Author Topic: Sell Car or payoff and keep?  (Read 4764 times)

Marko34

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Sell Car or payoff and keep?
« on: November 23, 2014, 08:56:16 PM »
Hello!

So I have a '09 Ford Fusion, still owe 9k on it which is about what it blue books for.  I was dumb when I was younger and bought it on a much larger loan then I should have.  I have just finished paying off my credit card debt.  Have been making 42k/year but going back to school in January for my masters so in a few weeks, I'm not certain what my income will be, though I'm not that worried about finding something that more than pays the bills after a little while looking. I certainly would love to not have a car payment for the rest of my life moving forward.  I don't plan on ever having a car again that I can't pay for up front in cash.

My basic question is should I just payoff that car as quickly as possible and keep it?  Or should I list it to sell while paying it off, and the first time I can make enough profit to sell it and get a more Mustachian ride, do that.  Say a 3-5k Corolla or Civic, some sort of smaller stick shift with better MPG, even though at that price range it may be several years older than the Fusion.  Or should i not list it to sell, and just blast away until I have the ford completely paid off, then sell it and buy cheaper so I actually end up with some cash leftover?  Is there any justification for having a midsize sedan when I'm single with no kids? haha  Anyway all thoughts are welcome!  Thanks!

madmax

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Re: Sell Car or payoff and keep?
« Reply #1 on: November 23, 2014, 09:29:13 PM »
If you could have done without a car during your Masters, I would have said sell the Fusion. However, since it looks like you do need a car and you have taken a hit on depreciation already, I would say keep it and run it to the ground. What is the interest rate on that loan? If it is below 2% or if you can refinance, maybe keep hoarding some cash until you are able to get a new job.

Marko34

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Re: Sell Car or payoff and keep?
« Reply #2 on: November 24, 2014, 11:57:19 AM »
Hey Madmax,

Thanks for the reply.  So again i bought this car at a high rate when i was younger, and basically any way you look at it, I end up paying way more than I should have.  Right now my interest rate is at a high 6.9%.  I called and they said I could refinance it with them down to 4.2%.  I haven't looked at any other options, but that would only save me around $8 on my monthly payment according to the person I spoke to at the bank.  For them to do that, they would need to move forward with a Hard Inquiry on my credit.  I don't know how much that usually effects your score, but I know its best to limit them if possible.  Is it worth $8?  I don't plan on financing a home or another car anytime soon, so my credit score isn't hugely important at the moment.

With such high interest rates, is it simply best to treat this like CC debt and pay it off as quickly as possible? Whether that includes selling it when I am halfway there or not.  Or should i explore other banks for lower rates?

Thanks

madmax

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Re: Sell Car or payoff and keep?
« Reply #3 on: November 24, 2014, 10:44:23 PM »
6.9% and 4.9% is a hair on fire emergency. I would wager that your neighborhood credit union could offer a MUCH lower rate. My credit union's auto loan rate is 1.49%. Definitely shop around for a better rate. If you can't find something though, throw everything at the loan as quickly as possible to get rid of it. I was recommending refinancing over paying it off because of your upcoming stint at grad school.

Hard inquiries are not a big deal. Sure, your credit score goes down by 5-10 points when you get one but it recovers quickly in a few days. Also, you can shop around at different places for the best rate. A bunch of inquiries over a day or two get lumped together.

neo von retorch

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Re: Sell Car or payoff and keep?
« Reply #4 on: November 25, 2014, 08:24:48 AM »
re: Refinance

How many months are left on your car loan (and/or what is the monthly payment)?

If you would refinance at 36 months at 1.49% your payment would be $256 and in 3 years you'd pay a total of $208 in interest.
Assuming you have 36 months left at 6.9% your payment is $277 and you will pay $989 in interest.
So just $21 saving a month, but $989 over the life of the loan!

(And at 4.2% the payment is $267 but $595 total. Still a loan term difference of almost $400.)

Marko34

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Re: Sell Car or payoff and keep?
« Reply #5 on: November 25, 2014, 03:36:55 PM »
Thanks for the advice! 

Currently yes 35 payments left.  Glad to know inquiries aren't as big a deal.  I will probably shop for a better rate, but ultimately plan on paying it off as quickly as possible, and then hang on to the car long term.  It seems pretty reliable and isn't terrible on gas.  I'm excited to never have a car payment again as I continually strive to be more and more Mustachian.

SpicyMcHaggus

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Re: Sell Car or payoff and keep?
« Reply #6 on: November 25, 2014, 03:41:56 PM »
Get it refi now while you're employed. My last car loan was at 1.75% APR. look for a credit union in your area with a rate under 2%.

