Author Topic: Sell an SUV at a loss or optimize finances elsewhere?  (Read 2748 times)

casadlo

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Sell an SUV at a loss or optimize finances elsewhere?
« on: November 28, 2016, 06:09:00 PM »
Hello wise forum. I've recently taken over my mom's finances as she nears official retirement age in March (66). It's pretty dismal. She drives a 2014 Hyundai Santa Fe (not the sport model) that she bought new, and has a loan for. When I asked her how much equity she would have if she sold it, she said she would owe money because her monthly payments are so low and because new cars lose value the second you roll off the lot. I was hoping to use my cash 'stache to buy her a ~2007 Honda CRV* then have her pay me back, but she would have nothing. How do I get her out of this situation?

*She demands an SUV because it's too hard for her to get in and out of regular sedans. She wants the height.

MsPeacock

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #1 on: November 28, 2016, 06:20:08 PM »
Are you sure she would still be underwater on the loan? She has been paying on it for 2 years - of maybe a 5 year loan? I know these days there are much longer loan terms available for cars, so maybe that isn't the case.

Does she want/need to sell the car in order to eliminate the payment?


casadlo

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #2 on: November 28, 2016, 06:38:27 PM »
Yes I'm sure she'd be underwater, and I'm sure the loan is longer than 5 years, but I'm going to ask for more details. I need to get her to sell her house and car in order for her to have any way of retiring soon, so yes, we need to eliminate that payment.

Emg03063

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #3 on: November 28, 2016, 08:08:31 PM »
Is her retirement mandatory?  If not, the simple solution is to defer retirement until she can afford it.  I'm also curious as to why, as a (presumably) independent, functioning, gainfully employed adult, she isn't managing her own finances.

FrugalFisherman10

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #4 on: November 30, 2016, 07:05:40 AM »
^^what emg said.

Also, Have you considered Social Security?  If she's been working for a long time (30-40 years),  or if her husband had  (has), she probably has about $1k+ coming her way each month if she claims it. If she keeps working till she's 70 without claiming it, that number will go up quite a bit. I have no idea about her situation though obviously in terms of all that. In short, i would advise to not get too heavy handed here by uprooting your mom and selling her car, when she's only 66, and you're (presumably) not a professionall financial advisor that would know the ins and outs of old age stuff like benefits, ss, medicare. Respect her and her life situation..maybe she doesn't want to retire, etc.

To answer your question, we would need a lot more info. What is spending like in other parts of her life?

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ender

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #5 on: November 30, 2016, 07:13:02 AM »
How much longer is her loan on the car?

Yes I'm sure she'd be underwater, and I'm sure the loan is longer than 5 years, but I'm going to ask for more details. I need to get her to sell her house and car in order for her to have any way of retiring soon, so yes, we need to eliminate that payment.

I'm a little skeptical here. If she bought a 2014 brand new in 2014, the car is about 2.5 years old. If you're talking about downgrading her to a 2007 CRV that is going to be a dramatically different vehicle and taking a huge loss on it - does this actually make sense to do?

And how much is her payment on the car per month? Depending on how bad you take a loss on this it might not even make sense to sell it.

What other income sources will she have? You can't make a decision like this on single pieces of information, it has to be considered within her larger financial situation.

It's probably going to be a good idea to ditch the car but also make sure you consider the resentment factor - as her kid, it sounds like you are going to be making her get rid of a nice car and giving her a ~10 year old vehicle (also why a CRV? if it's just an SUV she wants find some cheaper FWD one that's newer, CRVs are crazy expensive compared to newer, FWD ones, you can get decent 3-4 year old FWD small SUVs the size of a CRV for ~10k). It's likely she will feel resentment over this if it's your idea to sell the car if you get her and older car.

casadlo

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #6 on: December 01, 2016, 08:37:55 PM »
Thanks everyone. She has about $200k in her 401k and is unmarried. Her boss is asking her to retire, and she doesn't like her job, so basically she wants to retire as soon as she thinks she can afford it. She's unmarried. My intention wasn't to do a full blown case study post, just to talk about her car situation. She pays $490/month towards that, and that and her mortgage are her highest payments, as is typical. I'm trying to reduce both but wanted to explore the car option a bit. Also, if you have any thoughts about SUVs that are cheaper/better than the CRV, please do let me know.

index

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #7 on: December 01, 2016, 09:48:45 PM »
You can get a 2011 vw Tiguan with 80k miles for 6-8kish right now depending on your location thanks to the VW scandal. It would be a significant upgrade from her current suv or a CR-V.

ender

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #8 on: December 02, 2016, 06:19:04 AM »
Also, if you have any thoughts about SUVs that are cheaper/better than the CRV, please do let me know.

Ford Escapes are cheaper. Pretty much any small SUV is cheaper than a CRV, though, as CRVs are one of the most expensive used small SUVs. KBB puts a used base trim level 2007 CRV with average miles at almost $9k retail.

There are 45 SUVs with under 80k miles, 2011 or newer, and only within 250 miles of me on cars.com between $8k - $10k. Do some searching, you will find a lot of newer options.

My intention wasn't to do a full blown case study post, just to talk about her car situation.

Just a note, talking about this one piece independent of everything else makes it incredibly difficult to give meaningful advice.

You don't even know if she is underwater on the car. If she has -$5k vs +$5k worth of value on the car it makes a big difference. Does she have any sort of pension? What is her expected SS income? What are her other expenses? Etc. All part of this question.

calimom

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #9 on: December 02, 2016, 09:36:52 AM »
It sounds like retirement is imminent, and quite possibly also the sale of her house. What kind of equity does she have if she's downsizing? Could a chunk of that go to paying off the current car loan if she's happy with the Hyundai? And with $200K in retirement accounts, it's not dire, coupled with SS and possibly a part time job doing something she might enjoy.

rothwem

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #10 on: December 02, 2016, 10:33:30 AM »
I think it's sad when people on this forum try to FIRE anyone other than themselves. Your mom is a grownup and has been doing the same thing for the last several decades. What makes you think that you buying her a different car is going to make her more financially secure?

I think you ought to direct your mother to some financial literacy books, then let her decide what to do with the car.

AZDude

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Re: Sell an SUV at a loss or optimize finances elsewhere?
« Reply #11 on: December 02, 2016, 10:57:03 AM »
Assuming the Santa Fe cost ~$30, she is probably about $5K or so underwater(that is a big assumption, but with the information present, its the best I can do) and probably still owes something like $15k to $20k, and has payments for the next 4.5 years(assuming 7 year loan... ugh...).

She has $200K in cash in her 401(k) which she can access in total the minute she retires. She could easily pay off the entire vehicle in cash after retirement.

Then, $180K * .04 = ~$600 per month. Plus SS of probably $1,500 at least. That is $2,100 per month. Not a great living, but for a single person who is retired, it should be enough.

Contrast that to selling the car, paying the $5k to get out of the loan, and then paying another $8K to get a cheaper SUV(could also go with a pick-up truck or minivan). In this scenario you save ~$2k to $7k total. That comes out to about an extra $23 a month in retirement income.

The car is hardly an emergency type of situation, although it is definitely a bad deal and I might advise the same way you are strictly on principle.