Author Topic: Sell a 2016 Car that I'm making payments on?  (Read 3124 times)

DoubleNickels

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Sell a 2016 Car that I'm making payments on?
« on: August 02, 2016, 12:58:10 PM »

Before I discovered Mustachianism, back in April I bought a new 2016 Chevy Malibu and financed the whole thing on a 5 year loan, about 3% interest.  Monthly payments are $415/month.

Purchase price was about $23k, current balance owed is $22k, and according to KBB.com, I could sell it for about $19k to $20k.   Keep in mind that on top of the $23k, I sunk about $1700 in sales taxes (not counting the licensing fees, etc).   

So, I know it was a dumb purchase from a Mustachian point of view. Now, I'm trying to figure out what I should do.  It seems like I have two primary options.
Option 1:  Keep the car, accelerate the payments as much as I can, keep the mileage as low as I can, realizing that I have sunk costs of $5500 to $6000 and make the car last as long as I can, keeping my long-term car costs low, and spreading out all of that "loss" over the potential 20 year life of the car.
Option 2:  Sell the car, eat the loss, buy one of the recommended low-cost cars to own with cash. 

Some of the pros of Option 1 are:  Less work and annoyance.  Selling a car to a private party can be time-consuming. Regardless of what kbb.com says, I will likely be dealing with lots of low-ball offers, test-drivers, and tire-kickers.  I will keep my emergency fund intact.   I also will have a long-term reminder of the costs of the crazy clown car habit.  The Malibu gets great gas mileage—around 30 mpg average.

Some of the pros of Option 2 are:  The money going to payments now can go toward replenishing my emergency fund, and then to pay down other debt (home mortgages)   Immediate rewards (once the cash is sunk) of the Mustachian lifestyle.  I can buy a vehicle (likely a minivan) that would help meet some needs of the lifestyle:  cheap camping as recreation, hauling stuff for projects on rental house, etc.  Lower insurance costs.

Obviously, if I had the choice to make all over again, I wouldn't buy the new car.   I try to make decisions rationally, though I realize that we all make decisions from an emotional standpoint. My emotional side (the same one that had me buying the car) is now saying that I should get rid of it.  But my rational side is saying that if I could understand how to estimate future depreciation on the Malibu, that might help me decide.  Other than the 55 cents a mile concept, I am not really sure how to estimate annual depreciation on the vehicle, or maybe more importantly, to estimate future repair costs (to keep it going 20 years)?   Is there a good way to do this?   I think this information is needed to make a good decision, or at least to rationalize the decision I make. 

I'm definitely interested in hearing the opinions of the community. 

Basenji

  • Handlebar Stache
  • *****
  • Posts: 1036
  • Location: D.C.-ish
Re: Sell a 2016 Car that I'm making payments on?
« Reply #1 on: August 02, 2016, 01:09:21 PM »
Following, hopefully you'll get some good answers. I've got a car I want to get rid of and I think it would be interesting to see how to cost-benefit it

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3340
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Sell a 2016 Car that I'm making payments on?
« Reply #2 on: August 02, 2016, 01:17:05 PM »
Purchase price and sales tax is, as you know, sunk cost.

So, assuming you sold the car, you have $3k debt that's... irrelevant to your decision. Would you buy the Malibu with $19k, today, knowing what you know? How about instead you buy a 6-10 year old economy car for $5-8k? Assuming you don't have available funds, it sounds like you would end up with $8-11k debt overall. Unfortunately, with a car loan, you'll still be required to have collision insurance for the time being, though you should be able to pay off $10k much faster than $22k, and then you can drop collision and really start saving on insurance.

The real question is - how serious are you about spending according to your (new) values? Do you want to accelerate your progress, or continue slowly, but get to keep your expensive luxury yacht?

I don't recommend you buy a car you hate, but you can definitely do a lot better than your current car situation.

humbleMouse

  • Bristles
  • ***
  • Posts: 297
  • Location: Minneapolis
Re: Sell a 2016 Car that I'm making payments on?
« Reply #3 on: August 02, 2016, 01:57:30 PM »
I think you are exaggerating how hard it is to sell to a private buyer.  It's a pretty easy process. 


neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3340
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Sell a 2016 Car that I'm making payments on?
« Reply #4 on: August 02, 2016, 02:09:31 PM »
If you want to estimate depreciation, look up the KBB private party value of a 5 year old Malibu and a 10 year old Malibu (or reasonable Chevrolet sedan equivalent.)

I recently sold two cars privately. The one was to my sister, so that was super easy. The other one - I listed on CraigsList and Cars.com. I replied "no" to several lowball sight-unseen offers, and then showed the car to a guy, who promptly offered me just shy of asking price, and I accepted. Exactly one showing, one sale. Easy. Not always going to go like that, but if you price right for a nearly new vehicle based on KBB private party value and comparable cars available on cars.com/craigslist, you'll do fine. (Make sure you consider those various data points, too, when estimating current value.)

