -- if you can't afford to buy the $5000 Honda in cash, then you can't afford to buy the $5000 Honda at all.

Go buy the most reliable thing you can find for $2000 or less. Then you can save up that $313/month for a year and then buy your fancy $5000 Honda.

neo von retorch

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Re: Is this car downsize enough!
« Reply #6 on: December 18, 2014, 08:49:24 AM »
You owe $18,200 owed. What is the luxury car worth according to Nada and listings at cars.com/Vehix.com? Why don't you try selling it?

Bob W

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Re: Is this car downsize enough!
« Reply #7 on: December 18, 2014, 09:14:26 AM »
You may be upside down on your car more than you suspect.

I agree with other posters.   Sell your current car for what the market will bear.   Then find you a nice 3-4K Toyota Camry with about 150K on it.  01/02/03.      At that point your payment would be zero(0).  Your gas costs would go down and your insurance would be cheaper. 

You could probably save 500 per month on this.

By the way, since you are in sales it is probably worth your time to focus on selling 25% more this year.  Sales is one career conducive to FIRE.  You basically can set your own annual income while greatly reducing your expenses.   Be sure to get into a sales game that has great residuals as well. 

Do this well and you could retire in 3 years.

FinallyWakingUp

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Re: Is this car downsize enough!
« Reply #8 on: December 18, 2014, 10:29:36 AM »
You may be upside down on your car more than you suspect.

I agree with other posters.   Sell your current car for what the market will bear.   Then find you a nice 3-4K Toyota Camry with about 150K on it.  01/02/03.      At that point your payment would be zero(0).  Your gas costs would go down and your insurance would be cheaper. 

You could probably save 500 per month on this.

By the way, since you are in sales it is probably worth your time to focus on selling 25% more this year.  Sales is one career conducive to FIRE.  You basically can set your own annual income while greatly reducing your expenses.   Be sure to get into a sales game that has great residuals as well. 


Yes. Cars.com says it's worth $20,750 if I sell it. That's what I'll do and then by a $3-4,000 Honda/Toyota.
And yes, the sales part (income) is important. I am planning to increase my income this coming year. Already business set to close for January is 3X higher this year than last. I'm a mortgage loan officer so no residuals other than past client repeat business but I think this years income can realistically be 25% higher or more than last based on a variety of factors specific to my situation. I think I just needed to be talked down from the ledge of financing something else and thinking it was ok just because it was less. Us sales guys can sell ourselves into some bad situations (face punch).

I've already made several adjustments like started using YNAB Nov 1st, reduced electric bill by $70 mo by shopping rates, negotiated $10 off cell bill per month. Researched cutting cable and going to OTA antennae/Netflix/Hulu setup which will save $150. Also paid off $2300 in debt since Nov 1 thanks to budgeting. Craiglist proceeds $360 so far. Plus we had Christmas of course. We're working things from several angles.
Do this well and you could retire in 3 years.Thanks for all the advice.

FinallyWakingUp

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Re: Is this car downsize enough!
« Reply #9 on: December 18, 2014, 01:56:52 PM »
Ok, folks. My expensive car is listed and based on other listings I think I can walk away with $4000 when it sells then I'll use that to pay cash for a solid Honda or Toyota and save $400+ per month. That savings coupled with other savings we've found and proper budgeting will be used to attack our remaining credit card debt etc! We're on our way!
Thanks for the free therapy session ;)

Jack

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Re: Is this car downsize enough!
« Reply #10 on: December 18, 2014, 02:27:21 PM »
I'll use that to pay cash for a solid Honda or Toyota

Just FYI, a Hyundai is fine too.