That said, selling it now for more than what you owe (if possible) is the best long term, as it will continue to depreciate. a $4k honda civic can only lose $4k in value, whereas your fusion still has many thousands to drop in value.


Forcus

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Re: Sell Car or payoff and keep?
« Reply #7 on: November 25, 2014, 04:00:43 PM »
That said, selling it now for more than what you owe (if possible) is the best long term, as it will continue to depreciate. a $4k honda civic can only lose $4k in value, whereas your fusion still has many thousands to drop in value.

Just a comment on this. An '09 Fusion with even decent miles will probably be less likely to puke expensive parts than a $4k Honda. Around here a $4k Honda is generally late 90's / early 2000's with 150k miles. I've been bitten before on trying to "downgrade" to cheaper cars and then shelling out a bunch of money just to get them reliable. To wit, my last purchase was for $6,200 and I have $13k in it right now although $2k was optional. Of course it's always possible that $4k Honda will last forever and a just-out-of-warranty Fusion will grenade a pricey transmission, but as I get older and newer cars get better I am less willing to gamble in this area.

If the maths made a compelling story to downgrade (even with anticipated maintnenance expenses, saving ~$100 or more a month) then it would probably be a good idea to go ahead and sell. But my experience lately is that it has been harder and harder to find anything decent under $5k and the frustration and expenses and unknowns in a $5k car can make it more appealing to just keep what you have.

Just my thoughts.

SpicyMcHaggus

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Re: Sell Car or payoff and keep?
« Reply #8 on: November 26, 2014, 09:10:17 AM »
That said, selling it now for more than what you owe (if possible) is the best long term, as it will continue to depreciate. a $4k honda civic can only lose $4k in value, whereas your fusion still has many thousands to drop in value.

Just a comment on this. An '09 Fusion with even decent miles will probably be less likely to puke expensive parts than a $4k Honda. Around here a $4k Honda is generally late 90's / early 2000's with 150k miles. I've been bitten before on trying to "downgrade" to cheaper cars and then shelling out a bunch of money just to get them reliable. To wit, my last purchase was for $6,200 and I have $13k in it right now although $2k was optional. Of course it's always possible that $4k Honda will last forever and a just-out-of-warranty Fusion will grenade a pricey transmission, but as I get older and newer cars get better I am less willing to gamble in this area.

If the maths made a compelling story to downgrade (even with anticipated maintnenance expenses, saving ~$100 or more a month) then it would probably be a good idea to go ahead and sell. But my experience lately is that it has been harder and harder to find anything decent under $5k and the frustration and expenses and unknowns in a $5k car can make it more appealing to just keep what you have.

Just my thoughts.


Please don't take offense to what I am about to say.
If those are your experiences, then you aren't doing it right.

I'm a car guy. I live and breathe shopping for my next 10 year old car just as much as a highschool kid does if he thinks he's getting a new Mustang. You really need to do a ton of research to determine which ones have problems you can address yourself and which are out of the realm of fixing.  My recommendation is a 4cyl Toyota Camry or Corolla. Manual transmission. Don't know how? Learn. It will save you money on buying cars. It will save you money rebuilding automatic transmissions, and you might even get better MPG.

I am always happy to help someone shop for cheap reliable transportation. I've had great luck with my budget rides for years. You have to know how to pick them.

Forcus

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Re: Sell Car or payoff and keep?
« Reply #9 on: November 26, 2014, 10:24:55 AM »
Please don't take offense to what I am about to say.
If those are your experiences, then you aren't doing it right.

I'm a car guy. I live and breathe shopping for my next 10 year old car just as much as a highschool kid does if he thinks he's getting a new Mustang. You really need to do a ton of research to determine which ones have problems you can address yourself and which are out of the realm of fixing.  My recommendation is a 4cyl Toyota Camry or Corolla. Manual transmission. Don't know how? Learn. It will save you money on buying cars. It will save you money rebuilding automatic transmissions, and you might even get better MPG.

I am always happy to help someone shop for cheap reliable transportation. I've had great luck with my budget rides for years. You have to know how to pick them.

No offense taken!! I have biases and unique experiences. I have owned very few foreign cars so I don't advise on Toyotas / Hondas not because I have bad experiences, just no experience (I have owned 75 cars, 59 domestic, 16 foreign, of those foreign, no Hondas and 1 Toyota). Our local (central IL) economic climate is somewhat insular, you really cannot find anything good for under $4k, the pricing structure is "elevated" (IMO) because of the amount of wealth in the area. Also my definition of good might be higher than others, for me it is reasonably reliable without needing anything but minor maintenance, won't embarrass you if you need to go to a wedding, or take a consultant out at work, etc. I've taken vacations to Colorado, Nevada, California and am amazed at what is available there. The definition of good is different, rust is mostly a non-issue (which causes big issues here). I feel like the "good" scale starts at maybe $2500 in other parts of the country, just not here. Another bias, I always prefer fun-to-drive cars over basic econoboxes so generally Accords, Camry's, etc. may be perfectly acceptable but not on my radar. I skip right over them on CL but do note price points, etc. for occasional discussion.