FIREby35

  • Pencil Stache
  • ****
  • Posts: 610
Re: Sell a 2016 Car that I'm making payments on?
« Reply #5 on: August 02, 2016, 08:37:54 PM »
I sold an expensive, bad car decision years ago when I found MMM. I lost 10k (ish). You know what - it was the best thing I ever did. I didn't have to think about how I was driving a stupid waste of money that contradicted everything I knew to be correct. It's funny how knowing the math can make you embarrassed to drive an expensive car because it is so obviously stupid. It's been 3 years and I NEVER regret accepting that sunk costs are, by definition, already lost and buying the used car. The point is stop losing money - which you can do.

DoubleNickels

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: Sell a 2016 Car that I'm making payments on?
« Reply #6 on: August 03, 2016, 03:09:21 PM »
Thanks for the replies. That's exactly the kind of information I'm looking for.

I need to build a case for this. I've brought it up with my wife and her main concern is buying something used and the possibility of expensive repairs on a used car.  That has been our experience in buying most used cars, though admittedly, we've bought primarily domestic models. 

In reading MMM's blog posts about used cars, obviously you have to be selective, but notes that there are many reliable used cars (and names them) that should be able to go to 200k miles with just routine maintenance and not needing additional repairs.  I know that Hondas and Toyotas are held up as very reliable, as are Scions now.  Our one experience with a Honda was not good; We had an 80s Civic that required extensive costly repairs.   Other than taking MMM's word for it, where are some of the sources that can speak to the reliability of car models not needing extensive repairs up to 200k (besides anecdotal evidence)? 


FIREby35

  • Pencil Stache
  • ****
  • Posts: 610
Re: Sell a 2016 Car that I'm making payments on?
« Reply #7 on: August 03, 2016, 06:25:57 PM »
The cost of repairs is nothing compared to the cost of a new car. That's just a left over talking point from the mainstream.

Choices

  • Pencil Stache
  • ****
  • Posts: 516
    • ChooseBetterLife
Re: Sell a 2016 Car that I'm making payments on?
« Reply #8 on: August 03, 2016, 09:18:16 PM »
Most of the costs of older cars are the same ones you'd incur by keeping your new car. Tires, brakes, oil changes, etc. are part of the joy of car ownership.
I think that the estimated costs of maintaining an older car are often emotionally inflated and false.

As stated above, sunk costs are sunk. If you were to buy a car today, what would you buy? Then make your situation mirror that answer.

Good luck! Do you have a significant other who is also affected by this decision? What is his/her opinion? It's important that you're both on the same page.

neo von retorch

  • Magnum Stache
  • ******
  • Posts: 3340
  • Location: SE PA
    • Fi@retorch - personal finance tracking
Re: Sell a 2016 Car that I'm making payments on?
« Reply #9 on: August 04, 2016, 05:37:08 AM »
Similar to consumerreports.org, you can use truedelta.com to get an idea of how many repair trips various cars need. The data there is pretty clear. Most Honda/Toyota models require very few repairs.

Eric222

  • Pencil Stache
  • ****
  • Posts: 902
Re: Sell a 2016 Car that I'm making payments on?
« Reply #10 on: August 04, 2016, 06:22:35 AM »
Piping up to say that when I sold my car earlier this year, it was pretty straightforward.  I had to show it to 3 people.  I advertised on Craigslist and Autotrader (both free).  The first person called after it sold to ask if she could buy it (had to talk her husband into it). Second person looked but wasn't that serious.  Third person bought it for my asking price.

I had a few lowball offers by email as well - you just write back no thanks, the price is $x.

It was much less painful that I thought it was going to be.  It is certainly much less effort than it would take to make the extra money required to keep the car.

FIREby35

  • Pencil Stache
  • ****
  • Posts: 610
Re: Sell a 2016 Car that I'm making payments on?
« Reply #11 on: August 04, 2016, 07:06:23 AM »
You can also take it to Carmax and get a decent offer. Put it online and don't sell it for less than the offer in hand from Carmax.

afuera

  • Bristles
  • ***
  • Posts: 433
  • Age: 27
  • Location: Houston, TX
Re: Sell a 2016 Car that I'm making payments on?
« Reply #12 on: August 04, 2016, 08:55:42 AM »
We sold our Mercedes earlier this year for around 22K to a private party.  CarMax offered us 19K and we thought we could do better so we cleaned it and took pictures and listed it on craigslist. I also mentioned it to coworkers and friends that we were selling it.  We lucked out and one of my coworkers wanted to buy it and we ended up selling it to him after it had only been on craigslist for a few hours.  The whole process was much easier than I imagined it being when we first decided to sell.

Cassie

  • Walrus Stache
  • *******
  • Posts: 5668
Re: Sell a 2016 Car that I'm making payments on?
« Reply #13 on: August 04, 2016, 12:08:38 PM »
If you can afford it I would keep it and pay it off as fast as you can. Then I would drive it until it was dead or costing too much to repair.  Then the next time I would buy a used car.