SpicyMcHaggus

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Re: Sell Car or payoff and keep?
« Reply #10 on: November 26, 2014, 11:22:41 AM »
You need to shop other areas. I have a 2006 Audi A4 that cost less than $7k. 110k miles.
Flew to CT to pick it up.  Most aren't willing to do that. I would suggest chosing a few close metro areas and stalking their craigslists. Great deals can be had in Chicago, St Louis, etc.

For you, I would recommend Lexus. Acura/Honda have had issues with the automatic behind their V6s since 2002.
Pretty much any lexus newer than 2002 and with less than 150k miles is a solid bet.  If the Camry/Accord is too boring, look at a GS or IS series Lexus. The IS250/350 is high on my list of good choices.

http://chicago.craigslist.org/chc/cto/4775225390.html
http://chicago.craigslist.org/chc/cto/4777496929.html

Forcus

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Re: Sell Car or payoff and keep?
« Reply #11 on: November 26, 2014, 12:21:01 PM »
You need to shop other areas. I have a 2006 Audi A4 that cost less than $7k. 110k miles.
Flew to CT to pick it up.  Most aren't willing to do that. I would suggest chosing a few close metro areas and stalking their craigslists. Great deals can be had in Chicago, St Louis, etc.

For you, I would recommend Lexus. Acura/Honda have had issues with the automatic behind their V6s since 2002.
Pretty much any lexus newer than 2002 and with less than 150k miles is a solid bet.  If the Camry/Accord is too boring, look at a GS or IS series Lexus. The IS250/350 is high on my list of good choices.

http://chicago.craigslist.org/chc/cto/4775225390.html
http://chicago.craigslist.org/chc/cto/4777496929.html

Thanks, I do stalk nearby CL, one problem with Chicago is the postings come in so rapid fire that the car ones can disappear in only 3 or 4 days (and I hem and haw a lot). Another problem I'm seeing with Chicago is a lot of (fresh water) flood cars, some of which do not have salvage / rebuilt titles or carfax indicators. A hint, if on a 5 year old car the metal seat fasteners to the floor are shedding rust on the carpet, it's probably been flooded!!

I have picked up cars out of state in the past and it has mostly worked for me (except the 77 Trans Am that needed a tune up... Nope.... all the ring lands were wiped off the piston on the #1 cylinder). I tend to shy away from this now due to the time factor. But last time we seriously shopped for a new car (a couple years ago, pre-MMM), even with flying out to Nevada and driving back, food, hotel, we would have still saved a couple thousand on a $20k vehicle vs. anywhere closer and local.

I should have included in my comments that they applied to the local area. I assume that even the average buyer on this board probably won't fly somewhere to pick up a $3-4k car.

I like the IS250 / 350's but harder to find in manual. When I do find them they are usually over $10k unless they have super high miles. I've been eyeing G35's / 350Z's but the wife doesn't like 'em. You didn't mention Acura TSX / etc. as alternatives (not for me...  but for someone who wants an Accord but sportier).


SpicyMcHaggus

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Re: Sell Car or payoff and keep?
« Reply #12 on: December 01, 2014, 08:32:36 AM »
If this is about you and only you, then i would say the 350z is a poor choice. it doesn't even attempt to have a rear seat.
They don't make the AWD Lexus IS in manual transmission. The last manual version was the IS300.

I don't mention the Acura or other things on MMM because if one was truly into frugality, it would be bicycle and Honda Fit. We wouldn't be having this conversation. If you want a luxury car and hem/haw and can't make up your mind, perhaps you're not fully dedicated yet. Are you sure this is a lifestyle you want?

Bob W

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Re: Sell Car or payoff and keep?
« Reply #13 on: December 01, 2014, 09:26:23 AM »
Refi at 5 years for a $150 a month payment.  Then over the next 3 months save 9k and put it into an S and P fund labeled "car."     The thing is to have the money to actually buy a car but since the banks are giving money away at 2%.  To use their money and invest yours.   

The piece of mind of keeping the nice car you have vs. buying a used one of unknown history is worth it to me.   

Then in the future, with your next car purchase in 12-15 years,  you will be FI and you can go with a cheap used one.   

I'm assuming that you will put less than 10K per year on your car so it should easily last 25 years in total.  In fact, if you follow the low mileage per year theorem it may be the last car you ever own and could go 50 years at 5 K per year.